And how tragic for America. The federal Consumer Financial Protection Bureau, in filing suit today against one of the country’s many tax syphons (put the phrase tax syphons in my search function for previous posts), calls the exploitation of America’s poor by for-profit colleges like ITT “truly an American tragedy.”
The federal Consumer Financial Protection Bureau this morning filed a civil lawsuit against for-profit college company ITT Educational Services, seeking restitution to students allegedly harmed by ITT’s private loan programs, a civil fine, and an injunction against the company.
Senator Feinstein’s husband, Richard Blum, has been a big investor in ITT. Which is… Okay, that’s her business, you might say, though UD would say that it represents at least an embarrassment … But the real scandal here comes from the fact that Blum is a University of California regent who presumably had something to do with that university itself investing in ITT. From a 2010 article in the Berkeley Daily Planet:
… Blum’s firm, Blum Capital Partners, has been the dominant shareholder in two of the nation’s largest for-profit universities, Career Education Corporation and ITT Educational Services, Inc. The San Francisco-based firm’s combined holdings in the two chain schools is currently $923 million — nearly a billion dollars. As Blum’s ownership stake enlarged, UC investment managers shadowed him, ultimately investing $53 million of public funds into the two educational corporations.
The regents’ conflict-of-interest policy requires them to “avoid the potential for and the appearance of conflicts of interest with respect to the selection of individual investments … public officials shall not make, participate in making, or influence a governmental decision in which the official has a conflict of interest.” And the California Political Reform Act of 1974 provides civil and criminal penalties for officials who ignore conflicts of interest — as UC makes clear in ethics training presentations specifically created for university officials. The Board of Regents, however, is self-policing and it tolerates situations that cause others concern.
John M. Simpson of Consumer Watchdog, a nonprofit education and advocacy organization in Santa Monica, California, comments: “It is hugely inappropriate for the University of California to invest in for-profit colleges when it should be promoting public education. And something stinks when university investments end up in companies largely controlled by a regent. To the average fellow on the street, this would seem to be a conflict of interest. It is up to Mr. Blum and the UC treasurer to explain how it could not be a conflict of interest.”
Shades of Yeshiva University under the management of Bernie Madoff and Ezra Merkin! … Well, that university investment strategy ended badly, and I think Berkeley’s is about to come to grief too… But … look. You don’t need to be Thomas Frank to be sickened by the cynicism of America’s greatest public university getting rich off the backs of America’s most vulnerable student population…
Especially since it’s not only Berkeley. There’s Columbia University, already famous for its business dean’s starring performance in Inside Job. Columbia’s president, Lee Bollinger, sits on the board of the company that owns Kaplan. Students there were so disgusted by this that they started a petition calling for him to leave the board. The language of their petition pithily summarized the American for-profit ed business model:
Kaplan exploits the poor, the vulnerable, and the taxpayer to enrich itself.
In announcing the suit, the CFPB said this was just the beginning of a much wider action against the whole scummy industry. UD is skeptical. It has been scummy — reeking to high heaven, in fact – for a couple of decades, and no one with any power to really kill it off seems to have cared. That’s the American tragedy.