WASHINGTON (AP) — The troubled for-profit education company Corinthian Colleges Inc. and the Education Department reached an agreement late Thursday that has 85 of the company’s 100-plus campuses going up for sale, and 12 others closing.
Corinthian owns Everest College, Heald College and WyoTech schools. It serves about 72,000 students in 26 states and Ontario, Canada, and receives about $1.4 billion in federal financial student aid annually. The highest concentrations of students are in California, Florida and Texas. Students generally receive career training in areas such as auto mechanics or health care.
Jack Massimino, Corinthian’s chairman and chief officer, praised the agreement in a statement.
“This agreement allows our students to continue their education and helps minimize the personal and financial issues that affect our 12,000 employees and their families,” Massimino said. “It also provides a blueprint for allowing most of our campuses to continue serving their students and communities under new ownership.”
The company declined to identify the schools that will close. However, the company did say that Heald College was for sale in a recent SEC filing.
(a) As previously reported by the Company in a Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on June 23, 2014, the Company and ED mutually agreed upon an MOU providing for the immediate release of certain Title IV funds and establishing the framework for a transition plan that is intended to result in the sale of certain of the Company’s schools and the teach-out of certain other schools, together with a monitor to review certain aspects of the Company’s ongoing operations.
On June 25, 2014, the Company’s board of directors approved a plan (the “Heald Plan”) to sell all of its Heald campuses (the “Heald Schools”). The Company has not yet secured a buyer for all or any subset of the Heald Schools, but has allocated internal resources to identify potential buyers and evaluate proposals for these campuses. The Company intends to execute definitive sales agreements with one or more third parties for the sale of the Heald Schools within approximately six months.
Until the sale is completed, the Heald Schools will be accounted for as discontinued operations. Net assets held for sale are required to be recorded on the balance sheet at estimated fair value, less estimated costs to sell. Accordingly, the Company anticipates recognizing a non-cash charge during the quarter ending June 30, 2014 related primarily to impairment of long-lived assets and recording the estimated fair value of the schools included in discontinued operations, but such charge cannot be reasonably estimated at this time, beyond the Company’s expectation that the charge will be material.
(b)-(d) The Company is unable in good faith to determine the type of costs (other than impairment charges) it will incur in connection with the Heald Plan or to estimate the total amount or range of amounts expected to be incurred in connection with the Heald Plan and for each major type of cost associated with the Heald Plan, including any portion that will result in future cash expenditures. The Company will file an amended report on Form 8-K under this Item 2.05 within four business days after it makes a determination of such costs and an estimate or range of estimates for such costs, including any portion that will result in future cash expenditures.
Ted Mitchell, the undersecretary at the Education Department, said the agreement will “protect students’ futures and fulfill the Department’s responsibilities to taxpayers moving forward.”
“Ensuring that Corinthian students are served well remains our first and most important priority, and we will continue to work with Corinthian officials and the independent monitor on behalf of the best interests of students and taxpayers,” Mitchell said.
The department put Santa Ana, California-based Corinthian on heightened financial monitoring last month with a 21-day waiting period for federal funds. That came after Corinthian failed to provide adequate paperwork and comply with the department’s requests to address concerns about the company’s practices. The department said the concerns included allegations of falsifying job placement data used in marketing claims to prospective students, and allegations of altered grades and attendance.
The sides earlier reached an initial agreement that allowed the company to obtain an immediate $16 million in federal student aid funds to keep operating. But a more detailed plan was to be worked out that spelled out the future of the campuses.
Under the terms of the agreement, the campuses will inform students of their options and each campus will have a plan that allows students to complete their program, if they choose to do so. The company has agreed to only use federal aid funds for daily operations and will hire an independent monitor. Under a number of circumstances, students will be eligible for a refund paid for using a reserve fund of at least $30 million from Corinthian’s funds.
The company faces multiple state and federal investigations. California Attorney General Kamala Harris has sought a court order that would force the company to stop advertising and to start telling prospective students that it is looking to sell or shut down its colleges.
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