InfiLaw is trying to sell Florida Coastal. If it did so, it would be left with only one law school, namely Arizona Summit, since Charlotte closed down several months ago after losing its license. But Arizona Summit is also in trouble with the ABA and must be suffering financial pressure from rapidly shrinking enrollment.
Measured by the LSAT scores of their entering classes, the InfiLaw toilets (including defunct Charlotte) are among the bottom ten of the 200 or so ABA-accredited law schools. Their median LSAT scores of 143 and 144 represent the 21st and 23d percentiles, respectively—down in the bottom quarter of the pool of people taking the LSAT. Graduates of these über-toilets also face perfectly dreadful prospects of employment. Of last year's graduates, 22% from Arizona Summit and 40% from Florida Coastal were unemployed ten months after graduation, and many others were in short-term, part-time, or non-legal (very likely low-paying) positions. Only 1% from Arizona Summit, and none at all from Florida Coastal, got Big Law. No graduate from either school got a federal clerkship.
Florida Coastal recently had to answer allegations from the ABA of non-compliance with various standards for accreditation. Scam-dean Scott DeVito has claimed that his toilet school is "fully compliant, based on [its] data". Elsewhere we have discussed the accuracy of that claim.
A change of ownership could hold up any disciplinary action against Florida Coastal, but the ABA has the power to prevent any "major change in" Florida Coastal's "organizational structure"—presumably by withdrawing accreditation or imposing other sanctions if the change goes through without the ABA's consent.
I doubt, however, whether Florida Coastal will change hands as a going concern (rather than as a package of land and other assets). Who, after all, would want to buy a failed toilet that has seen its first-year enrollment shrink by more than 70% in six years? that struggles to keep the middle half of its class within the 140s on the LSAT? where a minority of students hold long-term, full-time jobs of any kind ten months after graduation? that faces disciplinary action on multiple grounds from its accrediting authority?
Perhaps some readers of this article will assist the InfiLaw scamsters by posting bids below. Would anyone like to start with 1¢?
I still don't see how anybody thought Infilaw was viable given the reality of the market, or why Sterling Partners though it was a good venture capital investment.
ReplyDeleteSure, if you're on the inside, why wouldn't you try to vote for dollars for yourself, and you'll sell any lame-ass "feasibility study" in exchange for dollars. So-called businesses vie for free money all the time, especially from foundations and gubmint. But when you look at the bros and broettes on the Sterling Partners website, they look like folks who like to sit around counting their money. How were they bamboozled by this...?
Oh well, that's the "market" for you, I guess. At least Infilaw's debts are dischargeable in bankruptcy, and Sterling can get a write-off. For the graduates and students, not so much...
InfiLaw was immensely profitable while it lasted. The InfiLaw scamsters ran off with a fortune—primarily by ripping off "gubmint", as you put it. The three InfiLaw toilets used to be huge, with a couple of thousand students each. Annual receipts, a large part of which came from student loans, must have run into the hundreds of millions of dollars. (Suppose 5000 students per year, with average tuition of $30k [probably an underestimate]. That's $150 million a year.)
DeleteFar from being bamboozled, the InfiLaw scamsters knew exactly what they were doing. They wanted to wring cash out of those toilets while they could. David Frakt, in the course of his application for the post of dean of Florida Coastal several years ago, presented a strategy for the school's long-term viability; but the dean of Florida Coastal cut it short, telling Frakt to leave immediately. Why? Because he and the other InfiLaw scamsters didn't want anything to disrupt their rip-off of students and, above all, the public (which foots the bill for unreimbursed student loans).
The InfiLaw scam thrives on an arbitrage opportunity stupidly offered by the federal government: payments in any amount designated by the law school for any student admitted by the law school, with all risk absorbed by the student and the government. Yes, the jig is now up for InfiLaw. So what? InfiLaw is laughing all the way to the bank, with its billions in ill-gotten gains. Presumably the robber barons of Sterling Partners will soon pull out of the law-school scam and find another governmental boondoggle to exploit.
I think they made a profit in the final accounting.... it's like a mine: You lay out a huge amount of capital to open it up, you run it as hard as you can, when the gold or copper vein is depleted, you shut the mine down. Shutting it down doesn't mean you failed; it just means you're done with that particular resource.
DeleteWhat on earth are you talking about @7:25. They've already extracted hundreds of millions in loan dollars unless you believe Infilaw reinvested all the money. They knew the gravy train was going to end eventually.
ReplyDeleteAh, OK. It was pump and dump, not actually trying to make something viable long-term.
DeleteI guess that's why I'm not in that line of business.
Sucks to have a conscience, doesn't it?
DeleteThe Rise and Fall of a Law School Empire:
ReplyDeletehttps://www.wsj.com/articles/the-rise-and-fall-of-a-law-school-empire-fueled-by-federal-loans-1511544524
I believe they will stay in the law school game as long as they can, or until the Federal Loan Gravy Train stops rolling. You have to appreciate that once you have a school up and running, and ABA-blessed, the Federal money comes in UP FRONT, and at NO RISK, each semester like clockwork. All they have to do is maintain ABA accreditation, enroll students at "market price" and on sending in the loan papers, the Department of Education will instantly cut them over a check for the full amount, no questions asked. And if a student drops out or fails, the school does not have to give any part of the money back. The Feds will only look to the student for repayment.
ReplyDeleteThat's a pretty sweet deal compared with some other kinds of industries private equity firms get involved in, that require a lot of money for plant, equipment, technology, etc., and have heavy state and federal regulation on top of that.
I believe that Infilaw got back all of its money and more the first year each school had ABA accreditation, and the first wave of that sweet, sweet, student loan money started rolling in.
They made a ton of money-and the risk here is that they find some local politician who thinks it's a great idea to have a local law school, so s/he gets the local state u-or even the local community college-to buy it. Law schools have become the latest vanity projects of politicians, much like post offices were in the '30s.
ReplyDeleteAnd if not the state U, some other college. Didn't Arizona Summit enter into a deal with a Florida based HBCU?
I'm with you on land, Old Guy, but what other assets save used furniture and wall hangings are there to sell? Used law book sets used to be a decent business for people who brokered them but on-line research has sent that business the way of the dinosaurs and the rumble seat.
ReplyDeleteWell, assets are assets. I don't suggest that they're worth much. Probably land and cash make up the bulk of the value of Florida Coastal.
DeleteThere may also be substantial liabilities.
Incidentally, the dinosaurs are still with us: we call them birds.
And TTT law students are still with us: we call them pigeons.
DeleteI suppose there might be some secondary law journals that ended up making good and the back issues of which some other law school might want to buy. Law review/journal articles are of such little use that few are available on-line, perhaps because then their bread-and-butter, the libraries of other law schools which subscribe to their paper editions, would turn off the cash flow.
A bargain at any price.
ReplyDeleteRemember the Shel Silverstein poem "Sister for Sale"? This is a sign of desperation. The "professors" and deans should have known better than to work for a private equity firm that can sell off and cuts its TTTT losses.
ReplyDeleteAnd where exactly would they ever have found jobs? One thing I've noticed is that a lot of laid off law profs, having broken into the inner circle of hackademia, are able to secure sinecures as undergrad teachers of some kind of supposedly law-related tripe.
DeleteJohn Marshalls rep really isn't relevant - the school will acquire the reputation of UIC. What if Princeton bought New York Law School? What would the Woodrow Wilson School of Law be ranked?
ReplyDeleteSome years ago, it was reported that Princeton's law school ranked in the top 20 on surveys. As you know, Princeton hasn't had a law school since the middle of the nineteenth century.
DeleteI wonder if there's even any land involved? Looking at the "campus" on Google Maps, it appears the school is held entirely within a standard office building, among many others, situated on a modest lake.
ReplyDeletePretty view off the back deck and all, but I doubt Sterling owns it; looks more like a lease job. All the better for Sterling to put no skin in the game and just rake in the government loan money.
Perfect! Sub-let the space for the remainder of the term with a bit of build-out for the new tenant and you're gone. The loss (if any, depending on the local market) will pale compared to the millions syphoned off from chumps who took out loans.
DeleteI think we should all chip in and buy this one, too, for OTLSS and/or Campos and/or Nando and/or the TLSC.
ReplyDeleteAnyone who thinks Infilaw owns land and buildings can visit the following public pages:
ReplyDelete1. Arizona Summit -
http://www.parallelcapitalpartners.com/news/2015/2015/07/14/parallel-capital-partners-acquires-one-north-central
2. Charlotte -
https://www.foundrycommercial.com/properties/office/charlotte-plaza.stml
3. Florida Coastal -
https://www.foundrycommercial.com/core/fileparse.php/2530/urlt/0026191-8787-baypine-rd-2-pg-9-6-2017.pdf
By the way, this last page shows Florida Coastal’s leased space is currently on the market.
Thanks for digging that up. So the entire building that Horrida Coastal occupies is on the market for leasing. The toilet school must have given the landlord notice. Has it shown the students the same courtesy?
DeleteIf InfiLaw has no land, its two remaining toilet schools must not be worth much in a fire sale.
My first reaction was "the perfect crime," but then those only exist in fiction. Crime in real life is never perfect for the victim.
DeleteI think what really gets under my skin is the effrontery these people showed by heavily recruiting minority students by telling them they were being kept out of the profession by racism, but don't worry, we're your friends, just sign these loan papers.