A Case Study of the Illegal and Unethical Behavior in
Corinthian Colleges, Inc.

Benancio Varela benancio.varela@yahoo.com GM 591 Leadership and Organizational Behavior
Professor Horst
August 10, 2011

Introduction Corinthian Colleges, Inc., (CCi) by way of more than 102,000 students enrolled as of March 31, 2011, is one of the leading post-secondary education companies in North America. Their duty is to change students' lives. They present diploma and degree programs that prepare students intended for careers in demand or for advancement in their chosen fields. The corporation operates 105 schools in 25 states and 17 schools in Canada. CCi has 122 Everest, Heald and WyoTech campuses nationwide. CCi serves the great and growing segment of the population seeking to acquire career-oriented education. They propose programs in areas that include health care, business, criminal justice, transportation technology and maintenance, construction trades and information technology. CCi in addition offers students the chance to take classes online through Everest College in Phoenix and Everest University in Florida. Their business was founded in 1995 and they completed an preliminary public offering in 1999. Historically, CCi has developed through acquisitions as well as through organic growth. Organic growth consists of opening new division campuses, remodeling, escalating or relocating existing campuses and adopting curricula into existing colleges. As of December 31, 2010, they had roughly 17,700 employees in North America, as well as 6,600 full-time and part-time faculty members. They have an educational approach. They are paying close attention to the ongoing maturity of their employees is helpful to our students, and therefore to our company and its shareholders. Toward that end, they are making widespread investments in training to build people capability, reduce voluntary turnover and build up our entire organization. [ (Massimino, 2010) ]
Problem Statement How can changes in CCi be made to help decrease the illegal and unethical behavior that the company is having with its fraudulent course of action designed to recruit students and overcharge the federal government for the cost of such education? Corinthian Colleges behavior has effected numerous of people working for the company. Whether it's the students being effected or it could be the employees. With the circumstances that is at hand, the students are the ones who are suffering the most out of this situation. The real true nature of the problem is that CCi has been doing illegal and unethical behaviors that developed a fraudulent course of action designed to recruit students to their colleges and overcharge the federal government for the cost of their education that they are receiving. Thereafter, a Congressional Committee launched an investigation of such practices; the U.S. Department of Education released data showing that the loan repayment rates for Corinthian enrollees were well below the level required for federal loan program eligibility; and the Company disclosed that its enrollee default rates had significantly increased, and were continuing to do so. As a result of these revelations, the Company's stock fell from $9.25 on August 3, 2010 to $4.49 on August 20, 2010. The extent of the unethical behavior is gigantic because since they are losing both students and employees due to this nature. When it was announced by the U.S. Department of Education that the loan repayment options for the students were well below the federal requirement, it asks the question as to where is that extra money going too? This continued to do so and it caused their stock to drop from $9.25 per share on August 3, 2010 to $2.92 per share on August 15, 2011: that is a drop in $6.33 in a matter of just one calendar year.

Literature Review In this section, I will present to you research used to assist in analyzing CCi's illegal and unethical behaviors both in the corporate office and how their financial aid department is signing the students up for loans that are below the federal minimum repayment rate. These studies explain illegal behaviors and unethical practices. "Ethical conduct is expected of all organizations whether they are for-profit or not-for-profit (hereafter nonprofits). Nonprofits which include governments, government agencies and Internal Revenue Services’ (IRS) Code 501 (c) organizations provide very essential public goods, humanistic services, generate a significant part of our gross domestic product (GDP), and employ millions of our nation’s workforce." (Bhandari, 2010) What this part of the article is talking about is conduct is to be ethically and not unethical. It is good information that the federal government came up with as the best way for all organizations should run their ethical conduct in the business world. This works for CCi since being slammed for performing unethical practices both at the main campus and the other campuses across the United States. "Predicting behavior has been the major objective of psychological theories, and some of them have been doing a very good job. The theories may be very useful in investigating unethical behavior." (Chang, 1998) This article talks about how behavior is a vital source in the business world today. You would need to be sure that the behavior is used in a proper way and you don't want to have a bad reputation with every single employee being in a negative mood every single day. You don't want to be a student and have to talk with anyone from the school then all of a sudden they show you unethical behavior that makes you feel uncomfortable. That's why businesses should take trainings that help them with their behavior. "Whistleblowing involves present or former organization members reporting illegal, unethical, or illegitimate activities under the control of organization leaders to parties who are willing and able to take action to correct the wrongdoing. Organizations are taking greater interest in whistleblowing. Some have established special departments for the receipt of whistleblowing reports." (Keenan, 2002) The article presents a study that examined the qualitative differences between upper-level, middle-level and first-level managers with respect to a variety of individual, organizational, communication climate and moral perception variables related to whistleblowing. The media and press portray almost on a daily basis incidents related to illegal, fraudulent, or unethical behaviour. It has become almost commonplace to read or hear about such activities as insider trading, bribery or kickbacks, stealing company funds or property, sexual harassment, and negligence resulting in environmental disasters.
Analysis
The illegal and unethical practices that CCi is responsible for fraudulent course of action designed to recruit students to their colleges. This section of the paper will provide an analysis of the problems that is facing CCi and the direct causes of the problems. I will also break down as to how CCi tried to fool the federal government and Department of Education by lowing their loan repayment rates below the federal standards. As I stated before hand, their business was founded in 1995 and they completed an preliminary public offering in 1999. Historically, CCi has developed through acquisitions as well as through organic growth. Organic growth consists of opening new division campuses, remodeling, escalating or relocating existing campuses and adopting curricula into existing colleges. As of December 31, 2010, they had roughly 17,700 employees in North America, as well as 6,600 full-time and part-time faculty members. It was just on Sunday, August 14, 2011, that the U.S. Appeals Court revives a suit against CCi. " The U.S. Court of Appeals for the Ninth Circuit revived a lawsuit on Friday against Corinthian Colleges Inc. that alleges that the for-profit institution received federal student aid while improperly paying its recruiters based on how many students they brought in." (Keller, 2011) For-profit colleges run by the Apollo Group, Corinthian Colleges and the Washington Post Company are being investigated by Florida on allegations of unfair and deceptive enrollment practices. In a regulatory filing, Apollo said a notice from the Florida attorney general included a subpoena to produce documents and information about its University of Phoenix business from January 2006 to the present. The Florida attorney general's Web site also says Sanford-Brown College (part of Career Education), Kaplan (part of Washington Post) and Everest College (part of Corinthian) are subject to the investigation. Others include Concorde Career Colleges, Argosy University of Florida, Keiser School and Medvance Institute. (Reuters, 2010)
Solutions
CCi with their fraudulent and illegal ethics that they are doing are downright criminal in taking money behind their students backs. They need to resolve this issue in order to gain the trust of its students, employees, and share holders back to put an end to these behaviors. After evaluating this situation, I can see at least 3 possible solutions to solve the problem. Solution 1 is to find the leadership of the company and show them better techniques that their employees should use. Solution 2 is to grow the department and show them the ropes as to how to sign their students up for loans at the federal standards set by the U.S. Department of Education. Solution 3 is to have team building exercises if the team believes that there are problems inside the company itself and not with other issues at hand. For the first solution, it would have to be changing the leadership views within the company. Doing this will possibly change the focus of the company have everyone involved with the strategy process. The positives in doing this is an improvement of the relationship that board of directors and the employees will have. For doing leadership changes within the company will possibly allow the company to work as one cohesive unit. The negatives in this solution could be that the original leaders of the divisions would not want to change their ways since they believe that those ways don't need changes and always say that there is nothing wrong with the group. One could say "Why change something that isn't wrong?" Solution 2 consists on growing up all the departments so that nothing gets by and is viewed as equally as everyone. In particular is to allow the financial department to sign their students with the correct information about their loans when signing up for school. They already had problems when they were signing them under the federal issued loan rates that are required. They signed these students with loans with a low percentage and it caused a stir with high loan repayment rates that are illegal in the United States. If they have trainings to show everyone the correct percentage to sign everyone with then the students wouldn't have to worry about having high monthly payments when they are payments are repaying their loans to the lenders. One negative that could arise is that they could back to the old ways and say to the students that hey we will give you this loan at this rate and you can pay this much per month to pay it off. The third and final solution that I would recommend would be to have team building exercises to increase productivity within the business itself. Having team building exercise are great way to build trust, develop communication, and resolve conflicts. One activity could be the trust exercise. What I mean by that is an exercise is when you stand in front of someone of the group and that person is to catch you when you fall backwards. If they catch you without falling, then you know you can trust that person with everything. If they don't want to participate in the exercise, then you know that they can't be counted on as a team player. The pros would be to create team strategies and to build trust amongst everyone. The cons could be that no one wants to do these exercises and could care less. Building together with team could allow them to be one cohesive unit and it would help eliminate problems that could be in the workplace.
Reflection
This assignment was a positive influence on my development of my life in personal, academic, and professional. It is good that I learned techniques that can help reduce problems that can arise if you know you are doing things under the table. It is best to step forward and take claim to the problem otherwise it will be a matter of getting the federal government involved. I have learned ways to step up into the leadership role and take things by the horn. In the end, this assignment and class had help provide me with leadership skills and organizational behavior to be successful in my life in all aspects of my professional, personal, and academic view of life.

References
Bhandari, S. B. (2010, October 1). Ethical Dilemma of Nonprofits in the Agency Theory Framework. Journal of Leadership, Accountability & Ethics , pp. 33-40.
Chang, M. K. (1998, December 1). Predicting Unethical Behavior: A Comparison of the Theory of Reasoned Action and the Theory of Planned Behavior. Journal of Business Ethics , pp. 1825-1834.
Keenan, J. P. (2002, March 1). Whistleblowing: A Study of Managerial Differences. Employee Responsibilites & Rights Journal , pp. 17-32.
Keller, J. (2011, August 14). U.S. Appeals Court Revives Suit Against Corinthian Colleges Over Recruiter Pay. The Chronicle of Higher Education .
Massimino, J. D. (2010). CCi, Employee Handbook. Santa Ana.
Reuters. (2010, October 23). Florida Investigates For-Profit Colleges. New York Times .