College admissions scandal shows there's nothing like a cheap bribe


College admissions scandal shows there's nothing like a cheap bribe

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"The whole world is scamming the system," said the co-operation witness 1 in the Justice Ministry's massive complaint, accusing dozens of wealthy individuals, investors and leaders in a massive corruption scandal in the country. colleges.
Indeed, according to the DoJ, this witness allegedly created a complex scam pretending to be a nonprofit organization, the Key Worldwide Foundation, in Newport Beach, California. As the witness explains, the parents would make a "donation" to the foundation, which would serve to facilitate falsified applications in prestigious universities. Some involved artificially inflated standardized test scores through payments to supervisors. Others introduced non-athletic children as athletes competed with fake awards and tampered pictures to allow academic coaches to better regard them as "sports recruits".

The scandal has trapped the investment industry, including the founder of TPG's Rise Fund; Douglas Hodge, former CEO of bond giant Pimco and still a partner of Sure Ventures; Gordon R. Caplan, Senior Private Equity Attorney at Willkie Farr & Gallagher; and Manuel Henriquez, founder and chairman of the specialized financial firm Hercules Capital.
Despite all this investment expertise, these charges, if true, would demonstrate a very weak ability to assess risk and return.
First and of course because if money is not an object, there is a simple, socially accepted and legal way – for your child to go to university, said the Attorney General of the United States at Tuesday's press conference: do not talk about giving a building, "he said. "We are talking about fraud."
This highlights the argument that the college system is in any case a scam, a false meritocracy riddled with legal loopholes for inherited children, children of donors and athletes with poor grades, which can lead to conclusion that the harm caused by fraud to fraudsters is limited. As one of the cooperating witnesses said, trying to make a customer sign, "the playground is not fair". But at least paying for a new building or furnishing a chair is no doubt advantageous for other students, who can then use the build or learn from a great new teacher. This type of concordance with the argument advanced by Matt Levine at Bloomberg View – namely that the actual victims were the schools, stripped of potential donations. This is the traditional method of setting up institutions.
Let's put all this aside for a moment: fraud is inherently riskier than the legal means of doing anything. So what was the attraction in the allegedly criminal way? In part, it was supposed to be cheaper. Parents charged by the Department of Justice may have considered themselves purchasing the product sold outside the mark: by the most common legal means used to use your money to get your child into a particular college, like naming a building or giving a chair, could start at $ 1 million, depending on the school. The institutions of the Ivy League could exceed 10 million dollars, Dana Goldstein, head of education at the New York Times, tweeted with respect to the charges.

According to the filing of the complaint, these parents spent between $ 200,000 and $ 6.5 million. Thus, depending on the target, the methods described in the document can be about 80% cheaper.
"There is an entrance door which means you enter yourself," says Cooperating Witness No. 1 in the complaint. "The back door is through the advancement of institutions, which represents ten times more money."
It looks like a volley. But not when you consider the risks of accusation, arrest, your image in the press (especially if you are an actress in Hollywood) and possibly a jail sentence. Ignoring ethics – as wiretap stated: "Honestly, I'm not worried about the moral issue here," the exact financial costs of all these risks are difficult to determine. There is not much transparency or standardization in the indictment market. But a simple backward calculation suggests that adding this disadvantage would certainly tip the balance in favor of legality.
More fundamentally: for this cohort of alleged perpetrators, the return on investment of the criminal path will be pitiful. Their children were already going to be well.
Granted, the Coastline Community College could mean that kids would lack some awesome links, but since they are offspring of their parents and grew up in Los Angeles or Newport Beach, they probably already have a lot of them. Even if they had completely left school and replaced it with a business school, a year of navigation around the world or a visit to a branded shoe store, they would be in a better situation than today .
Of course, parents might have pained in conversations about overpriced Caesar salads or golf at Pelican Hill, but with the right turn and the projected confidence, they would survive. Their kids would then go to the lucrative careers that they already have on YouTube or to jobs in their partner's venture capital company, or whatever. Their future was sustainable.
College degrees are more for those who need to prove themselves, a checkpoint outsider must pass to be considered for admission. Those who are already inside are already inside.
They – children and their parents – already have so many advantages and so many very legal and normal means to secure the future of their children, from expensive tutors to academic consultants to important donations. Yet they would (allegedly) have used this maximum risky corruption to save $ 800,000, which in some cases equates to less than half of a month's after-tax compensation. Now they are paying a lot more for the reputation and probably the loss of income. A very bad business.