Law School Transparency Seeks To Monetize Services

Dan,

You really seem to hate the law school reform movement. Why? Too close to home? Threat to the bottom line?

Would you agree that in the last decade, there has been a real disconnect between student outcomes and tuition costs?

I agree with folks like Bernie Burk who think that LST encouraged very necessary and desirable improvements in transparency. In fact, LST is a big success story. Prospective students have much more, and much better, information. At the same time, my own view is that this monetization is strategically undesirable if LST's goal is to keep its credibility (and therefore its efficacy) high. And, separately, given the incredible venom directed at Steve for suggesting that LST might be looking monetize, it seems only fair to acknowledge the gap between those critiques and this news.

I would hope for, but oddly am not expecting, an actual useful conversation about this. I've dealt with the people from LST repeatedly in the last two years and haven't seen any real evidence that they are not sincerely interested in the issues they address. Of course they could be fantastic liars. Or they could be, you know, sincerely interested in the issues they address. Maybe they think the fee is a good idea, or an imperfect but necessary one. Calling it extortion doesn't actually improve anyone's analysis on that point, as far as I can tell.

By the same token, that doesn't make the fee a good idea. Perhaps any such effort needs to be restructured or monitored by outside experts to guarantee impartiality. Perhaps it impairs their independence and their ability to change their minds. Maybe charging a fee is even a bad idea from start to finish and is irremediable. That it might be sincere and well-intentioned wouldn't change that as far as I can tell.

The Simkovic and McIntyre paper is either good or bad on its merits. There have been some useful points of both praise and criticism of the paper. There have also been some too-lazy-to-read-the-paper attacks that assume that if one can accuse the authors of having any self-interest, then there's no point addressing the merits of the paper itself. I find it hard to view LST any differently. Their work, and this fee idea, are either good or bad on their merits, and the value-added of asking about their motives is in my view not terribly likely to add more than just asking directly whether this is a good or bad idea, and if a bad one whether it can or should be modified or rejected altogether. I'm not terribly shocked that a professor wants to write work that gets attention in order to actually get attention or even sell a copy of his book, that someone who starts a non-profit would still like to have a salary, that someone who gets personal value out of writing on a scamblog, or feels a sense of vindication in doing so, would be inclined to think ill of law schools. Of course these motives can be relevant, but they're pretty thin gruel for conspiracy theories, and direct evaluation of arguments is still bound to generate more light and less heat. I don't doubt there are reasons to criticize this apparent move, but I suspect they will be just as persuasive regardless of speculations about motives–just as I'm sure there are reasons to praise or criticize specific positions that Dan has taken, but the idea that he hates the law school reform movement also seems pretty silly to me.

I think that this is going to be bad for them, simply because they are bucking the establishment, and if there's one rule of life, it's that the establishment can be cheerfully corrupt, but that the rebels must be pure.

Dan, thanks for posting that update; it puts them in a much better light.

Barry, I agree that it puts them in a much better light.

What does that say about Diamond and Leiter? But haters gonna hate.

LST is a non-profit that seeks to serve potential law students but needs funds to do so. Libraries, museums, national and state parks, and many other NFPs charge fees to cover costs. It could, like USNRW I guess, charge law students a fee to see its data. Charging law schools a fee seems to be a better way to stay independent than coming up with a way to scare up subscribers (ads! rankings of party schools!) or charging subscribers a lot of money, like Consumer Reports does. Either way, it doesn't make LST suspect, it just makes it nonmagical in that it actually needs funds to operate.

"LST is a non-profit that seeks to serve potential law students but needs funds to do so. Libraries, museums, national and state parks, and many other NFPs charge fees to cover costs. It could, like USNRW I guess, charge law students a fee to see its data. Charging law schools a fee seems to be a better way to stay independent than coming up with a way to scare up subscribers (ads! rankings of party schools!) or charging subscribers a lot of money, like Consumer Reports does. Either way, it doesn't make LST suspect, it just makes it nonmagical in that it actually needs funds to operate."

Exactly right. The amazing thing about LST is that it's done such fantastically valuable work over the past three years with no funding at all, beyond a few thousand dollars in donations.

The question for MacK is why does LST need to subsist forever? Employment reporting has been changed to report full time positions, JD-required positions, etc. part time positions separately. That was the whole point of LST, wasn't it?

Maybe it doe not need to subsist forever – except that only recently were new ways in which law schools gamed the data revealed – while court decisions to date have taken the view "so the law school lied" that is not fraud because the students should not have been taken in …

The only real way to fix this problem is some sort of SarBox type rule for any institution receiving Federally backed student loans – that any data it publishes about outcomes that is misleading puts the dean etc. in jeapordy

How much money are we talking about here?

"The question for MacK is why does LST need to subsist forever? Employment reporting has been changed to report full time positions, JD-required positions, etc. part time positions separately. That was the whole point of LST, wasn't it? "

Salary information and reporting rates are arguably more important than raw numbers of people employed, and this information is not required to be disclosed.

I would like to know more about LST's nonprofit status. The organization's own web page doesn't provide any real information. Here is what information is publicly available–if any of this is wrong, it would be nice to get the full information directly from LST.

LST apparently is a North Carolina corporation, but the North Carolina secretary of state's page says that its status is "problem report." This status means that a creation document has been submitted for filing but did not comply with the filing requirements.

LST is not a tax-exempt organization for federal purposes–that doesn't mean it's not a nonprofit, but it does mean that it hasn't undergone the kind of review that people often associate with something being a nonprofit (and it also means donations aren't tax-deductible).

Anyway, given that this is an organization devoted to transparency, and given the constant mention by its supporters of LST's nonprofit status, it would be nice to know more about LST's own organizational status.

https://www.secretary.state.nc.us/corporations/Corp.aspx?PitemId=10308915

if schools refuse to pay, would that mean that Mr. McEntee would be forced to get a real job?

What are LST's qualifications to perform an audit? Would they just choose their audit targets by just whichever school has someone sticking their necks out to say something pro-law school that week, or whomever Campos goes after in his blog that week? That seems to be how it works at most of the scamblogs, of which these guys are a part.

@none

We are a GA nonprofit, and we just filed for foreign corp status in NC about a week ago. My guess is that it's still processing, but I'm sure we'll receive notice of what's wrong (if anything) shortly. Things are done by mail in NC, sadly, which makes the process a little more strung out.

We are filing our 1023 to the IRS soon. We have just one more section to fill out and then we will be having somebody review it.

Hope this answers your questions.

And, of course, if the IRS does grant LST tax exempt status, it will have to file an annual report on either a full Form 990 or the postcard version 990N (if their annual receipts are <50K). The option is theirs and I hope they will opt for the more "transparent" approach, namely, the filing of the full 990. I don't know why this simple point caused so much consternation when I pointed it out some months ago but I am glad to hear LST is moving ahead with this step.

Steve, any thoughts on allowing comments on your blog? Signed comments of course, you know, in the interest of transparency.

I was recently offered the chance to be listed in a Who's Who in Law. For a fee, of course.

Steve, it caused so much consternation because you clearly had no idea what you were talking about, were engaging in all sorts of wild accusations that were absurd in the context of the conversation, and had to be educated by several anonymous commenters about non-profit tax law. I'm glad to see you read those comments and can now parrot back "990N (if their annual receipts are <50K)" like a good fellow.

Go ahead and be as patronizing as you like BJD. That's a feeble effort to discourage constructive debate.

I was right then and now – I asked for a non profit's 990s. Anyone doing diligence on a non profit would ask the same question. LST claimed to be a non profit and asked for donations. It is reasonable to assume such contributions are deductible and so it is reasonable to ask if the organization has 990s available to provide greater transparency to potential donors. This is best practice.

Guess what, there were no 990s because they had not become a tax deductible organization. But no where did they explain that to their potential contributors. Now they admit no donations prior to late 2012 will be deductible.

I want to see the 990s so that I can learn about their contributors. I would also like to know about their relationship, if any, to class action lawyers who are suing law schools, particularly in light of their effort now to extract payments from law schools to earn their "trust." (Good luck with that.)

Steve- Let's review:

No Steve, "anyone doing diligence on a non profit" would try to figure out what the non profit does before they go digging into their Form 990s. With no evidence and seemingly no familiarity with LST outside of perusing their website, you said "My guess is that LST is really interested in making money not in any serious change…No doubt it will be offering law school applicants some kind of software package that will only add to the cost of going to law school." Not exactly "encouraging constructive debate" wouldn't you say? And clearly not just the innocent inquiry into an organization that you are now trying to say it was.

At one point, you believed that LST had taken its website down out of some fear of your incredible detective skills: "Their website is also now down for some unexplained reason." You assumed I was part of LST simply because I was also advocating for transparency, again without failing to basic questions. You then started blabbering about "angel funding" and "valuations" in a bad parody of a day trader who's read too many Investing for Dummies books.

LST already has given you answers to your questions, either directly or in other media. They admit they receive few donations. I'm not sure why you're trying to find out about their donors, likely a few sympathetic law professors and recent law grads giving $50 a pop. They've admitted they talk to the class action lawyers and to the public relations staff at the very schools those lawyers are suing. I'm mystified at why you're pursing this with such fervor, I'd really like some "transparency" from you before I start theorizing.

Now go ahead and misinterpret everything I've just said.

As I made clear in my post Profits of Doom (LUN) my suspicion – now confirmed – that there was a business model at work was first triggered by my experience of the obstinacy of the law school critics in the face of the point I made about the macroeconomic context of the law school. That context is amply and, to my eyes, persuasively, explained in the Simkovic/McIntyre paper.

The obstinacy was so great that when I pointed to the possible business model at work, Derek Tokaz, Research Director for LST, called for a boycott of my classes until I was "forced out" of my teaching position. (That and the death threats I received on ATL are among the reasons, Stan, why I no longer allow comments on my blog.)

To this silliness that non-profits don't have business models, well just ask yourself if the board of directors of the Gates Foundation has a business model – since two of those directors are Bill Gates and Warren Buffett, what do you think?

As for disclosure by LST, no, my questions have not been answered and it would appear from the post today by Brian Leiter, LST has created a whole new raft of questions among law school deans.

LST does't just "talk" to class action lawyers, they write op-eds in support of the class action lawsuits (one of which was, once again, this time in a federal appellate court, thrown out). So yes, I would like to see a list of their contributors as well as the names of their advisory board members to see if any of those lawyers are more closely involved. One of the neat little tricks, of course, is that by delaying the filing for non-profit status – out of misfeasance or malfeasance, I don't know – they did not have to file the 990s and so avoided public scrutiny until now.

Correction: LST delayed the filing for "tax exempt" status, not non-profit status.

"that there was a business model at work was first triggered by my experience of the obstinacy of the law school critics in the face of the point I made about the macroeconomic context of the law school"

Your prediction about LSTs "business model" was akin to me saying that tomorrow it would be sunny, watching it snow, and then celebrating the fact that I predicted “weather”. What you actually said, again, was this: "My guess is that LST is really interested in making money not in any serious change…No doubt it will be offering law school applicants some kind of software package that will only add to the cost of going to law school."

That's nowhere near what LST has attempted to do with their certification program, which I don't think is going to work for other reasons we could debate if you stop ranting about extortion. All you managed to prove is that non-profits need money to run. If you want to label that a "business model" because it’s a neat turn of phrase you read in Business for Dummies, then go ahead. But labeling something a "business model" doesn't make the organization a business or give the founders secret profit motives. Yet again, you have seriously overstepped and refuse to acknowledge it.

“The obstinacy was so great that when I pointed to the possible business model at work, Derek Tokaz, Research Director for LST, called for a boycott of my classes until I was "forced out" of my teaching position.”

It may have been that, or, more likely, it was your conduct over a long series of posts in which you attempted to say that SCU had done something (I am still unsure what) about tuition, and everyone pointed out that tuition had risen by thousands starting in 2007 and that this rise was greater than Stanford’s. Derek pointed out that students should evaluate those posts to see if they’d be interested in taking classes from somebody who refused to admit very basic economic facts about their own law school:

http://www.constitutionaldaily.com/index.php?option=com_content&view=article&id=1901:santa-clara-prof-steve-diamond-approaches-escape-velocity&catid=42:news&Itemid=71

"they write op-eds in support of the class action lawsuits."

Information that surprised nobody but yourself, just like the fact that LST was associated with Derek Tokaz or DJM, that they didn’t have to file a 990 because they don’t have enough in donations (puts the whole kibosh on the shadowy rich plaintiff’s lawyer behind the curtain theory), and other things that you had to be told by very patient commenters. One of LST's founders even disclosed his entire work history since founding the organization, including salaries. I'm not sure how forthcoming LST can continue to be with you without running into the "Orly Taitz" problem.

The entertainment continues.
Some of you are engaged in endless name calling, insulting comments and almost constant accusations against those you clearly perceive to be your "enemies"?
Is this all the fault of the "others" who "force" you to behave so badly?

How is LST (a non profit) seeking to monetize its services any different from law professors and non-profit law schools monetizing the publication of legal scholarship? LST put in a lot of work to produce data, which arguably has some value. Law professors put in a lot of work to produce legal scholarship, which arguably has some value.

Unfortunately, many law schools are still failing to provide transparent information to prospective students. LST performed an audit of law school websites in early January 2013 and found that two-thirds of law schools had not complied even with the ABA's very minimum standards. After receiving that information from LST, deans and associate deans from about 100 law schools communicated with LST's executive director, Kyle McEntee. He helped many of them improve their transparency–although one-third of law schools still failed to meet the ABA's standard as of late February.

LST charged no one for either the audit or the counseling. And this was the second year of providing free services; Kyle and his colleagues performed similar reviews in 2011-2012, notifying schools of glaring omissions in their disclosures or problems with the manner of in which they made those disclosures.

As professors, we may not like the idea that law schools are dragging their feet on transparency–but the facts are pretty clear. The above information comes from the LST site (transparency index) and SSRN papers linked from that site. So the question is: How do we restore trust in legal education? We, as faculty, could work closely with our schools, assuring that each of our schools reports data appropriately. We could also police the sites of other schools for failures that harm our collective reputation. But do we want to do that?

Alternatively, we could donate to LST. I've done that for the last two years, as I note in this post: http://www.lawschoolcafe.org/thread/assuring-transparency/. But relatively few faculty have donated to LST and the organization can't exist on good intentions alone.

That leaves two other options: charging law schools for the type of services LST has been providing or charging prospective students for access to the information LST generates. I think LST made a wise decision to ask schools, not prospective students, to pay for the service. We will restore trust in our schools much faster if schools themselves step forward. If prospective students have to pay for information about the trustworthiness of schools' scholarship and employment information, that seems like yet another deterrent to pursuing law school.

In creating the certification process, LST suggested that schools seek private donations to cover the cost of certification. I am willing to be that donor at the school where I teach. We have a good record of transparency, but I think it is well worth outsourcing some of the work we do to preserve that record–while helping assure that legal education generally regains the trust it should have.

I encourage other faculty to support LST, either through personal donations or by supporting the certification effort. Commitments to transparency are easy for schools to make; it's the actions that count.

I think this post – as applied to Leiter & Diamond and their views on law school reform, is pretty fitting:

http://krugman.blogs.nytimes.com/2013/08/07/the-year-of-living-stupidly/

"To this day, one often hears pundits and establishment types in general talking as if we had a clear distinction between the elite, who know How Things Work, and the great unwashed who need to be led to elite wisdom. The reality, however, is nothing like this."