Former Washington Post Co. Still Owns Stake in Embattled For-Profit Corinthian Colleges
Graham Holdings Co., the renamed corporation that owned the Washington Post newspaper before selling it to Jeff Bezos last year, retains a major stake in Corinthian Colleges, a for-profit education company that is under investigation by a range of federal and state law enforcement agencies. According to an SEC filing today, Graham Holdings has sold about 1.7 million shares of Corinthian this month, but still owns another 4.6 million, amounting to about 5.3 percent of the company’s shares.
Graham’s continued ownership of Corinthian highlights how a family company that once proudly owned a prestigious investigative newspaper has fallen into the position of primarily owning for-profit education businesses that are themselves under investigation. Before selling the Post newspaper, 55 percent of the company’s revenues came from its own Kaplan Education subsidiary, which is in turn dominated by the Kaplan for-profit colleges unit. Kaplan itself is under investigation by at least four state attorneys general, Delaware, Florida, Illinois, and Massachusetts; has high dropout and loan default rates; and has been accused of deceptive and coercive recruiting practices.
But Corinthian, which operates Everest, Heald and WyoTech colleges, has an even more troubling record. The Santa Ana, CA-based company faces a major lawsuit from California attorney general Kamala Harris, who has charged that the company has engaged in “false and predatory advertising, intentional misrepresentations to students, securities fraud and unlawful use of military seals in advertisements.” Corinthian is also under investigation by a group of thirteen state attorneys general (Arkansas, Arizona, Connecticut, Idaho, Iowa, Kentucky, Missouri, Nebraska, North Carolina, Oregon, Tennessee, Washington and Pennsylvania) into its recruiting and business practices.
Federal investigators also are probing Corinthian. In June 2013, the Securities and Exchange Commission issued a subpoena to the company concerning student recruitment, degree completion, job placement, loan defaults and compliance with U.S. Education Department rules. In September 2013 Corinthian reported that the U.S. Justice Department is investigating claims that the company violated the False Claims Act with respect to its recruiting and financial aid practices and by, among other things, manipulating attendance records to keep federal aid for students no longer in attendance. In December 2013, the Consumer Financial Protection Bureau notified Corinthian that it expected to pursue legal action against the company for violation of federal laws with respect to private students loans. And in January, even the U.S. Department of Education, whose enforcement efforts have generally failed to address for-profit colleges abuses, moved toward taking tough measures with Corinthian, saying in a letter to the company that there were signs of “systematic deficiencies” in its operations and charging that the company “has admitted to falsifying placement rates and/or grad and attendance records at various institutions and because of ongoing state and federal investigations into serious allegations.”
Corinthian has denied all these allegations. The company charges students $47,ooo a year for an associates degree in business at Everest College in Florida, while the same program at nearby Miami Dade Community College costs $6,400. Two-thirds of Corinthian’s associate degree students drop out, three-quarters of former students couldn’t pay down their loans, and 36 percent default within three years, the highest rate of all publicly-traded college businesses. Corinthian gets almost 90 percent of its revenue from federal taxpayer dollars. Its CEO, Jack Massimino, has taken home as much as $3 million a year in compensation. (The Graham company has in the past refused to disclose the annual earnings of the Kaplan CEO, Andrew Rosen. The previous CEO left with a $76 million goodbye package when he departed in 2008.)
Corinthian is in trouble. Although the company tried to put a happy face on it in recent reporting to investors, student enrollments are down, revenue is down, the stock price has declined, and the company is laying off staff. One market research company concluded in a report to investors last month “simply put, we believe management is running out of options.”
Graham’s ownership in Corinthian has dropped into recent years from 8 percent, down to 6.6, and now to 5.3. It’s a shame that the Graham Company CEO, Donald Graham, has only acted to jettison Corinthian stock now that the company is on the ropes. It’s a bigger shame that Graham has used to his personal prestige to press the Obama Administration to refrain from issuing strong “gainful employment” rules to hold career colleges like Kaplan and Corinthian responsible for waste, fraud, and abuse with taxpayer dollars. And it’s unfortunate that, after all the recent revelations of industry abuses, Graham and Kaplan, and the APSCU for-profit college trade association of which Kaplan and Corinthian are members, continue to fight against reasonable rules to protect students.
Graham Holdings Co. board members include Columbia University president Lee Bollinger, IAC chairman Barry Diller, and Pepsi executive VP Larry Thompson.
This article also appears on Huffington Post.