In 2007, the California attorney general filed a lawsuit against Corinthian Colleges, Everest’s parent company. California’s complaint against Everest and Corinthian included a litany of allegations: falsified job placement statistics, aggressive and unethical sales practices, and a pattern of jobless graduates carrying mountains of debt.
But that case never went to trial: The lawsuit was immediately settled with no admission of wrongdoing on Corinthian’s part. The company paid a $500,000 civil penalty and $4.3 million in restitution to students at campuses that had notched the worst violations. As of this year, according to a source familiar with the matter who spoke on background, $3.4 million of that money has been paid out to 6,000 eligible students, for a total of approximately $560 each.
Six years later, a new California attorney general, Kamala D. Harris, filed a new lawsuit against Corinthian that was, for the most part, indistinguishable from the first complaint, detailing the same violations, alleging that the company had materially broken every agreement made in the previous settlement. The recent federal lawsuit, and those in Massachusetts and Wisconsin, trace similar lines.
The Department of Education began its own investigation into Corinthian in January, requesting details on everything from the company’s job placement rates to financial aid practices. In June, it claimed Corinthian was taking too long to respond completely, and temporarily cut off the school’s access to the federal financial aid money that made up almost 90% of its revenue. Corinthian was so short on cash that even the 21-day delay sent them into a financial tailspin, threatening bankruptcy; the DOE eventually agreed to release the funds, but only on the condition that Corinthian would sell off or close all of its campuses within six months. The final list included only 12 schools that would be shut down; Corinthian plans to sell the other 85, likely to a private equity firm or a for-profit competitor.
But the lawsuits, investigations, and even the Department of Education’s forced shutdown are unlikely to result in any real change for the vast majority of Everest’s current and former students. One of the deep ironies of Corinthian’s collapse is that there are, experts say, effectively too many victims for there to be any reasonable way to compensate them, or to actually shut down the dozens of Everest campuses. It would cost the government billions to forgive the outstanding debt of former students, and any attempt to shut down Corinthian’s schools would displace 70,000 current ones.
The lawsuit by the Consumer Financial Protection Bureau seeks debt relief for students — but only on a tiny fraction of loans, those made directly by Corinthian, not the federal loans that make up the vast majority of students’ debt. Lawsuits in California, Wisconsin, and Massachusetts may provide some restitution to former students in those states, but like the 2007 settlement, would do little more than chip away at students’ loan tallies.
Corinthian College’s impending demise will likely work against former students, said Pauline Abernathy, the vice president of policy organization The Institute for College Access and Success. “The issue is, if [the government] were to win a lawsuit, where would the money come from to compensate students?” Abernathy said.
It’s all but impossible that any real money will come from Corinthian. Corinthian is so cash-strapped that it has been selling off assets — even equipment belonging to its chain of automotive schools — just to stay afloat until it finds a buyer for its campuses. It is extremely unlikely, experts agree, that any state would be able to recover a substantial settlement from the company.
“The chances are slim” that former students will ever see any kind of meaningful debt relief, said Maura Dundon, senior policy counsel at the advocacy group Center for Responsible Lending.
In September, at a speech at NYU, Holder defended the lack of prosecutions of top executives on the grounds that, in the corporate context, sometimes bad things just happen without actual people being responsible. “Responsibility remains so diffuse, and top executives so insulated,” Holder said, “that any misconduct could again be considered more a symptom of the institution’s culture than a result of the willful actions of any single individual.”
In other words, people don’t commit crimes, corporate culture commits crimes! It’s probably fortunate that Holder is quitting before he has time to apply the same logic to Mafia or terrorism cases.
Fleischmann, for her part, had begun to find the whole situation almost funny.
“I thought, ‘I swear, Eric Holder is gas-lighting me,’ ” she says.
Ask her where the crime was, and Fleischmann will point out exactly how her bosses at JPMorgan Chase committed criminal fraud: It’s right there in the documents; just hand her a highlighter and some Post-it notes – “We lawyers love flags” – and you will not find a more enthusiastic tour guide through a gazillion-page prospectus than Alayne Fleischmann.
She believes the proof is easily there for all the elements of the crime as defined by federal law – the bank made material misrepresentations, it made material omissions, and it did so willfully and with specific intent, consciously ignoring warnings from inside the firm and out.
She’d like to see something done about it, emphasizing that there still is time. The statute of limitations for wire fraud, for instance, has not run out, and she strongly believes there’s a case there, against the bank’s executives. She has no financial interest in any of this, no motive other than wanting the truth out. But more than anything, she wants it to be over.
In today’s America, someone like Fleischmann – an honest person caught for a little while in the wrong place at the wrong time – has to be willing to live through an epic ordeal just to get to the point of being able to open her mouth and tell a truth or two. And when she finally gets there, she still has to risk everything to take that last step. “The assumption they make is that I won’t blow up my life to do it,” Fleischmann says. “But they’re wrong about that.”
Good for her, and great for her that it’s finally out. But the big-picture ending still stings. She hopes otherwise, but the likely final verdict is a Pyrrhic victory.
Because after all this activity, all these court actions, all these penalties (both real and abortive), even after a fair amount of noise in the press, the target companies remain more ascendant than ever. The people who stole all those billions are still in place. And the bank is more untouchable than ever – former Debevoise & Plimpton hotshots Mary Jo White and Andrew Ceresny, who represented Chase for some of this case, have since been named to the two top jobs at the SEC. As for the bank itself, its stock price has gone up since the settlement and flirts weekly with five-year highs. They may lose the odd battle, but the markets clearly believe the banks won the war. Truth is one thing, and if the right people fight hard enough, you might get to hear it from time to time. But justice is different, and still far enough away.
The FBI in Seattle created a fake news story on a bogus Seattle Times web page to plant software in the computer of a suspect in a series of bomb threats to Lacey’s Timberline High School in 2007, according to documents obtained by the Electronic Frontier Foundation (EFF) in San Francisco.
The deception was publicized Monday when Christopher Soghoian, the principal technologist for the American Civil Liberties Union in Washington, D.C., revealed it on Twitter.
In an interview, Soghoian called the incident “outrageous” and said the practice could result in “significant collateral damage to the public trust” if law enforcement begins co-opting the media for its purposes.
The EFF documents reveal that the FBI dummied up a story with an Associated Press byline about the Thurston County bomb threats with an email link “in the style of The Seattle Times,” including details about subscriber and advertiser information.
The link was sent to the suspect’s MySpace account. When the suspect clicked on the link, the hidden FBI software sent his location and Internet Protocol information to the agents. A juvenile suspect was identified and arrested June 14.
The revelation brought a sharp response from the newspaper.
“We are outraged that the FBI, with the apparent assistance of the U.S. Attorney’s Office, misappropriated the name of The Seattle Times to secretly install spyware on the computer of a crime suspect,” said Seattle Times Editor Kathy Best.
“Not only does that cross a line, it erases it,” she said.
“Our reputation and our ability to do our job as a government watchdog are based on trust. Nothing is more fundamental to that trust than our independence — from law enforcement, from government, from corporations and from all other special interests,” Best said. “The FBI’s actions, taken without our knowledge, traded on our reputation and put it at peril.”
An AP spokesman also criticized the tactic.
“We are extremely concerned and find it unacceptable that the FBI misappropriated the name of The Associated Press and published a false story attributed to AP,” Paul Colford, director of AP media relations. “This ploy violated AP’s name and undermined AP’s credibility.”
Before we jump all over the FBI, it happens more than you think and has similar things happened recently in Saskatoon with false news stories planted in the media. That and the Seattle Times got it’s outrage wrong. You don’t need spyware to get an I.P. address.
The investigator who led the Department of Homeland Security’s internal review of the Secret Service’s 2012 prostitution scandal quietly resigned in August after he was implicated in his own incident involving a prostitute, according to current and former department officials.
Sheriff’s deputies in Broward County, Fla., saw David Nieland, the investigator, entering and leaving a building they had under surveillance as part of a prostitution investigation, according to officials briefed on the investigation. They later interviewed a prostitute who identified Mr. Nieland in a photograph and said he had paid her for sex.
Mr. Nieland resigned after he refused to answer a series of questions from the Department of Homeland Security inspector general about the incident, the officials said.
A spokesman for the Homeland Security Department’s inspector general said in a statement that he could confirm only that Mr. Nieland resigned in August. But the spokesman added that department officials “became aware in early May of this year of an incident in Florida that involved one of our employees.”
“While the law prohibits us from commenting on specific cases, we do not tolerate misconduct on the part of our employees and take such allegations very seriously,” said the spokesman, William O. Hillburg. “When we receive information of such misconduct, we will investigate thoroughly, and, during the course of or at the conclusion of such an investigation, we have a range of options available to us, including administrative suspension and termination.”
In an email message on Tuesday, Mr. Nieland said, “The allegation is not true,” and declined to answer any questions.
FRANK BOURASSA IS AN AMUSED, easygoing man of 44 whose standard answer, when you ask him why he beat up such-and-such a person, or got stabbed by so-and-so, or committed this or that felony, is “I don’t know, I guess for fun.” On a website he recently launched, Frank describes himself as an “insane million making Master earner,” though he does not necessarily look like an insane million-making master earner. He is a shortish guy with a nocturnal, indoorsy complexion and a faux-hawk hairdo that sometimes looks fussed over but usually not. He has a big belly that started coming into focus a few years back, during his house arrest for a pot charge. He favors old T-shirts and complicated jeans with lots of pockets and zippers, which, actually, probably did set him back a buck or two. He drives an aging Mitsubishi Eclipse in which I think I counted three different apparatuses for affixing Oakley-style sunglasses to the flip-down visors. You see, an insane master earner who makes his millions by illegitimate means “can’t just drive around in a Ferrari,” Frank explained.
“If I need a luxury car, there are luxury cars I can use, but most of everything I buy, I have to go through somebody else. You have to have discipline, or otherwise you get caught. I’m a silent partner in many things.”
Frank’s self-image may be described as not merely healthy but hyperpituitary. When I asked him where he found the lunatic gumption not only to enter into the risky business of counterfeiting but to do so at the unheard-of scale of hundreds of millions of dollars, Frank replied with a shrug: “I can do anything I want. I can go to the moon. I’m good at figuring out stuff. I could do a heart transplant if I wanted to.”
Are we to take Frank at his word? Should he be allowed by NASA to attempt a lunar landing? Should he perform your father’s triple bypass? I will say only this: Do not discount someone who apparently launched a currency-fraud scheme so cunning that he was able to rook the Secret Service and the Canadian government and then walk away from the whole mess a free and wealthy man.
This is what he did.
WHEN MOST PEOPLE look at a dollar bill, we don’t see a material object; we see magic—a totem embodying luck, labor, destiny, and one’s essential value compared with that of the guy next door. Or if we look at money practically and technically, we see such a profusion of security features as to make the notion of faking one a ludicrous impossibility. But as Frank began delving into the matter, his research bore out a simple but life-altering revelation: Limitless wealth was a craft project. Frank started loitering in counterfeiters’ chat rooms. He paid a few visits to the U.S. Secret Service’s website, which, handily, offers an in-depth illustrated guide to serial numbers, watermarks, plate numbers, and all the other fussy obstacles to the counterfeiter’s art. “It would be difficult, but obviously currency is made by human hands, so it would be physically possible to do,” Frank said. “But I thought, if I’m going to do this, I’ll go big or go home.”
Serious counterfeiters do not spend their money themselves but instead sell in bulk, and the going rate for a good bill, the Internet informed Frank, was 30 percent of face value. He reasoned that if he was going to put himself through the hassle and expense of buying supplies and so on, he should print enough in a single batch to leave himself set for life. He figured something in the $200 million range would suffice. It should be stated plainly that by the standards of most counterfeiters, printing $200-plus million is not going big—it is going insane. In fact, the hubristic volume of the operation would prove, in ways Frank did not intend, to be a major blessing in later days, when Frank’s fortune would take a turn for the worse.
Drawing on cautionary news reports of failed counterfeiters, Frank sketched out a set of best-practice guidelines for his new concern. First, “don’t ever try to pass the money yourself. You want to be as far away as possible from where the money’s being spent.” Second, “don’t sell your stuff to anyone who’s going to be passing it locally. I knew from the beginning, I needed to sell my bills to Europe or Asia.” Third, resist the temptation to print big bills. “Do twenties. It’s stupid to try to pass hundred-dollar bills anymore. People look at them all day long, hold it up to the light and everything. Nobody looks twice at a twenty.” Fourth, don’t cheap out. Most of the people who try their luck at counterfeiting do so by breathtakingly broke-dick means, with stuff you can buy at Office Depot.
“Can you make bills on a $50 ink-jet? Sure, if you want to get busted right away,” said Frank. “All the security features in a bill are basically there to stop broke fucking-moron assholes who are trying to do their thing on an ink-jet. I knew if I wanted to succeed, my bills had to be as perfect as possible, as close as possible to the way the bills are actually made.”
I can’t wait till the story of the entire counterfeiting ring comes out.