March 06, 2019

Senator Warren and Colleagues Demand Answers on Shamefully Weak SEC Settlement with Corinthian College Executives

Text of the Letter (PDF)

Washington, DC - Today, United States Senator Elizabeth Warren (D-Mass.) led U.S. Senate Committee on Banking, Housing, and Urban Affairs Ranking Member Sherrod Brown (D-Ohio), U.S. Senate Democratic Whip Dick Durbin (D-Ill.), and Senator Richard Blumenthal (D-Conn.) in sending a letter to Securities and Exchange Commission (SEC) Chairman Jay Clayton seeking answers about last week's feeble settlement with two top Corinthian College executives who materially misled the public about the financial status of the company prior to its May 2015 collapse.

Corinthian College shut down in May 2015 amid ongoing questions from the Education Department and while facing fraud charges from federal and state regulators. This collapse affected shareholders, cost taxpayers tens of millions of dollars, and left tens of thousands of students with useless college credits and no way to continue their education. The collapse left scores of former Corinthian students on the hook for millions in fraudulent debt for worthless degrees.

On February 28th, 2019, the SEC announced a settlement with former CorinthianCEO Jack Massimino and former CFO Robert Owen. The settlement revealed that they failed to properly disclose to investors and the public that the Education Department found that they had used "questionable accounting," resulting in a "substantial risk for Corinthian's continued access to federal student loan funding ...and severe financial and regulatory risks."

This settlement was shockingly small. Mr. Massimino was fined $80,000. Mr. Owen was fined $20,000. Neither admitted any wrongdoing as part of the settlement, and the SEC did not bar them from being an officer or director of another publicly-traded company or for-profit college.  These fines represent far less than Corinthian's compensation package worth up to $9.6 million received by Mr. Massimino and the college's compensation package worth up to $2.3 million received by Mr. Owen from 2011-2013. The Education Department is still pursuing scores of former Corinthian students in debt collections today for amounts that exceed these fines.

"This weak settlement by the SEC is an insult to the victims of Corinthian's fraud.  It neither holds executives truly accountable for their misdeeds nor deters future bad behavior," wrote the senators. "It represents a loss for taxpayers, investors, and the thousands of students that Corinthian defrauded."

The lawmakers requested an explanation of the rationale for the settlement and a briefing on this matter as soon as possible.