Stephen J. Lubben has contributed an article on the bankruptcy filing by Corinthian Colleges to the New York Times. Here are some excerpts from the article, titled “Corinthian Colleges’ Lean Business Model Leaves Little for Creditors”:

“Corinthian Colleges, the for-profit education company familiar to corporate law professors for its appearance in textbooks about securities regulation, now has a chance to appear in bankruptcy and restructuring texts as well.

“Corinthian filed for Chapter 11 bankruptcy protection in Delaware on Monday, along with two dozen affiliates. Its petition lists more than $100 million in debt owed to its secured lenders and at least $100 million more in unsecured debt. Its liabilities include $1.25 million in “trade debt” owed to Barclays Capital, most likely connected to Barclays’s attempts to sell the company, and hundreds of thousands of dollars owed to a host of law firms, which have handled an onslaught of litigation. Corinthian also owes an “unknown” amount to the Department of Education. It listed assets of $19.2 million. . . .

“It has been a long slide for Corinthian, once a Wall Street darling. The company, founded in 1995, bought more than a dozen struggling vocational colleges and by 2010 enrolled more than 110,000 students online and at 100 Everest College, Heald College and WyoTech campuses nationwide. But federal and state regulators accused it of falsified placement rates, deceptive marketing and predatory recruiting, particularly of low-income students. The last of its campuses closed in late April. . . .

“An article on the website for Career College Central, a trade publication, noted in 2010 that one of the crucial ‘advantages’ of for-profit colleges was that the ‘schools don’t spend money on building big campuses or tenured faculty.’ In short, they don’t have many assets.”

Lubben’s complete article is available at: http://www.nytimes.com/2015/05/07/business/dealbook/corinthian-colleges-lean-business-model-leaves-little-for-creditors.html?ref=education&_r=2

Actually, none of this should come as any surprise to either Corinthians’ creditors or its stockholders. When the dot.com bubble burst, several things became very apparent about the new “digital economy”: the stock prices were being driven by “exuberance” and not by actual corporate assets or profits–that is, there were no hard assets and there would never be any hard assets, and there was only the promise of profits; likewise, the most successful members of this new “entrepreneurial” class understood very clearly how ephemeral  their “holdings” were and as slickly and as quickly as possible exchanged them for oodles of hard cash.

As Lubben notes, Corinthian Colleges once had about 100 campuses nationwide. But those “campuses” were nothing more than storefronts from which students were recruited into academic programs that few of them would ever complete and that, when completed, would yield largely worthless degrees.

To a very large and very real extent, Corinthian Colleges was little more than a money-transfer outfit: it specialized in recruiting students who would qualify for federal aid, facilitated their applications for that aid, and used the lion’s share of the generated revenues to expand its recruitment of more students. For every dollar spent on instruction, five or six dollars were spent on recruitment. The ballooning enrollment numbers drove up the stock price, creating great wealth for a selected group of individuals who operated the corporation and who invested intelligently, if cynically, in it. But Corinthian Colleges was the equivalent of an automobile manufacturer that lines up hundreds of thousands of customers, attracts large numbers of investors, and then never actually makes more than a very few complete automobiles.

It ought to be criminal, but in the present hyper-corporatized environment, it is simply “business.”