Charlotte School of Law sister institution also facing major heat
One little-understood part of the Charlotte School of Law debacle is the private-equity backing that has financed the school since its opening. The school’s owner, Florida-based InfiLaw, is controlled by Sterling Partners and Boston-based ABRY Partners. Sterling specializes in investing in for-profit education ventures.
Dan Primack, a journalist who covers private equity for the Axios website, wrote an interesting note today about troubles at the Charlotte school’s sister institution, the Arizona Summit Law School. He questions why Sterling and ABRY didn’t make sure InfiLaw didn’t operate more ethically. InfiLaw also operates a school in Florida.
He notes that U.S. Secretary of Education Betsy DeVos faces a tough decision on whether to allow federal-backed student loans for the Arizona school, given her advocacy of for-profit education. Charlotte School of Law no longer has such federal backing, which is putting its future at risk. It is Charlotte’s only law school.
Here are Primack’s comments:
Earlier this week, the American Bar Association announced that it was putting Arizona Summit Law School on probation, due to egregiously low bar exam passage rates. This made ASLS only the second law school in the country to be put on probation by the ABA ― the first of which, Charlotte School of Law, subsequently was shut off from the federal student loan spigot by the U.S. Department of Education.
The connection? These are two of three for-profit law schools owned and operated by InfiLaw, which in turn is owned by private equity firms Sterling Partners and ABRY Partners, alongside a bit of debt and equity co-invest from Ares Capital Corp.
- How bad is it? Last year, ASLS students taking the bar exam for the first time passed at just a 24.6% rate. The national average was 64.2%, while local rival Arizona State University came in at 78.8%. In Charlotte, things got so bad that the school secretly paid “at risk” graduates to delay taking the bar exam until after taking a third-party prep course. And before you think this is some cut-rate program, one year of attendance at ASLS runs over $67,000.
- What went wrong? Who knows? Seriously, I mean that. A spokeswoman for Sterling Partners said that the Chicago-based firm does “not comment on matters related to InfiLaw.” When I pointed out that Sterling has actually commented plenty in the past, extolling the virtues of for-profit education, she said she’d get back to me. Never happened. I also called the Sterling managing director currently responsible for InfiLaw, but his EA said he’d need “permission” to speak with me. Permission from who? No comment, and apparently it wasn’t forthcoming since he never called back. Also silent was minority equity-holder ABRY Partners, which actually wiped all references to Infilaw from its website last summer. As for InfiLaw itself or Ares Capital…. well, you guessed it.
- What now: The big question going forward will be if the Department of Education ― now under new management ― gives ASLS the same treatment that it gave Charlotte. It seems like a fairly cut-and-dry case, but new Ed Sec Betsy DeVos is a well-known proponent of for-profit ed, to the point that she even hired an advisor whose last job was as a lawyer for a for-profit ed company under federal investigation. It’s also worth noting that DeVos has personal exposure to some Ares-related CLOs (collateralized loan obligations), but there is no indication that they are invested in InfiLaw.