Thursday, February 7, 2019

Toilets Я Us, Part VII: Profiting from the "non-profit" scam?

Notorious scam-chain InfiLaw is trying to turn über-toilet Florida Coastal into a non-profit institution.

After the closure of Charlotte and the announced closure of Arizona Summit, Florida Coastal is the last so-called law school in the InfiLaw scam-chain. Suddenly the profit-oriented firm InfiLaw is eager to turn its sole surviving über-toilet into a "non-profit" entity. Why? Florida Coastal offers some odd-sounding justifications, all of which ring hollow in light of InfiLaw's profit-seeking motive.

Especially interesting is the following:

Florida Coastal officials said that at the end of the process, the law school would be an independent entity. But they didn’t rule out some kind of role for InfiLaw, its parent company.

“We’re not exactly certain what InfiLaw’s final role, if any, will be. But they will not be the owner,” said Jennifer Reiber, Florida Coastal’s dean of academic affairs.

Other institutions, like Grand Canyon University, that have converted to nonprofit status have signed management agreements with their former parent companies after splitting off. Kyle McEntee, the executive director and co-founder of Law School Transparency, said he questioned what kind of arrangement the new nonprofit entity would have with InfiLaw.

“Will InfiLaw be managing or does it hope to manage the law school?” he said.

So it seems that "non-profit" status might involve an "agreement" whereby InfiLaw would "manage" "non-profit" Florida Coastal—for consideration, bien sûr. Is this sort of sweetheart deal with the former owner the new face of the law-school scam? How can an entity be approved as "non-profit" if it intends to cut a questionable deal of this kind?


  1. O.G., I have seen some serious fortunes made in this way, Iniflaw has just added a new twist. Saw a man get quite wealthy running a boarding school for juvenile delinquents. Fourth-rate physical plant but all the state wanted was for someone to take these un-adoptable kids off their hands for a reasonable monthly fee. He taught the trade to a younger fellow who struck pay dirt in group homes for the developmentally disabled business. That was an even sweeter deal. The state's housing finance authority gave him 100% financing. He could never keep the buildings, but big deal, they cost him nothing. He hired low wage workers trying to build a resume and then sold maybe 30 $1.00 portions of canned sweet corn all day long out of a $6.00 number ten can of the stuff. Nice work if you can get it. Nursing homes work the same way but are generally for-profit. When the customer runs out of money Good King Medicaid takes over. Wouldn't THAT make small-town solo practice look good?

    But Infilaw's scam is far more creative. The three examples I gave all involve people who the state needs to take care of but doesn't want to deal with. No state has any interest in Florida Coastal's survival. Infilaw is tapping into the twin pipelines of politicians saying they are helping those traditionally excluded and paper shufflers whose jobs will end about five seconds after the student loan spigot is shut off.

    I had many clients tell me of their sure-fire plan to game the non-profit system for profit. I easily shot all of them down, usually on the point that you can never get your capital back out. But there are ways to do it and I doubt anyone at the IRS is paying anywhere near enough attention to the scam as it now exists.

    1. Private prisons and foster care are other examples of the rip-off that you describe. Real horrors occur in both venues, but the state doesn't care (or, as you more delicately put it, "doesn't want to deal with" the populations in question).

      If Florida Coastal is allowed to siphon money off to InfiLaw under cover of "non-profit" status, something is badly wrong with governance and administration.

  2. In other news, fifth-tier New York Law School has received a negative financial outlook from Moody's:

    Reportedly New York Law School is rapidly depleting its reserves. Sounds a lot like Indiana Tech.

    1. Penn State and U of New Hampshire annexed independent toilets for the prestige value, Western Michigan is renting out its name to a toilet, U of Vermont wants nothing to do with its local toilet, U of Illinois at Chicago annexed a toilet that has long served as the toilet of choice for politically connected dopes who will get a city/county/state job upon bar passage but cannot get into any legitimate school. Who wants NYLS and why?

    2. UMass Dartmouth law school appears to be catching on. The July 2018 bar passage rate was 92.6% - third in Massachusetts. As readers may recall, UMass Dartmouth was established through the acquisition of Southern New England School of Law an state only non ABA accredited law school. Under UMass Dartmouth the school achieved ABA accrediation. This leaves Massachusetts School of Law as the only non ABA school in the stated.

      I figured that UMass Dartmouth would eventually attract better students than the Massachusetts toilet schools.

    3. Don't be so quick to give U Mass Dartmouth credit. Only 27 of its graduates took the exam in Massachusetts for the first time in July 2018—out of 71 people who enrolled for the Class of 2018:

      I don't know what led You Ass Dartmouth to an unusually good result on that one exam, but the small number of people taking the exam is one factor. Many law schools deter their poorest students from taking the exam; some even go so far as to offer them a large bribe. Does You Ass Dartmouth engage in such practices? I don't know, but an über-toilet that draws most of its students from the 140s is unlikely to see naturally stellar results on the bar exam.

  3. People get all worked up about Private (for profit) and Public (not for profit) schools. To me there is no difference. There is really no such thing as a truly private or truly public school anymore, and has not been for many years. All "private" colleges, military academies, law schools etc. take some public (government) money, and all "public" universities take some private money, frequently tens of millions. A law school that describes itself as a "public" not-for-profit school is going to charge a high tuition and promise gullible law school applicants jobs that don't exist, just as the private "for profit" law schools do. Fools who know, for a fact, that in today's economy there are all kinds of jobs, in many fields, good paying jobs doing all sorts of things, still decided to waste years of their lives and go deeply into debt pursuing jobs in a field where 10-100 jobs per vacancy is the norm, and has been the norm for at least a decade. That's pretty much their fault, and the smart students stopped going to any but the very top law schools a long time ago. Also, when did new law school graduates start deciding not to sit for the bar exam a few months after they graduate? I graduated in 1995, and literally did not know one single person who decided to skip he bar exam. . .

    1. You are correct about there being little difference, but for the wrong reason. It's not about getting some private or some public money, it's about lining the pockets of the people who run the circus. For-profits can pay dividends and (hopefully) eventually sell the business at a profit. Not-for-profits pay bloated salaries, benefits and retirement plans to the people in charge. They get no dividends or sales proceeds, but at this point who would buy Florida Coastal? Infilaw's game is up, they can no longer maintain the for-profit model so their best move is take the school non-profit, giving away its worthless capital, and milk it as a hired gun for-profit law school management company. It will only prolong the agony of present and future lemmings, but at this point Infilaw's only remaining good move is to dog it for cash money any way they can until it goes down the toilet.

    2. In regards to the economy, the Bureau of Economic Analysis has updated their website. The website provides tools to graph the real GDP by industry data and compare industries. The economic term “real” means that the data has been adjusted for inflation.

      I will tell you the numbers. But graphing the data on the BEA website provides a better illustration of the staggering decline of the legal industry. In 1997, the real GDP of the legal industry was $214.8 billion. But in 2017, real GDP had fallen to $210.7 billion, a decline of 1.9%. Over that same period of time, the U.S. economy grew 56.7%. The decline in the legal industry over the last 2 decades is not due to a one time drop during the Great Recession. When the U.S. economy declined 2.54% in 2009, the legal industry did decline a whopping 12.2%! The legal industry also declined in 2005, 2010, 2012, 2013, 2014, 2015, and 2017. While the U.S. economy has grown since the Great Recession, the legal industry continues to decline. Another number that illustrates the decline of the legal industry is the share of GDP. In 1997, the legal industry represented 1.86% of the U.S. economy. By 2017, the legal industry represented 1.17% of the U.S. economy. That is a decline of about 37%.

      These numbers reflect a decline in demand for legal services. Trolls will come on this blog and write comments about how they got legal jobs and everyone who failed to get a job is a loser. Of course a percentage of law grads will obtain jobs. There is still some demand for legal services. However, the demand for legal services has significantly declined over the past 2 decades. So there is not enough demand to employ the legions of law grads churned out by law schools.

      The data also debunks the other claim by trolls that the decline in the legal industry just reflects a general decline in the economy. Not only has the tech sector grown significantly, but many other industries have grown as well. It’s ludicrous to go to law school, invest 3 years and $250k to learn a “skill” that is valued less and less by employers and consumers, when there are so many other possible career paths that require less time, are far cheaper, and are highly sought after by employers.

    3. Does this new requirement in Canada to pledge, I guess at registration time, to diversity, etc. have a reasonable chance of adoption in the US? In other words, would the state bar organizations, take any chances of losing members, a plurality of which are non-practicing, to force an oath which not only the individual may not agree with, but may potentially expose them to liability? Just to maintain a sterile law license?

    4. The article claims that Horrida Coastal would benefit from "removing a for-profit label that has become toxic for many students".

      What is meant, I imagine, is that the label is toxic for many law schools, in that it (allegedly) harms them by driving students away. Should we put the error down to garden-variety illiteracy or to some trendy misuse of the word toxic?

      The for-profit law schools, one and all, are über-toilets. Is that a surprise? After all, they cannot readily compete with the not-for-profit schools, which benefit from tax exemptions and don't have to return money to shareholders.

      That point aside, though, there's little difference these days between for-profit and not-for-profit law schools. As was mentioned above, the latter simply blow their ill-gotten gains on their personnel, rather than on shareholders.

    5. Interesting, 6:41. Expect it to be challenged within the Ontario bar, if not through the courts.