Dear Commons Community,

The Republic Report has an article written by David Halperin that provides insights into how the for-profit higher education industry relies on key government figures to promote its interests.  Using the recently released hacked emails of Colin Powell, the article describes the relationship between Powell and Jeffrey Leeds, a private equity investor.  Here is an excerpt:

“The hacked emails from former Secretary of State Colin Powell have been widely noted because of Powell’s candid remarks about topics including Hillary Clinton, Donald Trump, and nuclear weapons. But Republic Report is intrigued by a series of exchanges about the for-profit college industry between Powell and Jeffrey Leeds, a key private equity investor in, and advocate for, schools that have been sued by law enforcement agencies for defrauding students and taxpayers.

The email messages capture Powell and Leeds not only musing about politics but also addressing unfavorable media coverage of their joint involvement with the for-profit colleges, discussing possible acquisition of campuses of disgraced Corinthian Colleges, flagging business opportunities with Bill Gates and investors in Kazakhstan, and contemplating how they could persuade perceived kindred spirits in the Obama Administration to end the government’s supposed “war” on their schools.

Last time I had checked, in June, Powell was listed as the chair of the advisory board of Leeds’ firm, Leeds Equity Partners, which invests in for­-profit education and until 2014 owned a major stake in the second­ largest for­-profit college company, Education Management Corporation (EDMC). It’s not clear if and when Powell ended his involvement with Leeds, but today he no longer appears on the Leeds website.

Pittsburgh-based EDMC, operator of the Art Institutes, Argosy University, Brown Mackie College, and South University, once had a reputation for providing quality higher education, but that reputation went downhill during the George W. Bush years, as a lax regulatory environment gave for-profit colleges incentives to aggressively recruit students, raise prices, and cut funding for actual instruction. EDMC’s descent became even more rapid, as faculty, staff, and students have told me, after Leeds Equity Partners, Goldman Sachs, and another private equity firm took over 85% of the company’s stock in a 2006 leveraged buyout.

Many students, including low-income single mothers, and U.S. military veterans like Chris Pantzke and Mike DiGiacomo, fell prey to EDMC’s deceptive and coercive recruiting and financial aid practices, and they ended up dropping out, without degrees or enhanced job prospects but deep in debt. Pantzke, who suffered from brain trauma during combat and severe post-traumatic stress disorder, was recruited for a two-year art degree at an EDMC school with the promise of special disability services. He was then denied assistance after enrolling, had difficulty attending the online classes because of his disability, and found that the school had used all of his $65,000 in GI Bill benefits, while he incurred another $26,000 in student debt.

With his firm invested in EDMC, Jeffrey Leeds joined EDMC’s board of directors. He also served on the boards of other for-profit education companies, including Datamark, then led by CEO Arthur Benjamin. And Leeds’ company also invested in EduK Group, “the largest private sector provider of postsecondary education in Puerto Rico.”

EDMC, which has been getting as much as $1.8 billion annually in taxpayer-funded federal student grants and loans, was sued in 2011 for $11 billion by the U.S. Justice Department, which claimed the company defrauded taxpayers of that amount between 2003 and 2011. Five state attorneys general joined that lawsuit, and many more have been investigating EDMC.

Last year, EDMC agreed to pay fines or forgive loans worth some $200 million to settle claims with the Justice Department and 39 state attorneys general.

At the time of the settlements, Attorney General Loretta Lynch said, “Operating essentially as a recruitment mill, EDMC’s actions were not only a violation of federal law but also a violation of the trust placed in them by their students – including veterans and working parents – all at taxpayer expense.”

By then, EDMC’s enrollments and stock price had plummeted, and Leeds and Goldman Sachs lost control of the collapsing company, which was taken over by its creditors, led by the firm KKR, in 2014.

With his company heavily invested in higher education companies, Jeffrey Leeds had become an aggressive advocate against accountability for for-profit schools. Leeds has long served, and still serves, on the board of directors of the troubled for-profit college lobby organization APSCU/CECU, and he has sharply criticized regulations issued by the Obama Administration to prevent career colleges from leaving students with crushing debt.

For his part, Colin Powell, the advisory chairman of Leeds’ private equity firm, gave the keynote speech at the annual convention of Leeds’ for-profit college lobbying group, APSCU, in 2011, in Grapevine, Texas. Speaking at a time when congressional investigations and media reporting had exposed abuses at EDMC schools and other for-profit colleges, and the Obama Administration was seeking greater accountability for the industry, Powell reportedly gushed, “Our society has such a need for education and no field has more to help than career and private sector education.” He exhorted the for-profit college owners and executives at the event to “Make the case. The purpose of private sector education is to help … people strive for a brighter future.”

The article goes on to provide details on email exchanges between Jeffrey Leeds and Colin Powell regarding EDMC.  The education-industrial complex at its worst.

Tony