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May 23, 2015

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terry malloy

if anyone pays a dime to enroll in that sinking ship I've got a bridge to sell them.

anon

Is there any sense of triumph in the fact that failing law schools will lay off faculty and shrink to beyond the point of objective dysfunction to cling to survival? To what end?

Is this sort of outcome a "victory" about which to crow? Some sort of vindication because someone was able to predict that a drowning man will drown others before going down?

What has become of this enterprise?

AnonLawProf

What student in his/her right mind would enroll?!?!?

charleston

There is a sucker born every minute, but any student with a lick of sense would transfer or not enroll in the first place. Law schools, even at the higher ranks, as looking for transfers.

Barry

"What has become of this enterprise?"

Posted by: anon

It has shrunk down to its core purpose of making money for the people who run it.

They're cashing out - note that the first wave already sucked as much money out as they could without immediately destroying the school.

public interest lawyer

This might be good news because of federal liability issues.

The owners originally stated that they could not remain open because "[t]hey cannot assure the students that they will be able to use federal student loans for their full three years, and are not sure the school will be able to maintain its license and stay open."

They are now undertaking to *assure* that the school will still be open in May 2018. The federal government is obligated to back otherwise unsecured student loans to the incoming class. How is that assurance possible?

If the law school closes and the stranded students exercise their option to default, the owners may now be subject to federal prosecution for fraud. They are taking the risk of having to keep the law school open with their own dollars to avoid criminal liability. I don't see why they would do that unless they know that Infilaw, as a last resort, is willing to come in and assume responsibility.

Orin Kerr

Public interest lawyer, when you say that "the owners may now be subject to federal prosecution for fraud," can you say more about how? Who would be defrauded of what property?

twbb

I don't know if it would rise to the level of criminal fraud as opposed to civil fraud if true, but didn't the founders who pulled all the money out of the school pledge to the ABA they would donate money if necessary in order to get accreditation? If they made that promise in order to qualify for federal loans without any intention of following through that might be a problem for them.

Orin Kerr

twbb, my apologies if I'm missing the obvious, but I'm still confused: Who was allegedly defrauded of what property?

public interest lawyer

What I'm suggesting is that the federal government would be defrauded of property if the students entered this program, based on the owner's assurances that they could finish the three-year degree, and then defaulted, leaving the government liable for the loans. I'm basing this wild surmise on the owners' statements about "assurances," not on any research or experience with federal student loans. It sounded to me like a term of art from a regulation. I think the owners have good legal advice and have figured the angles. I guess, however, there's another chess move. The owners could be promising incoming students that *they* will pay any outstanding federal student loans if the school closes before the Class of 2018 graduates. That would protect them. I'd like to see the acceptance letters. The owners have enough money in their piggy banks to do that. Meanwhile the Class of 2016, which has to be much larger than the Class of 2018 (who is going to enroll in this entering class?), goes out the door with non-discharged student loans. I modify my statement about any of this being a "good thing." What's good for the owners, the faculty, the students, the legal profession, are entirely different things. It's good for the remaining faculty if the institution survives as long as it can.

twbb

Orin, again, I want to be careful here because I just don't know enough about this specific case. For all I know nothing untoward has happened. As an intellectual exercise however, if a hypothetical person obtained accreditation for his or her school (and thus access to DOE financial aid) by knowingly making a false representation, they could potentially come under the ambit of the federal criminal fraud statute, 18 U.S.C. 1001.

That statute states:
"Except as otherwise provided in this section, whoever, in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States, knowingly and willfully. . . makes any materially false, fictitious, or fraudulent statement or representation . . . shall be fined under this title, imprisoned not more than 5 years or, if the offense involves international or domestic terrorism (as defined in section 2331), imprisoned not more than 8 years, or both."

A discrete "property" to be defrauded out of is not a required element; you just need a false or fraudulent statement "in any matter within the jurisdiction" of a governmental agency, full stop. Accreditation and student loan disbursement falls pretty squarely under the jurisdiction of the executive branch in the form of the DOE.

What's interesting about that statute is it's meant to be interpreted fairly broadly, and there is pretty strong caselaw establishing that the misleading statement does not have to made directly to the government agency involved. A case on point would be US v. Wright, 988 F.2d 1036, where the 10th circuit upheld the conviction under 18 U.S.C. s 1001 of a manager who filed false water quality reports. Though the reports were sent to the state, to which the EPA had delegated responsibility (sort of like the DOE's delegation of accreditation authority to the ABA), which was enough to invoke the fraud statute. I also note that in that case there was no "property" of which to be defrauded, though that was not an issue in the case.

I would assume that there are similar civil causes of action available; even at the state level as far as I know fraud doesn't require "property" to be defrauded but simply injury. I would think that the issue of contention under a common law fraud case would be of standing--who exactly would have the right to sue for fraudulent statements.


Th

Ray Campbell

Do we know the overlap between the professors laid off and professors who signed the letter protesting management's actions to the local paper?

[M][@][c][K]

The main problem TWBB is that the accused must know the statement to be false when it was made - and the fact as recited show little evidence that the representations were false when made because they were prospective. The backers of Charleston could simply argue that fact change, one for example that he got fired (or not renewed) as a Federal Magistrate unexpectedly.

So you would have to show that the owners never intended to fulfil the promise - and you may think so, and I may think so, and anyone who is not trying to defend law schools obsessively may think so, but that is not proof.

twbb

Right, and when I said "potentially" I really did mean potentially -- proving the requisite intent would be very difficult here, absent an incriminating email (like "don't worry about giving the money back, if it ever gets to that point we'll just close the school"). My point was just that the federal fraud statute is fairly broad and could (in my opinion) easily apply to misrepresentations made during law school accreditation.

anon

In the criminal arena, it is certainly not certain.

Glad to see that, finally, these conversations are turning to concrete consequences (where appropriate) and not just endless blather about this or that.

On the civil side, see Derry v. Peck and Restatement 526.

public interest lawyer

I'm referring to this provision in the enabling statute of the student loan program, 20 U.S.C. sec. 1087(d) - "Agreements with Institutions"

a) Participation agreements

An agreement with any institution of higher education for participation in the direct student loan program under this part shall—

(2) provide *assurances* that the institution will comply with requirements established by the Secretary relating to student loan information with respect to loans made under this part;

(3) provide that the institution *accepts responsibility and financial liability* stemming from its failure to perform its functions pursuant to the agreement;

(6) include such other provisions as the Secretary determines are necessary to protect the interests of the United States and to promote the purposes of this part.

My question was about the owners' initial statement that they had to shut down because they were unable to make "assurances," for purposes of student loans, that the school would be open for three more years. The decision to admit a Class of 2018 is an "assurance" based on the facts they know *as of last week.* Suppose this "assurance" is unreasonable or false? Any liability? The regulation that authorizes discharge of the loans is at 34 CFR 685.214 - Closed school discharge.

[M][@][c][K]

PIL

18 USC s 1001 has been held to encompass reckless statements that were false. Nonetheless, I think that barring a complete absence of grounds for a present belief that the class of 2018 could graduate as of now, it would be a tough case to prosecute.

The behaviour of the law school administration is disgraceful (though certain defenders even here don't seem to think so) but that does not mean that they can be charged with criminal conduct. Still, there is much that is presently non-public....

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