Crossing the line from selfish to predatory

By Eric Mink

I get the selfish impulse. What I don’t understand is predatory.

I can see how Wall Street hustlers thought they were so smart that they had acquired the key to eliminating risk and creating billions of dollars in profits from complex financial deals that had never existed before. Yes, their overweening pride and monumental mistakes drove the world economy to the brink of catastrophic collapse, and we are all still slogging through their F-5 wreckage.

But they don’t puzzle me. I get how—sealed in their universe of mathematical formulas, microsecond data updates and numbers on a scale that defies human comprehension—they could believe they had come up with all the answers to all the questions.

What I don’t get are predators—from small-time con artists to big-time corporations—whose everyday activities and basic business plans depend on the premise that ordinary people exist to be toyed with, lied to, harassed, cajoled and intimidated. That when the defenses of decent souls are down and their vulnerability is up, they’re ripe for harvesting. What’s the satisfaction of winning a rigged game against a weakened opponent?

President Barack Obama talked about predators last Friday when he went to Fort Stewart, a U.S. Army post in Georgia, to sign an executive order better protecting U.S. military veterans and their families from exploitation by for-profit colleges and career schools.

Two overdue pieces of federal legislation in 2008 and 2010, collectively known as the Post-9/11 GI Bill, upgraded benefits for veterans and their families and made billions of dollars available to help pay for their postsecondary education.

The lure of these billions made veterans raw meat for recruiters and marketers of some educational organizations run by for-profit companies. The mantra is: Sign them up fast, get their GI Bill educational benefits and move on to the next earnest, worried, misled ex-soldier, sailor, airman or Marine.

A Government Accountability Office investigation found for-profit recruiters bombarding potential veteran-students with hundreds of phone calls, misrepresenting the likelihood of getting a job after graduating, inflating prospective salary levels and lying about their school’s accreditation status.

In announcing his executive order, which mainly will ensure that veterans can get accurate information more easily, Obama cited an instance in which a for-profit recruiter “had the nerve to visit a barracks at Camp Lejeune and enroll Marines with brain injuries….” The injuries were so severe, Obama said, “some of them couldn’t recall what courses the recruiter had signed them up for.”

This business plan seems to be working well for the predators. In 2009, taxpayer funds supplied 86 percent of total revenue for the top 15 for-profit education companies, according to reports issued by the Senate Health, Education, Labor and Pensions Committee. Their collective profit margin was about 20 percent.

The prey haven’t fared so well. The Senate committee found dropout rates of 34.1 percent to 68.2 percent for veteran-students at the eight for-profit schools that take in the most GI Bill funds. In contrast, dropout rates at the two non-profit schools in that group were 13.1 percent and 26.4 percent.So poorly do these schools serve the former military service members that many end up with no degree and no job—but plenty of student debt. High costs at for-profit schools force veterans to take out loans to supplement their GI Bill benefits.

Getting an associate’s degree in business at for-profit Westwood College would cost $35,400 in tuition, according to the Senate reports, but just $7,000 at the non-profit Community College of Denver. Tuition for a bachelor’s degree in business would cost about $40,000 at non-profit Indiana University and $89,000 at for-profit ITT Tech.

If exploiting men and women who have served their country isn’t predatory enough, how about a health care consulting and management company accused of methodical deception, confrontation and threats over medical billing, directed at hospital patients and their family members? True, such conduct might violate federal privacy laws, fair-credit laws and emergency medicine laws, and possibly state consumer protection and privacy statutes, but predators must feed.

Last week, the hard-charging Attorney General of Minnesota, Lori Swanson, released six volumes of findings in connection with her federal complaint against Accretive Health, a Chicago company. Some hospital systems in Minnesota (and elsewhere) have turned over the management and operation of entire hospital departments to Accretive. The departments include not just billing and collections, but also admissions, registration and health information. Accretive inserts its own staff at the hospitals, where they have the power to hire and fire hospital employees and require the use of Accretive systems and practices.

Swanson’s documents describe high-pressure, collection-style tactics—sometimes at bedside—being used against patients and family members who have no idea they’re talking to people whose primary concern is money, not medical care. In addition to providing management service, Swanson notes that Accretive Health is licensed in Minnesota as a debt-collection agency, sometimes using the fictitious name, Medical Financial Solutions.

Early this week, a New York PR firm sent news organizations a statement, signed by an Accretive Health investor-relations executive, saying that the Minnesota Attorney General’s allegations contain extensive “inaccuracies, innuendo and unfounded speculation.”

Swanson’s federal complaint against Accretive Health says it was created in 2003 by a private equity firm, Accretive LLC. Accretive LLC’s managing partner is J. Michael Cline, a New York financier who also is Accretive Health’s founder and current board chairman.

In 2009, while Accretive LLC was preparing to convert Accretive Health into a publicly traded company, Swanson filed suit against a Minnesota-based company called the National Arbitration Forum, at the time the nation’s largest arbitration firm handling disputes over consumer credit card bills. Governance of National Arbitration Forum was controlled by Accretive LLC, which, according to Swanson, was considering linking Forum with Accretive Health. Accretive LLC also had created a debt-collection agency called Axiant LLC and acquired the assets of the nation’s largest debt-collection law firm, Mann Bracken.

Swanson’s lawsuit charged that National Arbitration Forum misled consumers and the court system into believing that it was a neutral party to credit card disputes. In fact, its connections to Axiant and Mann Bracken created “an irreconcilable conflict of interest.”

By the start of 2010, National Arbitration Forum had settled the lawsuit by getting out of the consumer credit card business, Axiant had filed for bankruptcy and Mann Bracken was placed in judicial receivership in Maryland. Later that year, Accretive LLC took Accretive Health public in an IPO that raised some $100 million.

I don’t understand the mindset of predators. Maybe they’re just made that way.