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No Limit to Wealth and Power: The College Admissions Scandal

April 17, 2019

Uncategorized

Michael Geiger

No Limit to Wealth and Power: The College Admissions Scandal

Wealth. Fame. Privilege. Entitlement. Whatever the origins and whatever the reasons, the new college admissions scandal sheds harsh light on a terribly broken system which provides opportunities to the wealthiest of the wealthy while denying opportunities to those without means. The ringleader, William Rick Singer and his organizations have been taken down as he has been cooperating with authorities. His cadre of accomplices including his professional test-taker, college admissions test administrators, and even a network of athletic coaches on the take at the subject universities, continue to fall like dominoes.

Parents who consumed Rick Singer’s expensive, magical elixir are under indictment. Some universities have taken steps to expel students who fraudulently secured admission to the prestigious schools through this scam. It appears that some students knew or suspected their parents’ influence in the admissions processes while other students proceeded blissfully unaware even after their SAT scores suddenly skyrocketed to near perfect levels. Families have been torn apart. Reputations have been ruined. Many face jail time for buying off the college admissions processes.

Beyond the obvious “How could this happen?” set of questions, a dynamic emerges in contrasting the responses of the two highest profile defendants: actors Lori Loughlin and Felicity Huffman. While the US Attorneys brought these charges a few short weeks ago, Loughlin and Huffman have headed in different directions to address the risks presented. Based on the disclosures of the US Attorneys and what has been reported at this stage, it is remarkable to witness such vast differences in the handling of these cases which grow out the same nucleus of facts.

Huffman rather promptly acknowledged the underlying improper actions of paying Rick Singer’s fake charity in order to get her daughter into the desired school. Singer’s team then “improved” the daughter’s SAT answers before the test was scored. Huffman, and 18 other parents, plead guilty to one count of conspiracy to commit mail fraud and honest services mail fraud.

For her part, Loughlin has not engaged in plea discussions with authorities. The morning after Huffman and the 18 others plead guilty, Loughlin and the remaining 16 other parents faced an additional charge of conspiracy to commit money laundering. Loughlin just formally plead not guilty to the charges.

By way of background, the scam operated for years in various methods. Singer tapped into the desperate, extremely wealthy market of neurotic parents who must have believed a) that their children would benefit for their entire lives with a degree from the “right”, prestigious university, and b) that their children had little to no chance to secure admission on their own merits at the subject universities. Singer founded the Edge College and Career Network, also known as “The Key”, as a college preparatory business. Singer sold himself as a family man and coach who understood the pressures placed on families during the college admissions processes. Singer, and his colleagues at The Key were all self-described “coaches” who could “help unlock the full potential of your son or daughter, and set them on a course to excel in life.”

The Key had two predominant paths to assist with college admissions: academics and sports. These paths were not necessarily mutually exclusive. For fees ranging from tens of thousands of dollars to $6.5 million for one student, Singer would develop a plan to “unlock” the student’s potential.

On the academic path, Singer would instruct parents in arranging for extended time for their children to take the SATs or ACTs, including how to obtain medical records to establish learning disabilities. Singer then arranged for his professional college entrance exam experts to moderate these smaller groups of students. The test experts would then “correct” SAT or ACT answers on the subject student’s exam before submitting the tests.

Alternatively, a test expert would simply take the SAT or ACT on behalf of the student. One such brainiac, Mark Riddell, received $10,000 per test from Singer. Apparently, Riddell was capable to target and achieve a specific score as instructed. Riddell just plead guilty and is cooperating with authorities on the details of the scam. With the ideal scores in hand, the students would be well on their way to admission.

The second path focused on sports. With university coaches bribed through Singer’s charity, Singer ensured students’ placement on university athletic teams, including soccer, track & field, and rowing. The corrupt coach would guide the application of the student through the admission process. These coaches would then require no participation in the sport by the “student-athlete” after admission.

Indeed, in one instance, one student met with his academic advisor who had prepared recommended Spring semester classes. Upon review, the student inquired why the proposed class scheduling was so spread out over time periods and days of the week. The counselor responded that such a schedule accommodated the student’s track & field training, practice and meet schedule in order to allow the student to compete in the pole vault events. However, the student had never participated in any track & field event at any level in his life despite now being a member of the university team.

Apparently playing off the endless greed of his ultra-wealthy client base, Singer established a bogus non-profit organization, the Key Worldwide Foundation (“KWF”). KWF’s stated mission included: “The Key Worldwide Foundation endeavors to provide education that would normally be unattainable to underprivileged students, not only attainable but realistic. . . . Our contributions to major athletic university programs, may help to provide placement to students that may not have access under normal channels.”

Clients of The Key would make a charitable donation to KWF rather than pay The Key for services. These parents knowingly arranged to have others cheat on behalf of their children and then secure charitable tax deductions for bribery payments.

Well, at least the payments, however improper, were being made to an organization which benefitted underprivileged students, right? Wrong. Even a cursory review of the IRS filings for KWF signaled something was seriously out of place. KWF had no employees. KWF had no independent directors. KWF had three officers, two of whom worked zero hours annually. Singer, the exclusive officer of KWF who did any work, reported working eight hours a week for KWF.

Journalists quickly seized on the reported donations by KWF. KWF listed partnerships with legitimate organizations, none of whom had heard of KWF and none of whom ever received any donation from KWF. Yet, KWF donated $100,000 to a suspended corporation operated by a soccer coach at UCLA and donated $1.5 million to a foundation run by a tennis coach at Georgetown. These coaches are now under indictment as KWF served as one conduit for bribery payments. The financial threads continue to unravel.

Once the feds tripped onto the scam, they set up Operation Varsity Blues (who said the FBI does not have a sense of humor!). Singer immediately flipped on everyone. He provided emails, bank records and documentation establishing the various frauds and bribes. He wore a wire and agreed to have his calls wiretapped. Singer spent months continuing to operate The Key and KWF while the FBI tracked every move.

When the US Attorneys finally moved against Singer, his accomplices, the varsity coaches and approximately 3 dozen wealthy parents, they already possessed all data produced by Singer, confirmatory bank records, wiretap recordings, student academic records, and surveillance photographs. Any defendant would have to confront this overwhelming body of evidence as well as Singer now singing like a canary.

Felicity Huffman promptly plead guilty to the one charge against her. Prosecutors may seek a few months prison time, but 12 months of supervised release and a $20,000 fine is equally likely. Prosecutors would seek no further charges against Huffman.

Huffman issued an apology: “I am ashamed of the pain I caused my daughter, my family, my friends, my colleagues and the educational community. I want to apologize to the students who work hard every day to get into college, and to their parents who make tremendous sacrifices to support their children and do so honestly.” Huffman acknowledged wrongdoing, accepted responsibility for her actions, and genuinely apologized. Her apology recognized how innocent people were harmed. Well played in capping risk and jeopardy and opening a path toward reception in the world of public opinion.

Lori Loghlin plead not guilty and has been rewarded with an additional criminal count. More counts may follow. Loughlin, who paid Singer $500,000, possesses the resources to secure top-shelf legal counsel. These lawyers appreciate the legal jeopardy and challenges in contesting the charges with such evidence against Loughlin. What could motivate Loughlin to fight under these circumstances?

We must speculate here, but perhaps Loghlin remains in denial. She reportedly commented to friends that she did nothing wrong and any other parent would have done the same if they possessed the means. Place to the side the self-unaware nature of that comment and it illustrates that Loughlin, in her own view, simply did what she perceived as in the best interest for her child. How could that be wrong?

Perhaps Loughlin equates paying for Singer with making sizable donations directly to colleges. Such donations are perfectly legal and may well result in favorable consideration by the admissions committee. The difference, of course, is that purchasing a bribery scam is illegal. In addition, donations to colleges should actually result in enhancements of educational processes or facilities in a regulated forum unlike any “donation” to KWF.

Perhaps Loughlin worries about her professional reputation as a well known character in an old sit-com or her current roles in Hallmark movies. Sorry, but the damage to reputation has already been done and Hallmark terminated its relationship with Loughlin.

Perhaps Loughlin believes her image as beloved Aunt Becky and star power, however diminished, will carry the day before any jury. Just ask Bill Cosby how that strategy worked out. Loughlin will not be able to escape the image of her as a super-wealthy parent willing to spend any amount of money on any scheme on a spoiled child to secure admission to an elite university where admission is not merited.

Candidly, absent a legal silver bullet, I do not envision a good ending for Loughlin. Whether it is her lawyers, family or friends, someone needs to get through to Loughlin to plainly set forth the risks and jeopardy with proceeding to battle in an unwinnable fight. Otherwise, let’s hope Loughlin looks good in orange.

I am often asked why parties should mediate to settle disputes. We have courts to decide issues and mediation may simply be an additional cost. Where parties appear to be as entrenched as Loughlin, why bother? I stand at the ready to encourage parties to seek resolution where possible for a multitude of reasons. Resolution brings finality and certainty. Resolution stops the spending of transaction costs. Resolution allows parties to move forward in life rather than fight about the past. This list can go on.

But now I have another reason to add: Do not be Lori Loughlin. In some instances, a party needs to candidly evaluate the case and conclude that it stinks and it is a loser. Get beyond yourself and accept some level of objective reality. Look at Felicity Huffman who apparently has found a path forward, albeit with some difficult challenges yet to be addressed. Nonetheless, her exposure is now capped and she is striking out on a plan to move forward. Loughlin remains at the bottom of a hole and has chosen a shovel instead of a rope. Resolution, however painful, appears the preferred alternative. Aunt Becky should know better.

2 responses to “No Limit to Wealth and Power: The College Admissions Scandal”

  1. ANDY MACK MAYO says:

    Reminds me of the sailor who realizes he is going in the wrong direction and refuses to turn around. I was taught this lesson once, When you see you are going wrong the only choice is to stop and turn. However, it’s hard to admit and so many of us just keep going.

    • Michael Geiger says:

      Mack. You are correct about it being quite difficult to admit error for so many of us. Once you do, you won’t be so far out at sea!

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