Education Dept. Fires Law Firm Investigating Fraud-Plagued Corinthian Colleges Collapse

Tuesday, March 15, 2016
Dennis Cariello (photo: Hogan Marren Babbo & Rose)

By Jeff Horwitz, Associated Press

 

WASHINGTON (AP) — The Education Department is removing a law firm hired to oversee the turnaround of schools owned by Corinthian Colleges Inc., a for-profit education company whose financial collapse had placed at risk more than $1 billion in federal student loans.

 

An Associated Press investigation identified conflicts with the ostensibly independent monitor.

 

The department said it was removing the firm, Hogan Marren Babbo & Rose Ltd. of Chicago, after the AP reviewed with senior agency officials its findings last week after a nine-month investigation examining the Obama administration's response to Corinthian's extraordinary collapse in 2014 amid allegations of mismanagement and fraud. The department had previously said only that it intended to review the firm's performance going forward.

 

The chairman of the firm's education practice, Charles P. Rose, declined Monday to discuss his firm's removal.

 

The monitor has been overseeing the business practices of Zenith Education Group, an offshoot of a student-loan debt collection firm that took over Corinthian's operations. It was serving as the U.S. government's close-up eyes and ears, reviewing Zenith's marketing materials and admissions phone calls and the accuracy of graduation and employment statistics.

 

"I've notified Zenith and Hogan Marren that we do not intend to approve renewal of Hogan Marren as the independent monitor," Education Undersecretary Ted Mitchell told the AP. "We believe we need a monitor with different capacities to serve in this next phase of Zenith's development."

 

The AP's investigation found that the way the monitor had been hired created an attorney-client privilege relationship that shielded its work from outside scrutiny and obligated it to act in Zenith's interest. The firm had been hired directly by Zenith as legal counsel. That distinction created the attorney-client privileged relationship.

 

After the AP questioned the arrangement, the Education Department last fall altered the terms of its monitoring arrangement. Contract addendums expressly warned that Zenith was not permitted to edit Hogan Marren's compliance reports before they were presented to the department. Nor could the firm solicit additional work from Zenith during its monitoring. The changes also allowed the government to request copies of the firm's underlying work product.

 

The AP found that the firm also had advocated on behalf of for-profit colleges, helped broker the purchase of Corinthian's assets and argued in a legal brief that for-profit schools had a free speech right not to inform prospective students about poor graduate employment outcomes.

 

Also, two lawyers overseeing the new for-profit operations, Rose and Dennis Cariello, were former Education Department officials who had worked at law firms employed by Corinthian in the months before it collapsed financially. Neither Zenith nor the attorneys would tell the AP whether they had personally performed legal work for Corinthian.

 

"The Department of Education can't accept them as independent, period," Sen. Sherrod Brown, D-Ohio, the top Democrat on the Senate Banking, Housing and Urban Affairs Committee and a critic of for-profit college practices.

 

The Education Department said it will hire a new monitor with a more prosecutorial mindset, though it has not outlined the structure of the arrangement or identified potential candidates.

 

The AP's investigation found that significant problems remain at the formerly for-profit college — including its flagship Everest College brand — even after Zenith's takeover. Zenith still recruits students through large-scale telemarketing. Major changes to its curriculum have not yet occurred. It has retained senior Corinthian executives in key posts. And it continues to recruit students using some of the same ads that Corinthian ran during the same daytime TV talk shows.

 

Recent graduates told the AP they are struggling to find work that would allow them to pay back their student loans, raising the prospect that the government is seeding a new crop of loan defaults.

 

To Learn More:

85,000 More Ripped-Off Corinthian Students Can Dump Their Loans (by Ken Broder, AllGov California)

Feds Bar New Students at For-Profit Heald Colleges and Fine Parent Corinthian $30 Million (by Ken Broder, AllGov California)

Feds Sue Corinthian Colleges, Ask Court to Wipe Out Private Student Loans (by Ken Broder, AllGov California)

Wells Fargo Main Investor in Nation’s Worst Private College Company (by Noel Brinkerhoff, AllGov California)

Comments

Jorge Garrido 3 months ago
MY OPINION I´m not surprised at all about the problem facing Hogan Marren Babbo & Rose a good law firm. Fact is ALL law firms where Patricia Edelson has gone to work big problems surface. The last law firm that employed her was sued by FACEBOOK for that firm knowingly represented a client who was committing fraud by alleging FACEBOOK was his original contractual idea with Zuckerberg. Now she works at Marren, Hogan, Babbo & Rose and the Dept. of Education, where she claims she worked so "brilliantly" and was so highly reputed, fired the firm where this woman works, and specifically related to her specialized area of work. I published in the Washington Times, on June 28, 2000 a full-page article, at my own expense, to expose some truths regarding the Clintons´ corruption schemes--vis-a-vìs the Puerto Rican NY vote among other key things, and someone at the Dept. of Education/New York Region) told me an order had come to the New York Region from Washington DC directly, to start an investigation against me and my school as a Clinton vendetta. Patricia Edelson was sent as the auditor of my school and she came without as much as affording (by law) previous written announcement, until I requested one after only a verbal telephone announcement. They came hurriedly in the midst of a hurricane that had just passed regardless of all the complications in travel and transportation and proceeded to fabricate a case against a school that had never participated in the student loan program, although it was licensed to do so, provide loans, but did not--hence never issued one single student loan--clamming thereafter fake clock hours in less than 10% of only 42 attendance records of a school with over 1,200 students enrolled. Pat Edelson´s testimony during the administrative hearing before administrative judge Canellos (who worked for the Dept. of Education) was: what made her suspect our school and request a further investigation, since they did not have any valid findings during her audit visit and without having produced an audit visit report (mandatory by law) was; I had told her we were waiting for the auditors´ visit and had prepared all week for such audit, something that is completely normal in my past corporate, Fortune 500 experience. She now does "mock interviews" to prepare proprietary schools--as her form of making a living--as my school had prepared by conducting its own self audit in advance preparation of the school´s audit and she did not like that. She was following a higher agenda set fro Washington DC, I believe. This is my opinion and I believe she was working for special interests who targeted me as a vendetta to my paid article. Now, everybody connected with the act of coming against us is suffering a greater pain than I and my wife, including from the Clintons on-down, to the court judge (judge´s son now serving 109 years in prison (Pablo Casellas), murdered his wife, Puerto Rico debt ridden $72 billion, Clintons investigated, Prosecutor (Guillernmo Gil Bonart) was investigated accused by Federal judges and the FBI of corruption The truth is being sought and one day will be brought to justice and published. I believe Patricia Edelson is a dark force working for other dark forces, is no good and attracts "no good". That´s my opinion. I believe whoever she did the dirty work on us also got her, her first cozy job as a reward since she didn´t earn that much money at the Dept. of Education. My published self funded newspaper article also helped to uncover Ana Belen Montes who worked as head intelligence officer in Washington DC in the formulation of U.S. intelligence policies toward Cuba and was actually a Cuba spy for more than 16 years. She was the biggest breach into U.S. intelligence. Now serving 25 years in prison. The truth will soon come out and my we will be redeemed from this fabricated gross injustice with Patricia Edelson at the center as henchwoman.

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