February 16, 2012
Rankings Gamesmanship Be Damned: Class-action fraud lawsuits can damage schools' credit ratings
In Fraud suits against law schools 'credit negative': Moody's, Moira Herbst (Reuters) reports that the recent lawsuits filed against law schools alleging fraud because their job placement stats reporting practices could result in credit rating downgrades accounding to Moody's. Moddy's, which maintains ratings for eight of the schools being sued, including Southwestern Law School; California Western School of Law; Brooklyn Law School; New York Law School; Golden Gate University; DePaul University; Hofstra University; and the University of San Francisco, noted that standalone schools are more likely to suffer "credit negative" effects than law schools that are part of a larger universities. However, reputational damage and tuition revenue declines could impact them all.
Now, who would have thought that "innocently" gaming stats for ego-stroking rankings purposes could be "credit negative"? I seriously doubt many law school administrators did. Until now, that is. Welcome to the real world. The legal academy can't point the finger at anyone else for this one. [JH]