Wednesday, October 14, 2015

Plundered School Struggles to Survive

By Professor Doom

     Across the country, an untouchable caste of administrators is bent on plundering our institutions of higher education, grabbing every penny while everyone else involved in the institution looks on in despair. The gentle reader might believe I overuse the word “untouchable,” but I want to once again demonstrate it really is the most accurate word to describe our Poo Bahs in higher education.

      One of the many schools I’ve covered is Cooper Union, a fine old school that gave free, quality education to students for more than a century. It can do so no more, as administration successfully looted the coffers.

     The linked article above indirectly hints at one of the major problems today: there is no investigative reporting. I’ve been at schools where the fraud is so…open, so carelessly done that any investigative reporter willing to devote a few hours to it could get enough material to make a whole career. Time and again when I highlight fraud at schools, I link to articles showing that it has been going on for years, if not a decade or more, in a manner that most everyone on campus knew about…but nobody in a position of power would do anything about it. Do investigative reporters even exist anymore?

     The school involved is Cooper Union, which intends to go from being a free school to a $19,000 a year school. It was obvious to me, long before the report came out, that the school had been plundered. I’m sure it was obvious to the faculty there that the school was being plundered. Faculty are helpless at this stage, as are the students, and alumni…accreditation has long since abandoned any attempt at keeping schools legitimate.

     “More broadly, the report is an indictment of otiose trustees, egotistical technocrats, and a culture where university administrators gone wild can effectively railroad all stakeholders, including students, faculty, alumni, and even the attorney general’s office.”

     What the report fails to address is how administration got this much power. The key issue is accreditation, the regulatory agency responsible for making sure schools are responsibly run, ethically managed, has been taken over by the same administrators that run the schools. 

      The Federal government, unfortunately, trusted accreditation, and thus indirectly gave our institutions of higher education a free ride to plunder through the student loan money, or, failing that, through a school’s endowment, leaving it destitute.

      Cooper Union, the plundered school, is a non-profit school. I maintain that the issue here of rapacious administration is actually occurring at many of our schools. It takes little effort to see such exists at for-profit schools (see my blog’s posts on Academy of Art University), but I assure the gentle reader much the same occurs at many of our state schools.

      So why did Cooper Union get the scrutiny that is so sorely lacking at so many of our schools? Turns out, it was a lucky break:

“State Attorneys General, it seems, can conduct this kind of investigation into any nonprofit college; the peculiarities of the Cooper Union situation, with its various cy près petitions, can for these purposes be ignored. If you’re at a college where administrators have gone mad, and the trustees are doing nothing, and the alumni and faculty can do nothing, then maybe – just maybe – your state AG might be able to help…”

     As I’ve examined in detail before, it’s completely hopeless to expect accreditation to do anything about a school, no matter how corrupt—much like feudal laws, written by noblemen, exempted the nobility from most every crime, the accreditor’s rules, written by higher education administrators, have been written in such a way that it’s all but impossible for an accreditor to hold higher education administrators accountable for their actions, much less close a school. 

     Accreditation will turn a blind eye, but the Attorney General is taking a look.

“…Although, frankly, in this case the AG’s intervention comes a decade too late.”

     Like most scandals in higher education, it takes a long time before even the most open fraud finally is “discovered,” even when everyone on campus knows about it. Administration is in the perfect position to squelch most any investigation. It’s what we saw at UNC, where admin plowed under investigations and harassed whistleblowers for 18 years before the evidence of the fraud there was simply too overwhelming to be ignored. Of course, it doesn’t help that accreditation’s own rules make it all but impossible for fraud to be spotted.

“The board was happy to pay [the Poo Bah] handsomely, despite the fact that Cooper Union is very small, and its members seemingly lapped up rhetoric about “growth” and “investment,” despite the fact that a school with free tuition can’t grow, and investments, by definition, are designed to elicit future cashflows...”

      Poo Bahs, and administrators in general, want growth and nothing else, and are willing to sacrifice everything for growth. Trouble is, Cooper Union offered free tuition: growing is a terrible thing to do when you have limited resources and growth will only strain those resources. That’s the obvious reality of a free tuition school.

      Because administration is out of control, and untouchable, obvious reality is irrelevant:

“[The Poo Bah], however, never aspired to modesty. Rather than preserving a storied institution for perpetuity, [The Poo Bah] decided that he should come in and shake things up. He had big visions, and expensive ambitions, and no real way to pay for any of them, but he was in charge, and he proceeded to embark upon a series of ultimately ruinous changes…”

     The Poo Bah tried to raise the money for his obscenely grandiose plans, but couldn’t. That didn’t matter, he spent the money he didn’t have…with nobody to stop him, he wiped out the entire free school’s finances by engaging in idiotic, ruinous business deals that were obvious on their face as being idiotic and ruinous.

      A quick summary of how vile these deals were:

“..first unacceptable condition was that its $175 million loan was to be secured by a mortgage on the Chrysler Building land. That land was granted to Cooper Union, in perpetuity, by Peter Cooper’s heirs – it was never designed to be collateral for short-term liquidity of dubious necessity….
The second unacceptable condition was that the liquidity was not going to be short-term at all: the loan would take the form of a 30-year mortgage, with a prepayment penalty so enormous (it was $81 million in 2012) that the loan could never be restructured…. The loan would last the full 30 years, even though Cooper Union had no real plan for where it would find 30 years’ worth of interest payments…”

     Are these deals not every bit as outrageous and ethically wrong as a state school Poo Bah getting a high end restaurant built as his personal dining room? Again, I maintain administration is untouchable in our institutions of higher education, and it doesn’t matter if the school is state, non-profit, or for-profit.

“…Faced with a loan whose terms were unacceptable on multiple levels, the Cooper Union board did exactly what you would expect them to do. They agreed to everything, and paid Campbell a hefty bonus for his troubles...” 

--Yes, a hefty bonus as a reward for destroying a school established in the 19th century, and with the resources to last another century, provided it remained small. Like I said, untouchable.

     Now, realistically, there should be mass arrests: every trustee of the school should be arrested, as well as the Poo Bah. Then the AG should completely negate all the contracts signed by the Poo Bah and his cronies, as unconscionable. Then the AG should start clawing back the money stolen by the trustees and Poo Bah. Regrettably, this isn’t happening…hey, did I mention how untouchable these guys are?

     More next time, but the gentle reader need not hope that I’ll discuss how the plunderers will pay for their crimes.

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