Chegg Executives, Board Members Sued for Insider Trading
Plus, students are using fake diplomas to apply to universities in Australia. Plus, Quizlet has new features. Plus, The Verge blows it. Again.
Issue 235
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Chegg Board Members, Executives Sued for Insider Trading
Earlier this month, the San Francisco Chronicle reported in a lengthy and well-reported piece (subscription required) that several Board Members and executives at Chegg have been sued for insider trading - allegedly dumping shares of Chegg while the stock price was high and before it was revealed to the general public that Chegg’s profits were being driven by massive cheating. Which, of course, they always were.
These suits appear to be in addition to the class-action suits filed by investors after the stock collapsed (see Issue 177). And in addition to the copyright challenges Chegg is facing (see Issue 55).
Merit of these new suits aside, the article is quite damning for Chegg and its leadership.
The Chronicle jumps off with the suit including Jed York, the CEO of the San Francisco 49ers, who has been on Chegg’s Board for years. Though, according to the reporting, these suits include Chegg’s CEO Dan Rosenweig, “and several other company executives.”
A summary:
The civil suits accuse the Chegg board of “gross mismanagement,” “unjust enrichment” and making false and misleading statements in SEC filings in connection with Chegg’s “schemes” to profit from the cheating scandal.
Here’s where I point out, yet again, that Paul LeBlanc, the President of Southern New Hampshire University, is also a Board Member at Chegg. The article does not say whether LeBlanc is specifically included in the suits.
Here’s where I also point out that the CEO of an NFL team is on the board of Chegg. That matters because it makes Chegg appear legitimate. How can it be cheating if they partner with the 49ers?
For example, according to the reporting:
In 2019, the 49ers partnered with Chegg to fund up to $100,000 in scholarships for first-generation college students from the Bay Area. The agreement made Chegg the “presenting sponsor” for all 49ers first downs in their home games during the 2019 season, with Chegg contributing $500 for each first down to the scholarship fund.
And:
In a news release at the time, Brent Schoeb, the 49ers’ chief revenue officer, said, “In Chegg, we have a partner whose principles and priorities align perfectly with those of our own, and we are proud to formalize this partnership to raise awareness and funds for their Students First initiative.”
Chegg’s principles and priorities align perfectly with those of our own, the 49ers said. Awkward sentence aside, that’s quite a thing to see in print. York, the CEO, tweeted Chegg ads.
Factually, the timeline and accusations are easy to grasp. As the Chronicle reports:
Records show Chegg has struggled to turn a profit. But during the pandemic, revenue from its $19.95-per-month online learning accounts skyrocketed, driving the stock price up.
Rosensweig, the CEO, told prospective investors that college students were turning to Chegg because they realized they needed more academic help than colleges could provide
But, in what I think was always obvious, the real reason was cheating. The article says:
On many campuses during the pandemic, the term “chegging” became a synonym for cheating on tests, as Forbes magazine reported.
Professors soon began to complain, records show. UCLA officials said Chegg-related cheating was “rampant.” Cal State Fullerton said it had uncovered “a very professional cheating operation” involving Chegg. At the U.S. Air Force Academy, which has a strict honor code, more than 200 students admitted using Chegg to cheat on math and engineering tests.
As the scandal unfolded, officials and faculty from Duke, Texas A&M, Purdue, Georgia Tech, Virginia Tech, Boston University and Nebraska directly contacted Chegg “about the extensive cheating,” class-action plaintiffs told the court earlier this year.
And while Chegg stock was up, driven by cheating, and while the CEO and others were saying there was a different reason - they sold shares.
On which, the Chronicle again:
Rosensweig, the Chegg CEO, sold more than 500,000 shares at a $48 million profit. On two occasions in 2020, according to the lawsuits, York sold 10,000 shares of Chegg he had acquired through directors’ options, making a combined $1.4 million in profit.
And:
In 10 years on the Chegg board, York has been paid cash and stock worth about $2 million for his part-time work, and he has turned a profit of $4.9 million on sales of company stock, records show.
But:
Chegg’s growth stalled as the pandemic subsided, the company revealed in a November 2021 filing. Rosensweig blamed the downturn on a slowdown in the education industry; on the news, the share price dropped from $62.76 to $32.12.
Today, Chegg shares are trading at about $10.
And, of course, Chegg had its cut-and-paste answer. In addition to saying these suits lacked merit, the company said:
Chegg takes academic integrity very seriously and has invested significant resources to protect it.
Sure.
This from the company that stopped cooperating with academic integrity inquiries (see Issue 152), telling teachers they:
decided to reinvest resources away from Honor Code Investigations
That’s Chegg’s version of “invested significant resources.”
Anyway, I have no idea whether what York, Rosenweig, and others did was insider trading. But if it is, or if it’s even close, I am the least surprised person in America that leaders of a company built on illicit shortcuts took a few of their own.
Universities in Australia are Catching Applicants with Fake Credentials
According to more excellent reporting (subscription required) from the Sydney Morning Herald, students are applying and being admitted to universities in Australia with fake diplomas and test scores.
I wrestled a bit with whether this belonged in The Cheat Sheet, but obviously concluded it did because it’s academic fraud and because I cannot imagine that students admitted with fake credentials will do anything but cheat once they enroll. Assumption, I know. But I don’t think it’s incorrect. And also, the article mentions it.
The news is pretty straightforward, if stunning. According to the reporting:
An internal report has revealed a surge in fraudulent admissions at the university [of Sydney] in 2022, when more than 250 prospective or enrolled students were found to have provided fake applications, up from just 15 detections in 2021. There have been 64 cases detected so far in 2023.
I don’t know what I was expecting, but it was not 250.
Also according to the reporting:
While most of the fraudulent applications in 2022 and 2023 were detected before admission, one-fifth of the applicants were already enrolled when they were caught.
Say what now?
The fraudulent applicants and students were mostly from China, though a sizable set was connected to online high schools in Ontario, Canada. Applicants from Canada do not have to take English exams, school officials said. As a result, the University of Sydney says it is no longer accepting applicants from online schools in Ontario.
The University of New South Wales, the report says:
also confirmed it saw an increase in admission fraud in 2022 linked to the fake Canadian diplomas, but did not disclose the number detected.
Some good news - it seems that these cases were uncovered by the University, through “routine checks.” Good thing someone was looking.
There’s also this, from further in the story:
Higher education expert with Australian National University, Andrew Norton, said the general experience at Australian universities was that cheating among Chinese students was quite high.
“If they’re catching that many I’d hate to see how high the real number is,” he said.
“Ultimately, the real victims of this are legitimate students. If an employer gets wind of a pattern of students not being up to scratch it undermines the integrity of the degree.”
I’m not clear whether Mr. Norton means cheating to get into school or cheating while there. Or both. But his last part about unprepared graduates undermining the integrity of a degree, that fits either way.
If you’re keeping score, that’s a nice bubble of cheating-related news coming out of Australia, and from the Sydney Morning Herald in particular (see Issue 234). All I can say is, fantastic. It’s so much better to report on these issues than it is to pretend they aren’t happening.
Cheating Leader Quizlet Launches New Features
The terrible trinity of large cheating providers is Chegg, Course Hero, and Quizlet.
Of the troika, Quizlet escapes the most scrutiny because it largely targets younger learners in middle or high school. And because Chegg and Course Hero are so awful. But the other thing too.
Anyway, earlier this month, Quizlet announced a series of new gadgets and services to draw young students to its illicit services. I won’t describe them in detail. Information is in that link. But the new services include a summarizer, a tool that will turn notes into flash cards and create quizzes from them, a gizmo that will set your notes to music and, of course, an AI-power tutor bot.
It does not say in the release, but I’d wager a lunch check that by uploading your “notes” to Quizlet to have them set to music or turned into flash cards, you are waiving your copyrights - rights you may not even own in the first place.
And, of course, Quizlet hawks its core service, “Millions of step-by-step explanations written by verified experts on Quizlet are now enhanced by advanced AI capabilities.” Yes, answers. It sells answers. Millions of them.
In the release, Quizlet describes itself as a “global learning platform,” an Orwellian cleansing that several media outlets mindlessly repeated when sharing the new features.
Of special note is that in the release, Quizlet says it is used by:
2 in 3 high school students and 1 in 2 college students in the US. Every month, over 60 million students, teachers, and everyday people use Quizlet
Sixty million. Every month.
The release also says it:
is backed by General Atlantic, Union Square Ventures, Altos Ventures, Icon Ventures, Owl Ventures, and Costanoa Ventures.
Cheating sanitized and commercialized, at scale, for profit.
On The Verge of Complete Sell Out
Speaking of how some media outlets mindlessly, breathlessly, and uncritically repeat the propaganda of cheating providers, I give you this, from The Verge.
For context, The Verge has a history of terrible narrative delivery - I cannot call it reporting - on exam security. There are several examples. But the story linked above may be a new low.
In addition to ridiculously describing Quizlet as, “a tool that helps personalize studying for students,” the author says:
Quizlet gave me early access to one of the features called Magic Notes. (Sadly, I didn’t get to try the song generator.) Magic Notes lets users upload or copy-paste text, and Quizlet summarizes it, then offers an outline, sample essay questions, creates flashcards, and even puts together a practice test.
Golly. How neato.
The entire article reads like an ad for Quizlet including choice journalism such as:
Quizlet is a tool for students to get an overview of the topics they discuss in class so they have a quicker grasp of the material before a lecture.
And:
I could see how students can find these AI-powered study tools helpful. It breaks down concepts and saves time when reading denser material.
The story does say the system “isn’t perfect” - pointing out that, like most AI, it makes errors. About which, The Verge says to:
make sure to continue guiding your child while using the features
Really?
And lest there be any confusion about where this advertorial comes down on academic integrity, it does say that early generative AI tools:
prompted panic from educators who worried kids used the tools to cheat.
Then, oblivious to its own irony, the writer ends the story with:
does no one use CliffsNotes anymore?
Setting aside the clear lack of learning value that CliffsNotes represented, the nameplate that is synonymous with cheap shortcuts is now owned by cheating provider Course Hero.
In hindsight, this article is not on the verge of anything. It’s shameless.