Thanks to the fantastic work by the Department Of Justice and the FBI we have learned the average bribe it takes to buy your kid’s way into an elite private university is between $250,000 – $400,000. Although, some bribe amounts went as high as $6 million.
The 10-month-long investigation, code-named “Operation Varsity Blues,” uncovered large bribes nationwide across various stages of the college admissions process. So far, two SAT and ACT exam administrators, one exam proctor, a college administrator and 33 parents, including actresses Felicity Huffman and Lori Loughlin were arrested.
The private universities spanned across the nation, including Yale, Stanford, Georgetown, USC and Wake Forest. A couple of public schools such as UCLA and the University of Texas were also involved in the scam.
In one alleged incident, the Yale women’s soccer coach received $400,000 to accept one student on her team, even though the applicant did not play soccer.
In another alleged incident, Lori Loughlin, aka “Aunt Becky” on Full House, allegedly paid $500,000 in bribes and fabricated photos depicting her daughters as competitive crew rowers in order to get them accepted into USC.
In another alleged incident, the Stanford University sailing coach agreed to also accept $500,000 in bribes in order for two students to gain admissions.
What’s up with crew by the way? It’s not a money-making sport for the university. Perhaps crew is a sport where a potential admit can be more easily manipulated into looking like a high caliber athlete through photoshop and other means.
Bribe-willing parents take note!
College Bribes And A Rigged System
According to Andrew Lelling, the US Attorney for the District of Massachusetts, the ringleader of the scam is William Singer, owner of a college counseling service called Key Worldwide Foundation, who accepted bribes totaling $25 million from parents between 2011 and 2018.
Singer’s counseling service is alleged to have been in reality just a money bribing business which enabled wealthy parents to buy their kid’s admission into an elite private university. Singer even set up his own fake charity where parents could “donate” the money and then write the donation off on their taxes.
“The parents are a catalog of wealth and privilege,” Lelling said. “They include, for example, the CEOs of private and public companies, successful securities and real estate investors, two well-known actresses, a famous fashion designer and the co-chairman of a global law firm.”
Implications Of The College Admissions Bribery Scandal
As the parent to a two-year-old currently “stuck” in extremely competitive San Francisco, I find the details from this investigation extremely fascinating. In fact, 14 of the 33 parents indicted hail from the SF Bay Area.
Over the years, I’ve written many posts regarding the private school system as I try to work out what’s best for our son.
After all, I come from a middle-class family and went to public high school, public college, and public graduate school. A public school education has worked out fine for me, but I want to make sure I’m not missing the benefits of going the private school route.
Here are some past posts to review:
If you read the posts, you might come away thinking I’m waging a jihad against the private school system. In actuality, I’m just trying to get my head around paying such enormous amounts of tuition for an asset that is declining in value.
After all, this is Financial Samurai, a personal finance site that focuses on optimizing our finances and living our best lives possible. Buying a taxi medallion ahead of the ridesharing revolution won’t help your finances.
I love the topic of education, and this latest college admissions scandal is worth reflecting on since every parent cares for their child’s future and we all care about competing in a fair society.
Here are 15 implications from Operation Varsity Blues.
1) Private school reputation takes a hit. Private schools are already under fire due to a number of reasons: 1) outrageous tuition, 2) student body is much wealthier than the overall US demographic, 3) rumors and now facts of buying your way in, 4) affirmative action, and more. The Varsity Blues investigation simply buttresses the point that this stuff goes on at private schools. It’s the same way we know shady recruiting tactics occur in D1 college sports.
2) Public school reputation grows. Notice how the vast majority of admission bribery cases occurred at private universities. Some argue this is because there are many more prestigious private universities than public ones. However, there are still plenty of prestigious public institutions like Berkeley, UVA, UCLA (named in scandal), UCSD, Michigan, Wisconsin, UNC Chapel Hill, Purdue, University of Illinois Urbana-Champaign, George Tech, US Military Academy, and William & Mary where it appears somehow much harder to buy your way in. The less public schools are implicated, by default the stronger their reputations grow.
3) Affirmative action for the wealthy gets harder to deploy. We learned from the Asian-American lawsuit against Harvard that donor legacy kids have a 10X greater chance of getting into Harvard than a nondonor, nonlegacy kid. The reason why affirmative action for the wealthy is far more egregious than affirmative action based on race is that wealthy people, no matter their race, already receive the best education, the best tutoring, the most stable home environments, and the most amount of access money can buy.
4) All universities take a hit overall in reputation and importance. Although it takes a tremendous amount of capital to bribe your kid’s way into these elite schools, a college education is fast becoming unnecessary. We can now learn everything for free online. It is also much quicker to do research and learn thanks to the internet. Yet, colleges continue to raise their tuition 2X-3X the rate of inflation each year. Meanwhile, it still requires the student 4-4.5 years on average to get a diploma. Talk about an antiquated system.
5) The angst for all parents is real, but should decrease. Even if you are a famous, rich, white person like William H. Macy, Felicity Huffman or Lori Loughlin, you are not immune to the anxiety and stress of trying to get your kids the best educational environment possible. The famous, rich, white person is competing against even more famous, rich, white people. This constant comparison will never stop until we make it stop.
Then there’s Manuel Henriquez, Founder & CEO of a publicly traded specialty finance company called Hercules Technology Growth Capital. He and his wife paid $400,000 in May 2016 to bribe Georgetown University head tennis coach Gordie Ernst to accept their older daughter as a supposed recruit. In other words, even an extremely wealthy man from the Dominican Republic whose children would benefit from affirmative action felt the need to cheat.
People of color and the poor should find some solace in the fact that people with all the privilege in the world are still stressing out about their kids’ future. People playing by the rules should feel better that something is being done about this rigged system.
6) Smart, hardworking students get unfairly sullied. Unless the FBI discovers the majority of students at elite universities have parents who buy their way in, it is likely that most students got in through merit. Unfortunately, this college admissions scandal will unfairly paint all elite college students and graduates, especially wealthy ones, with a suspicious eye. It’s the same way affirmative action may discredit an underrepresented minority’s achievements. We must remember that the vast majority of graduates of such schools are highly intelligent, good people.
7) Elite private university graduates will start questioning their accomplishments. Singer’s consulting firm made sure the kids had no idea they didn’t get into their respective universities by cheating. The FBI wiretaps highlighted such discussions. As a result, there will be plenty of students and graduates of these bribe-accepting schools who will wonder whether they got in due to their accomplishments. As self-doubt creeps in, self-esteem may drop, especially for graduates who end up working at a regular job, which most do.
8) Big city living is becoming less attractive. Notice how most of the schools implicated in this latest bribery scandal are located in large coastal cities such as Boston, Washington D.C., the San Francisco Bay Area, and Los Angeles. Big cities attract the most educated, type-A go-getters because big cities have employers who pay the most amount of money. The desire for money and prestige will eventually make you miserable because everybody is frantically competing to one-up the other.
9) Smaller city living is becoming more attractive. When we look back on our lives, we don’t wish we spent more time in the office trying to make more money and getting some meaningless title. What we wish we had more of was the freedom to spend time with family and friends and doing meaningful work. I foresee the continued growth and attraction of smaller cities as more people “opt out” of the grind. The FIRE movement has arisen partly because people are tired of all the corporate work BS and would rather be free.
10) The value of private businesses go up. The end goal for getting the best college education possible is to get the best job possible after graduation. Therefore, you’ll always be at the mercy of someone else’s decision if you do not own your own business. If you own your own private business, you can rig the system in your favor by hiring your know-nothing 22-year-old kid as VP of Operations and pay him or her a huge salary if you want. Unless you are a C-level executive at a public company, it is very hard to get your kid a top job or even an internship at your firm.
11) Poor Asian Americans face the toughest hurdle but could find some reprieve. Given there is clear affirmative action for the wealthy through “donations” and straight up bribes, while race-based affirmative action does not include Asian Americans for some strange reason, poor or middle-class Asian Americans will have the greatest difficulty of getting into an elite private university. This is one of the reasons why you see so many mom and pop stores owned by Asians across the country. They know nobody is coming to help them, so they must count on themselves.
12) Poor students will see a rise in reputation. On the flip side, if you happen to be a poor Asian American or a poor student from any race who graduated from an elite private university, your stock should go up given more people realize what you’ve had to go through to get in. My hope is that more universities look at one’s socioeconomic background when considering admissions.
13) A greater percentage of parents will donate to schools. The irony about this bribery scandal is that parents will simply go through legal bribery means by donating quid-pro-quo directly to their desired schools. The 33 parents caught so far were simply bad at cheating. They should have just contacted the admissions office at XYZ private school and discussed a plan to donate directly to a new building, courtyard, or scholarship. The donations will likely be more anonymous in the future.
14) There will be a rise in stealth wealth. Given the college bribery scandal has reignited hatred for the rich, the rich will flaunt their wealth less. Luxury car sales might go down as BMWs are traded in for Hondas. Rich parents will tell their rich kids to stop showing off their wealth over social media. There may even be a surge in luxury home inventory as the rich decide to move out of expensive neighborhoods. Stealth wealth has always been a good idea. As we surpass our 10th year in a bull market, practicing stealth wealth is more important than ever before.
15) The middle class may become wealthier and happier. As college becomes less important in finding a job, there will be fewer people spending four years and borrowing tens of thousands in student loans. With more time and less financial baggage, more people will be able to aggressively save to buy a house, start a family, and save for retirement. With more financial security and more time, society as a whole becomes much happier.
Let The College Admissions Bribery Scandal Pump You Up
Instead of getting bummed out about how all these image-conscious and misguided wealthy people buy their kid’s way into elite universities, get happy!
Not only do you not have to spend $250,000 – $400,000 on average per kid on bribes, you also don’t have to pay $50,000+ a year in tuition alone for 4-5 years! The bribes plus the full cost of attending a private university for four or five years could run you over $1 million.
Life is already hard enough as it is. We don’t need people who have all the means in the world pull further ahead from the rest of us who abide by the rules or who went to public schools.
Let us all thank Andrew Lelling, the U.S. Attorney for the District of Massachusetts; Joe Bonavolonta, special agent in charge of the FBI Boston Field Office; Laura Smith, special agent in the FBI Economics Crimes Unit; and the entire team for unrooting this scandal.
I trust this is just the beginning of much more to come!
Readers, what are your thoughts on the college admissions bribery scandal? Why didn’t these parents just donate directly to the school instead? Why isn’t there more backlash against affirmative action for the wealthy? What are some other implications about the bribery scandal I have not mentioned?