Wells Fargo Main Investor in Nation’s Worst Private College Company

Wednesday, January 01, 2014
Corinthian Colleges CEO Jack Massimino

Corinthian Colleges Inc., which operates a chain of for-profit schools and is now facing hundreds of lawsuits alleging fraud, has enjoyed the support of major Wall Street investors, particularly Wells Fargo.

The operator of nearly 100 private colleges has more than 200 lawsuits pending against it, including a case brought by California’s attorney general claiming fraudulent marketing practices aimed at recruiting students. The company was one of 30 for-profit college operations profiled in a scathing report (pdf) by U.S. Senator Tom Harkin (D-Iowa).

Despite its legal troubles, Corinthian counts Wells Fargo and other leading banks as major investors. Wells Fargo is by far the biggest shareholder in the company, with 11.6 million shares.

Corinthian’s second- and third-largest investors are the investment management firm BlackRock Fund Advisors (4.5 million) and investment adviser Royce & Associates (4 million). Bank of New York Mellon holds 3.5 million shares, and JP Morgan Chase 1.67 million shares.

An investigation by Huffington Post revealed that at least one Corinthian school, Everest College in Decatur, Georgia, paid contractors to hire graduates on a temporary basis in order to boost the school’s job-placement numbers.

Those hired were then let go after about a month on the job, with no further employment services provided by the school, which later went out of business. But not before Everest and other Corinthian schools reaped billions of dollars in federal student aid—as much as $10 billion in a decade, which provided more than 80% of the corporation’s revenues.

California Attorney General Kamala Harris has accused Corinthian of utilizing numerous fraudulent marketing techniques, including inflated job-placement rates, to lure students into its programs.

The state’s lawsuit claims that Corinthian—which charges more than $40,000 for tuition and related fees—targets single parents who are close to the poverty level, a demographic that its internal documents describe as “composed of ‘isolated,’ ‘impatient,’ individuals with ‘low self-esteem,’ who have ‘few people in their lives who care about them’ and who are ‘stuck’ and ‘unable to see and plan well for future,’ through aggressive and persistent internet and telemarketing campaigns and through television ads on daytime shows like Jerry Springer and Maury Povich.’ ”

Former employees at Corinthian “described a culture of data manipulation inside the company, one where hitting monthly employment targets took priority over finding quality positions for students,” Chris Kirkham wrote at Huffington Post.

The Santa Ana-based company and its subsidiaries—Everest, Heald and WyoTech—have 24 campuses in California, 111 total campuses in the United States and Canada and three online programs. About one-third of its 81,000 students are in California. It is the largest for-profit college company in the state. Corinthian, founded in 1995, was a pioneer in for-profit colleges and has assets of more than $1 billion.

-Noel Brinkerhoff

To Learn More:

How a For-Profit College Created Fake Jobs to Get Taxpayer Money (by Chris Kirkham, Huffington Post)

State Claims Corinthian Colleges Prey on Poor (by Matt Reynolds, Courthouse News Service)

Corinthian Colleges Inc. Major Holders (Yahoo! Finance)

State Sues California’s Largest For-Profit College Company for Fraud (by Ken Broder, AllGov California)

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