The big for-profit "college" is at long last in a heap of trouble. Basically a Ponzi scheme targeting specific groups of people and running them into piles of debt (so that the "college" could collect piles of cash from federal aid programs), their heavily-advertised "programs" - the ads generally run during daytime television shows like "Maury Povich" - suck people in with big promises of new and lucrative careers in next to no time.
What they don't mention is the huge costs associated with their "programs"; they inflate tuition so that students are forced into in-house loans to cover the costs that federal aid can't cover. The "college" makes out on both sides: they suck down the federal dollars, then "finance" the students for the rest. 60% of the folks they rack up debt on end up defaulting. Admissions administrators there made used-car salesmen look benign by comparison; some prospects received calls as often as seven times a day, pressuring them to sign up.
And most of them had no idea that the "credits" don't transfer to other colleges or universities. Promised high-paying jobs after they "graduated", in most cases those jobs never materialized. And as for the Portland connection?
Under the scenario laid out by the Consumer Financial Protection Bureau, Genesis and Aequitas were little more than well-paid participants in a Corinthian scheme to leverage more money out of the federal government.
Genesis is run out of Beaverton:
Genesis Financial Solutions, a Beaverton consumer finance company founded by prominent Portland philanthropist Irving Levin, has originated and serviced Corinthian's in-house student loans since 2008.
ASFG LLC, a subsidiary of Lake Oswego-based Aequitas Capital, agreed to buy Corinthian student loans, which enabled Corinthian to originate $444 million worth of loans. The deal provided a desperately needed source of liquidity. In return, ASFG reaped millions of dollars in fees.
Unsurprisingly, Neil Goldschmidt figured prominently into things, at least where Levin was concerned:
In 1987, ITT Corp., a publicly held New York-based conglomerate, was interested in entering the credit-card business, particularly high-interest cards issued to people with poor credit.
ITT's credit-card boss was a former concert cellist named Irving Levin. Part of Levin's interest in coming to Portland was personal--he saw it as an attractive place to raise his family. He was also aware that Oregon, unlike many states, had no laws limiting the amount of interest banks and credit-card companies can charge. A January 1988 state analysis, found in Goldschmidt's archives, notes that "ITT appreciates several aspects of Oregon's banking code, particularly the absence of usury laws."
Levin established the new company, First Consumers National Bank, in Portland in 1988, but he still needed a change in Oregon law to begin operations.
Archives show that Goldschmidt reached out to Levin, who was one of the first dinner guests invited to the newly renovated governor's mansion, Mahonia Hall. "The company, food and wine all left their impression, and we came away feeling optimistic about the chances to resolve regulatory issues," Levin wrote to Goldschmidt in January 1988.
Records show that changing Oregon banking law to accommodate Levin's company was one of Goldschmidt's top priorities in the 1989 legislative session. The bill enabling First Consumers to begin operations sailed through the Legislature.
In due course, ITT sold First Consumers, and Levin started up another operation which, like First Consumers, focused upon high-interest credit cards issued to people with bad credit. His buddy Goldschmidt sat on the board of this company from 1997 to 1999, at which time Levin sold the company to Household Finance for $300 million. Goldschmidt became a multimillionaire. Levin started Genesis Financial Solutions, which runs "internal finance operations" for companies including Best Buy and Zales. Six years ago, they began running "internal finance operations" (student loans) for Corinthian.
But now, the salad days are over for the folks at Corinthian: the feds have classified the "college" as a predatory lender, and the CFPB filed suit against them two months ago in an effort to force them to repay at least half a billion dollars in student loans. As a result, Corinthian is trying to sell off its 100 locations immediately.
Thus far, Levin is adamant that his company did nothing wrong - although they were sued by a former Corinthian student who charged that the company had falsified loan documents and stuck her with a loan that she never asked for. Genesis settled for an undisclosed amount.