The DOE Negotiation With InfiLaw

The downside of Freedom of Information Act requests is that they move glacially. The advantage is that you often get more depth to a story than you can by pinging a couple of off-the-record staff sources.

Hopefully, all ten pages of the disclosed correspondence will load and attach in JPG format, and this narrative will just touch upon a few of the high points.

In a June 18, 2019 letter to then-dean Scott DeVito, the first page mentions InfiLaw's ill financial straits, and the fact that it has a "going concern note" in its audited financial statements. This is the auditor's standard tool for alerting the reader of the financial statements that there is material doubt as to the audited entity's ability to continue as a going concern.

The main substance of the communication is that InfiLaw Holdings has two choices if it wants any loan funds released for students at Florida Coastal. Either it can pony up an irrevocable letter of credit for $11,362,511 (in which case, it will meet financial responsibility requirements) or it can put up an irrevocable letter of credit for $5,681,255 and agree to abide by all of the restrictions and criteria for "Provisional Certification." If it opts for the "Provisional Certification" option, it is not really in compliance with financial responsibility requirements, but will be allowed to operate provisionally for up to three years while it continues to meet all of the applicable regulatory restrictions and criteria for the Provisional Certification status. These requirements are then detailed in the next few following pages of the letter.

The July 12, 2019 letter is addressed to Chidi Ogene (of failed Charlotte School of Law fame), showing that he is still trying to negotiate for InfiLaw behind the scenes. Mainly, he is trying to get DOE to reduce the amount required for the letter of credit. The necessary surety must be available for draws as to loan discharge liabilities from all three InfiLaw schools, and the second page of this letter notes that Charlotte and Arizona Summit already had over $5.2 Million in closed school loan discharges as of that date. The letter also again mentions InfiLaw's financial problems and "going concern" note, and reaffirms that DOE will not go below $5,681,255 for the required surety (sorry, Chidi).

The July 26, 2019 letter sees discussions now elevated to the President of InfiLaw Holdings. The surety for "Provisional Certification" is still going to need to be $5,681,255. It is obvious that InfiLaw is having a lot of trouble coming up with it (because they would need to find a reputable bank with the requisite rating and credit quality willing to essentially grant InfiLaw credit in this amount). In this letter, DOE offers two additional options. One is that they will let InfiLaw phase the letter of credit in pieces. The other is that they will withhold a portion of each Heightened Cash Monitoring 2 Payment Method request each month for nine months to essentially fund a cash escrow with $5,681,255. Whatever InfiLaw elects as among any of the options for the $5,681,255 surety, it has to comply with all of the additional restrictions and criteria for "Provisional Certification."

There are other minor points of interest, but it is evident overall that the Trump Administration has not been significantly kinder or gentler with InfiLaw than the Obama Administration. DOE is not buying any pie-in-the-sky scenarios from these guys, but is looking hard at keeping its exposure for loan discharges covered.