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Education Department fires law firm overseeing the turnaround of Corinthian Colleges’ former schools

Students waited outside Everest College in City of Industry, Calif., last year to get their transcriptions and information on loan forgiveness and transferring credits. (Christine Armario/AP)
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The Department of Education is dumping the law firm charged with overseeing the turnaround of dozens of campuses once owned by Corinthian Colleges, the defunct for-profit chain that lost access to federal funds for lying to the government about its graduation and job placement rates.

When ECMC Group purchased more than 50 Corinthian campuses and created Zenith Education Group to run them in November 2014, the department insisted the company select an independent monitor to make sure the new owner steered clear of the mistakes made by Corinthian. ECMC, a student debt collector, choose Hogan Marren Babbo & Rose, a Chicago-based law firm headed by the department’s former general counsel, Charlie P. Rose.

Are Corinthian Colleges’ former schools on the mend?

Critics questioned the department’s approval of Rose to oversee the turnaround, given his ties to the agency and its interest in seeing the transition succeed. The attorney served in the department from 2009 to 2011 but was instrumental in the creation of the gainful employment rule to limit how much debt students amass in career-training programs. Still, his law firm represents for-profit colleges, brokered the sale of Corinthian’s assets and has an arrangement with Zenith that has raised suspicions of a conflict of interest.

An investigation by the Associated Press discovered that by Zenith hiring the firm as legal counsel, it benefited from an attorney-client privilege that obligates the monitor to act in the company’s interest. The agreement also shielded Hogan’s work from outside scrutiny, but the department updated the terms to prevent Zenith from making changes to the monitor’s reports before the government got a look, the AP said.

“We approved Mr. Rose’s appointment as monitor because he has a unique understanding of our regulations and expectations. He’s also someone who was instrumental in crafting the Gainful Employment regulations. That said, we have informed Zenith and Mr. Rose that as we enter this next phase of Zenith’s development, we believe it is time for a new monitor with a different background and set of capabilities,” Dorie Nolt, a spokeswoman for the Education Department, said in an email.

Education officials said the department is looking for a new monitor with a more investigative and prosecutorial background. Rose did not immediately return calls for comment.

How dozens of failing for-profit schools found an unlikely savior: A debt collector

A series of reports from the monitor did show the ECMC was struggling to clean up the mess left behind by Corinthian. Rose, who led the process, said in the reports that Zenith employees inaccurately described the financial aid process and pressured prospective students to enroll, the same sorts of tactics Corinthian was known to employ. The monitor also found errors in the way the company calculated completion rates on its website but said the firm corrected the problem.

On the other hand, Rose said Zenith lived up to its promise to reduce tuition by 20 percent and issue up to $10,000 a year in grants to needy students in the first five months of the $24 million sale. He praised the company for presenting students balanced information about its move to cap enrollment or phase out programs with poor completion and job placement rates. All of those findings, however, are thrown into question in light of the AP investigation.

In response to the investigation, ECMC chief executive David Hawn issued a statement defending Zenith’s efforts to transform the for-profit colleges into premier nonprofit schools.

“Without question, I continue to reaffirm that we have a long way to go in transforming our schools into a model of what career school training is meant to be. No one knows better than we do that we still have work to do,” he said. “Our disappointment is that the story failed to report on the magnitude of change we have made in our first year.”

He said the company has made “substantial progress” in “improving affordability, implementing a thoughtful and robust curriculum reform effort and creating student-centered admissions.”

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