The Clinton For-Profit College Standard
ITT’s biggest mistake was not putting Bill Clinton on the payroll.
Sept. 6, 2016
ITT Technical Institute folded on cue Tuesday after the Obama Administration issued a regulatory death warrant last month. ITT investors must be wishing they had ponied up for political protection like Laureate International Universities, the for-profit college that paid Bill Clinton $17.6 million to serve as its “honorary chancellor.”
ITT’s decision to close all of its 130 some campuses—stranding 40,000 students and 8,000 employees—comes after the Education Department barred new enrollees from tapping federal aid, delayed loan reimbursements and raised its collateral by $153 million. ITT had a mere $78 million on hand at the end of June and no way of meeting the Administration’s cash demand.
ITT’s execution follows the usual pattern: A pack of regulators attack from all angles—i.e., the Accrediting Council for Independent Colleges and Schools, Securities and Exchange Commission, Consumer Financial Protection Bureau and state Attorneys General—and try to run their target out of business before it can raise a legal defense. None of their charges has been proven in court.
Department officials claim they are merely trying to protect students and taxpayers even though the SEC and CFPB allegations involve ITT’s private loan program. Many ITT students won’t be able to transfer to other schools, and the college’s closure means that nearly $500 million in student debt could be wiped out. ITT has put up only $90 million in collateral to cover discharged loans. Taxpayers would be on the hook for the rest.
Although Education Secretary John King claimed that ITT could have stayed in business by taking “corrective action,” liberals appear to have plotted the company’s assassination long ago. Rohit Chopra worked at the CFPB and the Center for American Progress before signing on as a special adviser to Mr. King in January. In June 2015 Mr. Chopra warned ITT shareholders that the department “can revoke eligibility for federal student aid with minimal notice” and that “ITT may be forced to post even more collateral to maintain eligibility. . . . Unless ITT makes improvements to management culture, the board of directors, and executive compensation, it may be unable to survive over the long term.”
Immediately after the department imposed its lethal sanctions on ITT, Mr. Chopra departed for the Hillary Clinton campaign. Maybe he’ll be tasked to answer questions about the Clintons’ lucrative ties to Laureate.
According to the results of a public records request by Judicial Watch, Bill Clinton was paid $17.6 million to serve as Laureate’s “honorary chancellor” between 2010 and 2015. Laureate has also donated between $1 million and $5 million to the Clinton Foundation. The company’s founder Doug Becker contributed $2,700 to Mrs. Clinton’s current presidential campaign.
As the Washington Post reported on Tuesday, Mr. Clinton’s consulting duties were redacted from his publicly released contract and labelled trade secrets. At least part of his job involved speechifying, hobnobbing with foreign dignitaries and lending his credibility to recruit students and protect the company from regulatory depredations. He also may have had a word with his wife, the former Secretary of State.
The Post reports that Mrs. Clinton requested that a Laureate representative be invited to a State Department dinner in 2009—while the rest of the for-profit industry was on the Administration’s menu—because it was “the fastest growing college network in the world” and founded by Mr. Becker, “who Bill likes a lot.” Laureate has 87 campuses in 28 countries, most in the developing world, so the State Department’s imprimatur could be useful.
Yet the Obama Administration’s College Scorecard shows that its five U.S. campuses have graduation rates comparable to ITT’s. However, student debt levels are higher—$31,976 at Walden University and $43,417 at the NewSchool of Architecture and Design in San Diego compared to about $26,000 at ITT schools.
A report by the Senate Education Committee in 2012 found that Laureate devoted more of its revenues to marketing and profit (54%) than the industry average (42%). While progressives like Mr. Chopra howl about how companies determine executive pay and market-based incentives, Laureate says it seeks to align “executives’ interests with those of our investors” and be competitive in the industry.
We know that Mr. Clinton was paid more than what regulatory filings show ITT CEOKevin Modany has earned during the last five years (assuming no bonus this year). Laureate investors must have believed that the services Mr. Clinton rendered justified his rich remuneration. Readers can reach their own conclusions about for-profits and double standards.