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Financials

Corinthian Colleges exec grilled as creditors hunt for cash

WILMINGTON, Del., June 12 (Reuters) - A top executive of bankrupt Corinthian Colleges Inc on Friday detailed the for-profit higher education company’s executive pay and recent financial dealings, as creditors began the hunt to find money to repay what they are owed.

Corinthian Chief Financial Officer Robert Owen spent four hours in a windowless government conference room discussing under oath everything from fraud allegations to questions about a $125.02 expense payment to an executive.

In April, Corinthian closed its remaining campuses without warning. It filed for bankruptcy in May. Debtors are required to meet with creditors to answer their questions, and on Friday the toughest questions came from a lawyer with the California attorney general’s office, which has sued Corinthian for misrepresenting job placements for its graduates.

Corinthian also released thousands of pages of documents, including details of payments to Chief Executive Officer Jack Massimino. He received cash payments of $1.03 million in the year before the bankruptcy, according to court filings. The company agreed to pay him a $900,000 salary in 2014, according to securities filings.

The disclosures also showed that Corinthian paid out nearly $1 million in bonuses to executives, directors and managers in late June 2014. The bonuses were paid less than two weeks after regulators tightened oversight of the company, a move that hastened its demise.

On Monday, the U.S. Department of Education announced that it was initiating a program to forgive federal student loans to tens of thousands of students who attended a Corinthian school.

A decade ago, Corinthian was leading a sector of high-flying for-profit higher education companies that were increasing student enrollment 25 percent annually.

That growth attracted scrutiny, and sparked a number of lawsuits and investigations alleging false advertising, securities fraud and predatory lending.

Several state attorneys general took legal action, and on Friday Nick Campins from the California attorney general’s office pressed Owen about recent sales of properties and relations with lenders.

He also grilled Owen about revenue from Canadian subsidiaries. Owen acknowledged the revenue was used to shore up U.S. campuses so they could qualify for federal student loans, something Owen said may not have been disclosed to investors.

Santa Ana, Calif.-based Corinthian listed debts of more than $143 million and assets of just $19.2 million when it filed for bankruptcy. (Reporting by Tom Hals in Wilmington, Delaware; Editing by David Gregorio)

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