WHILE LA RAZA DEM FEINSTEIN HAS VOTED FOR ANYTHING THAT
BENEFITED ILLEGALS, INCLUDING DREAM ACT DISCOUNTS, HER HUSBAND, RICHARD C. BLUM
IS FUCKING OVER THE UNIVERSITY of CALIFORNIA FOR EVERY DROP OF BLOOD HE CAN
SUCK OFF.
Smart Money
The University of California invests
$53 million in two diploma mills controlled by UC Regents chairman Richard C.
Blum
June 30, 2010 - by Peter Byrne
Photograph by Curtis Cartier
A YEAR
ago, Richard C. Blum, then the chairman of the Regents of the University of
California, spoke at the Milken Institute's Global Conference 2009, held at the
Beverly Hilton in Los Angeles. The corporate confab was hosted by Michael
Milken, the "junk bond king" who went to prison in the aftermath of
the savings and loan fiasco in the 1980s.
Milken,
who is barred from securities trading for life by federal regulators, has since
re-created himself as a proponent of investing in for-profit educational
corporations, an industry that regularly comes under government and media
scrutiny in response to complaints of fraud made by dissatisfied students.
At the
conference, Blum, who is the husband of U.S. Sen. Dianne Feinstein and a
professional Wall Street speculator, sat on a panel called "The New
University and Its Role in the Economy," alongside the presidents of the
Massachusetts Institute of Technology and Arizona State University. The panel
focused on how universities can best serve the corporate jones for tech-savvy
employees by recruiting smart freshmen with scientific talent. One panel member
urged treating universities as "laboratories of business ideas and
products."
As
someone who oversees investment policy decisions for the University of
California's $63 billion portfolio, and as the largest shareholder in two
for-profit corporate-run universities (in which UC invests), Blum had a unique
perspective to share at the conference. He advised public universities to
attract business-oriented students with clever advertisements as vocational
schools do.
"It's
like anything else," he said. "It's how you market it."
Marketing strategy aside,
Blum has taken on two seemingly disparate roles—one as an advocate for a
nonprofit university, and the other as an owner of two for-profit educational
corporations. However, as a regent, Blum has taken actions that, intentionally
or not, have enhanced the value of his vocational schools. Are his loyalties
conflicted?
For several years, Blum's
firm, Blum Capital Partners, has been the dominant shareholder in two of the
nation's largest for-profit universities, Career Education Corporation and ITT
Educational Services Inc. The San Francisco–based firm's combined holdings in
the two chain schools is currently $923 million. As Blum's ownership stake
enlarged, UC investment managers shadowed him, ultimately investing $53 million
of public money into the two educational corporations.
The Regents'
conflict-of-interest policy requires them to "avoid the potential for and
the appearance of conflicts of interest with respect to the selection of
individual investments," and says "public officials shall not make,
participate in making, or influence a governmental decision in which the
official has a conflict of interest." And the California Political Reform
Act of 1974 provides civil and criminal penalties for officials who ignore
conflicts of interest—as UC makes clear in ethics training presentations
specifically created for university officials.
The Board of Regents,
however, is self-policing and tolerates situations that cause others concern.
John M. Simpson of Consumer Watchdog, a nonprofit education and advocacy
organization based in Santa Monica, says that's wrong.
"It
is hugely inappropriate for the University of California to invest in
for-profit colleges when it should be promoting public education," Simpson
says. "And something stinks when university investments end up in
companies largely controlled by a regent.
"To
the average fellow on the street, this would seem to be a conflict of interest.
It is up to Mr. Blum and the UC treasurer to explain how it could not be a
conflict of interest."
THE BUSINESS OF EDUCATION: While UC students were protesting
budget cuts last spring (far right), the firm owned by UC Regent Richard Blum
(right) was enjoying record dividends from its investment in for-profit
colleges. Photograph by Jim Block
Disaster Capitalism
Due to serial tuition
hikes by the UC Regents, their gutting of many classes and educational
programs, and the imposition of a 15 percent reduction of in-state admissions
to the university, the gateway to higher learning in California has seriously
narrowed. As a UC regent, Blum voted in favor of all of these measures—and such
actions have indirectly benefited his corporate colleges. But his schools are
not the only ones profiting from the financial disaster that besets many public
universities.
On
March 13, 2010, The New York Times investigated the situation, reporting
that many chain schools, including ITT Educational Services and Career
Education Corporation, "have exploited the recession as a lucrative
recruiting device while tapping a larger pool of federal aid ... selling young
people on dreams of middle-class wages while setting them up for default on
untenable debts, low-wage work and a struggle to avoid poverty."
The
Times noted
that for-profit schools are directly benefiting from cuts in education,
especially in California where state-funded universities and community colleges
have been "forced to cut classes just when demand is greatest."
Indeed,
ITT Educational Services recently reported to its shareholders that due in
large part to "higher unemployment rates among unskilled workers,"
company revenue increased by $300 million, to $1.3 billion. Responding to a
recession-induced increase in demand for vocational training, ITT increased its
tuition by 5 percent; 70 percent of ITT's revenue comes from federal tuition
aid programs. And ITT's profits rocketed in tandem with new enrollments even as
UC and other public universities were turning away students for lack of
programs.
Nationwide,
vocational school students are paying billions of dollars in tuition to
stockholder-owned education corporations, primarily using federal grants and
loans guaranteed by taxpayers. In the United States, the dominant vocational
education corporations are the University of Phoenix, Corinthian Colleges,
Strayer University, Kaplan (owned by the Washington Post Company), Career
Education Corporation and ITT Educational Services. Collectively, these
companies operate hundreds of schools and teach hundreds of thousands of
students, most of them eligible for public and private financial aid. The
chains offer training for such technical professions as radiological
technician, beautician, automotive mechanic, medical billing clerk, web
designer and massage therapist. But they also offer degrees in engineering,
computer science and business. Increasingly, they are promoting online
education, which limits their operational costs, even though virtual courses
are often not suitable for teaching nursing, cooking or car repair. As a result
of delivering substandard education, some for-profit schools suffer from
accreditation problems, according to recent news reports.
On a
fairly regular basis, government regulators—including the U.S. Department of
Justice—have accused chain schools of preying upon low-income individuals and
active military service members. Typically, state and federal agencies report,
chain school recruiters load students down with high-interest rate loan
packages that, on average, amount to $30,000. As a result, fewer than 70
percent of enrollees graduate. Such a high dropout rate requires the
corporations to continuously wage television, radio, Internet and print media
marketing campaigns aimed at enticing students who want to better
themselves—and who are, not incidentally, eligible for state-guaranteed loans.
Unfortunately,
those who do graduate with two-year associates degrees often find out that the
curriculum did not prepare them for the technical requirements of the jobs they
seek. And often, government reports note, when they do find work, their wages
do not match the inflated salaries promised by school recruiters. When dropouts
and underpaid graduates default on their student loans, the taxpayers remain on
the hook.
FIGHTING BACK: UC–Santa Cruz students
protested fee hikes in March. Photograph by Curtis Cartier
Profits of Doom
Blum's
investment bank entered the for-profit education business in 1987, when he
purchased a large block of shares in National Education Corporation, an
Irvine-based vocational school that specialized in awarding mail-order
diplomas. He joined the company's board of directors, sitting alongside former
U.S. Sen. Barry Goldwater and David C. Jones, a former chairman of the Joint
Chiefs of Staff.
Two years later,
according to a report in the Los Angeles Times, Blum got in hot water
when angry shareholders filed a lawsuit contending that "the company
issued rosy financial statements while Blum and other directors were selling
their shares." The shareholders claimed in court documents that Blum sold $2.7
million worth of shares at about $24 per share after he learned, a day before
the public announcement, that the company president planned to resign. When the
share price bottomed out at $3.50 a share after the announcement, Blum reinvested
in the troubled company.
A new
president was hired in 1994 to reform the school and bring it into the age of
computerized learning. By 1995, Blum had gained control of 11.5 percent of
National Education Corporation stock after combining his firm's holdings with
that of a nonprofit investment fund, Commonfund, for which Blum worked as an
investment advisor. (Commonfund manages investments for more than 1,400
universities, including UC.) In 1997, Harcourt, the textbook publisher, bought
National Education Corporation for about $750 million, or $21 a share. Blum and his private partners profited
handsomely.
After
he became a regent in 2002, Blum greatly increased his investment in for-profit
education. In June 2005, Blum Capital Partners bought 5 percent of the stock,
worth $24 million, in Lincoln Education Services Corp., a $300 million
operation with 32 campuses. Blum also acquired large blocks of shares in ITT
Educational Services and Career Education Corporation. These two purchases
followed dips in the companies' stock prices brought about by allegations of
corrupt practices made against them by government agencies.
In the
case of ITT Educational Services, federal and state regulators investigated the
company in 2004 after shareholders and students alleged that it falsified
student attendance, grades and job placement records in order to keep federal
financial aid flowing. When the news broke, the price of ITT shares halved.
Blum
Capital Partners pounced, purchasing reams of devalued ITT stock. It soon owned
the largest block of stock in the company, achieving a 10 percent ownership
stake in 2006. Not long afterward, the investigations were closed, with no
findings of wrongdoing. By May 2010, ITT's revenue exceeded $1.3 billion, and
Blum Capital Partners' stake was valued at $415 million.
Similarly,
Blum Capital Partners bought shares of Career Education Corporation, a $1.8
billion operation that serves 90,000 students, following a corruption
controversy. In 2004, Career Education Corporation was investigated by multiple
federal agencies after whistleblower lawsuits alleged that the school had
allowed failing students to remain enrolled in order to keep its pipeline to
federal grants and loans tapped. In 2005, after 60 Minutes televised an
unfavorable story about the chain school, the value of its stock dropped by
more than half. Blum Capital Partners bought in for $33 million. By May 2010,
its stake had grown to $508 million, making Blum's firm by far the largest and
most powerful shareholder of the chain school. A partner with Blum Capital
Partners, Greg L. Jackson, sits on the board of Career Education Corporation.
UC is
an investor in both educational corporations. Even as Blum was buying stock in
Career Education and ITT Educational Services, UC financial records show that
the university's investment managers were actively buying and selling these
same stocks—to the tune of $53 million. The university was not just holding
onto these stocks to accrue value over time (as a prudent manager would do), it
was day trading them in large amounts, as much as $2 million a trade, thereby
affecting the daily price of these stocks. Did
the fact that these two companies were largely owned by a regent—a Wall Street
speculator who sat on the university's investment committee—not pose at least
the appearance of a conflict?
Not to
UC officials. When UC Treasurer Marie Berggren was questioned about the
propriety of UC investing in Blum's for-profit college chains, her spokesman,
Steve Montiel, replied by email, "The Treasurer's Office doesn't track
Regents' holdings in making decisions about security selections, though Regents'
holdings are disclosed as a matter of policy."
In
other words, the treasurer does not review the Regents' financial disclosure
statements, which are public records, for potential conflicts. Of course, UC's
investments are also public records available to the Regents, so a regent could
easily avoid conflicts, should he or she choose to do so, by not taking
controlling positions in companies in which the university invests.
Blum
did not respond to repeated requests for comment. But UC spokeswoman Lynn
Tierney called on his behalf, saying that the university recruits its students
from the intellectual elite of applicants. Only those with very high grade
averages and SAT scores get in, she said. Therefore, "UC is not losing
students to Blum's vocational schools, and there is no conflict of
interest," she said.
The
bottom line is that UC is investing tens of millions of public dollars in two
for-profit school chains largely controlled by a regent and Wall Street
arbitrager who sits on UC's investment committee. Shown the documentation used
to support this story Noah Stern, president of Associated Students at the
University of California, says, "Student trust in the Regents was already
shaky. In light of this revelation of investment abuse, we need a structural
overhaul of the university governance system."
This
story is part of a ongoing series of investigative stories sponsored by Spot.us
and six Bay Area newsweeklies: 'UC Regents: An Elite Club That Runs a Vast
University.'
*
US
“Fifty Wealthiest Lawmakers” list: A Congress of the rich, by the rich, and for
the rich
By
Eric London
27 August 2012
27 August 2012
Last week’s report by
Washington, D.C. political blog The Hill details the vast wealth of the
nation’s legislative representatives and serves as an indictment of the
anti-democratic nature of the American political system. The “50 Wealthiest
Lawmakers” list shows that dozens of congressional politicians have amassed huge
fortunes while simultaneously slashing the wages, benefits and social services
of the American people.
In other words, not
only are these members of Congress overseeing a massive transfer of wealth from
the working class to the ruling class; they are also profiting from this
transfer.
The report reveals
the bipartisan composition of the extremely wealthy in congress. Seven of the
top 10 richest members of congress are Democrats; overall, Republicans make up
60 percent of the list.
According to The
Hill, 17 members of Congress have amassed fortunes of over $20 million, and
a total of 35 members of Congress have a net worth valued at over $10 million.
These numbers are
slightly skewed compared with past surveys. Due to the passage of the STOCK
Act, members of Congress now are legally required to report mortgages as
liabilities. The STOCK Act was passed after revelations were made regarding
banks giving members of Congress and their staffs “friendly” deals on their
personal mortgages in return for favorable legislation.
The list also sheds
light on the nature of wealth accumulation amongst the super-rich in America.
Among the elite today, wealth accumulation has less to do with productive work
than it does with parasitism, inheritance, and family ties.
Rep. Michael McCaul
(Republican of Texas) tops the list with a total fortune of $290.5 million.
McCaul’s wealth comes in part from his marriage to the daughter of Lowry Mays,
the founder of radio giant Clear Channel Communications. Belying the claim that
these fortunes come from productive hard work, McCaul’s 2011 financial report
explained that “certain assets owned by spouse were acquired via gift from
spouse’s parents.”
Democratic Party
leadership is featured prominently at the top of the list.
Sen. John Kerry
(Democrat of Massachusetts), the party’s nominee for president in 2004, is
second, with a net worth of $198.8 million. Like McCaul, much of this wealth
comes from family. His wife Theresa Heinz’s “numerous family trusts” have
helped push Kerry’s fortune up $5 million in the last year.
Democratic Senators
Jay Rockefeller (West Virginia), Richard Blumenthal (Connecticut), and Dianne
Feinstein (California) are also featured in the top 10. The respective fortunes
of these three senators ($83.1 million, $80.1 million, and $47.2 million) come
in large part from family inheritances and trusts.
Feinstein’s net worth is partially explained by her marriage
to investment banker Richard Blum, who also sits on the University of
California’s Board of Regents. Blum has been a
strong supporter of privatization and fee hikes. Feinstein also
reported owning homes in the Lake Tahoe area, the Coachella Valley, the
Hawaiian Island of Kauai, and San Francisco.
House Minority Leader Nancy Pelosi
(D-CA) ranks as the thirteenth wealthiest member of Congress, with a net worth
of $26.4 million. Much of Pelosi’s fortune comes from her husband Paul Pelosi,
a land developer. Pelosi’s fortune actually declined since 2010, but this can
largely be explained by $6 million in mortgages on two properties in
Washington, D.C. and San Francisco that are now counted as liabilities.
Republican Rep. James
Sensenbrenner of Wisconsin reported a net worth of $10.2 million. Among other
reported assets, “his prized stamp collection … is now worth at least $150,000.”
Maine Senator Olympia
Snowe, a Republican, ranks 35th on the list. A portion of her $9 million
fortune comes from investments in Education Management Corporation, a
for-profit post-secondary education company. Snowe’s husband, former Maine
governor John McKernan Jr., sits on the company’s board of directors.
All of the
Congressional members on the list amassed their vast sums of money on the backs
of the working people they purport to represent.
The web site
OpenSecrets.org reports that land speculation is the industry in which members
of Congress make the most money. Financial speculation, securities and
investments, oil and gas production, and commercial banking are also featured
in the top 10 profitable industries for members of Congress.
The report from The
Hill underlines what was already clear about American politics: the vast
majority of Americans are given no representation in government. Their
“elected” representatives are chosen from the rich, by the rich, and for the
rich.
The lives of these
members of Congress compare starkly with the realities that their constituents
face on a day-to-day basis. In the years following the financial crisis, the
average American family has lost 40 percent of its net worth. Half of America
lives either under the poverty line or one paycheck away from it. In some
states, a quarter of the population struggles to afford food. Meanwhile,
Congress cuts unemployment benefits, funding for health care, education, and
housing. Both parties have agreed that slashing pensions and food stamps are
next on the agenda.
For the richest
members of Congress, these cuts will result, as they evidently have already, in
an increase in net worth. For their working class constituents, the cuts pose a
more urgent threat: hunger, disease, poverty, and a loss of life.
No comments:
Post a Comment