Trouble remains following failed for-profit schools' revival

With a history of fraud discovered by auditors and investigators, and poor outcomes for students, the company drew only one interested buyer: a student loan debt collection firm that had formed a nonprofit educational company called Zenith Education Group.

A little over one year after Zenith took the helm, a review of the school's operations by The Associated Press shows that despite ostensibly new oversight by the Obama administration, the business model for what had been a failing chain of career training schools hasn't fundamentally changed.

The Education Department has permitted Zenith, the new owners, to recruit students using large-scale telemarketing and paid media campaigns that sometimes advertise programs that no longer exist.

Ominously for students and the government, recent graduates told the AP they are struggling to find work that would allow them to pay back their student loans.

"The Department of Education sold these schools to a firm that had no experience in providing education and insufficient motivation to genuinely fix the business model," said David Halperin, a Washington lawyer and consumer advocate who helped identify problems at Corinthian.

—A January 2011 whistleblower lawsuit alleged that Corinthian employees routinely fabricated employers to make it appear that unemployed graduates had landed good jobs in their chosen careers.

—Undercover investigators at the Government Accountability Office enrolled in Everest, Corinthian's flagship among its schools, and got passing grades for obviously plagiarized or incorrect assignments.

—A lawsuit by California's attorney general, filed in 2013 and amended in 2014, alleged rampant lying to students about job placement and cited internal marketing documents that identified Corinthian's best prospects as people with "low self-esteem" who have "few people in their lives that care about them."

After years of payouts to investors and multimillion-dollar bonuses for its executives, Corinthian had few assets, 70,000 students and massive legal trouble.

"There was this strong sense, from the media communications standpoint, where they said 'Do we really want all these students getting thrown out of school,'" said Robert Shireman, a former deputy undersecretary who left the department in 2010.

"Somewhere in there, someone came up with ECMC," Education Credit Management Corp., the nonprofit student debt collection company based in Oakdale, Minnesota, that controls Zenith.

A large portion of the student body was "at risk," and Corinthian had defrauded students through false promises of future employment and deprived them of a functional education, it said.

[...] reminiscent of the subprime mortgage crisis, Zenith said Corinthian had walked off with money from government-backed loans and left everyone else in the lurch.

[...] at Zenith are executives who oversaw Corinthian's accreditation, student finance operations and its hard-charging recruitment call centers.

Samples of recruitment calls from Zenith's call centers found that 11 percent of student contacts in November for Everest's physical campuses contained statements that merited review, including unsubstantiated statements about Everest's tuition, the likelihood of graduates finding jobs, child care options for students and the ability to transfer Everest's credits to other schools.

Under Zenith, an addendum to Everest's enrollment agreement said credits "will probably not be transferable to a college or university" and that an Everest degree "will probably not serve as a basis for obtaining a higher level degree at a college or university."

Separately, an AP reporter briefly registered last summer for classes at Everest in computer science to get a firsthand impression of Zenith's operations and then withdrew during a trial period before the bill of about $3,500 came due.

When Zenith took control of Everest, it shut down the school's online paralegal program as a result of its terrible track record, but continued to advertise the program on its website, in paid search ads and in correspondence with prospective students.

[...] Everest's online marketing materials continued to promote associates degrees in criminal justice and homeland security, programs that have been permanently phased out.