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Workers erect a scaffolding to renovate the Monument to the People's Heroes as a migrant worker walks past in Tiananmen Square, June 18, 2006 in Beijing, China. The 124-foot monument, constructed from August 1952 to May 1958, was the first structure on Tiananmen Square after the founding of New China in 1949. It was dedicated to those who died for their country. GETTY

Private industry is turning around problem kids from public schools and turning a profit doing it. It is said to be one of the hot new growth industries.

CBS News Correspondent Richard Schlesinger reports.
There's no question that some students can profit from a school where the rules are as tough as the kids.

In Houston, there is a private school for kids who were too much trouble for regular schools.

"I went to my classes. But I never did nothing. I just tried to fight someone else from another gang," says one student, Mauricio.

"I was talking about threatening to blow up my teacher's car," says another student, Brian.

What's different about the school is that the students aren't the only ones who may gain something from the learning experience. Businesses are now looking to profit from kids like Mauricio and Brian.

"We've invested about $35 million so far, and we believe we can make money when we get enough students and enough schools," says Randle Richardson, president of Community Education Partners.

Richardson is a player in one of the hot new growth industries - for-profit schools for those called "at-risk" kids. Every school system that has a zero-tolerance policy for violent kids - and every district with a dropout problem - is a potential customer.

Robert Crosby, who runs Richard Milburn High School Inc. from an office above an outlet store, says half a million kids a year drop out from high school. "That's a gigantic market."

Milburn High School includes nine schools in seven states. He makes school districts a simple offer, he says. "Give us your difficult kids. We'll keep them in school and graduate them, and we'll do it for less money than it costs you."

Crosby makes money while maintaining low overhead. Fifteen administrators run all his schools. They maintain small classes, and he claims 35 percent of his students go on to some form of higher education.

He has the best reason of all to teach kids well, Crosby says. "If I don't perform, the school district will fire us."

Outsourcing problem kids is so new many educators are still waiting to see how well the entrepreneur educators perform. Many investors, though, have already decided.

"Well the market for 'at-risk' kids is a $58 billion market in the United States," says John McLaughlin, who advises investors on this new business. Right now the advice he's giving is: Buy.

"We're going to look to outsource kids more and more in the future, not less and less, so it's a growth market from that standpoint," McLaughlin says.

McLaughlin believes these schools offer a way out for school systems that are spending too much time dealing with relatively few problem kids.

"Any time you solve a problem for a school, they're an interested buyer just like any other organization," McLaughlin says.

Potential critics of this business are holding teir fire for now. But there have been very few independent studies of these schools where the headmasters may be as concerned with IPOs as with the ABCs.

  • CBSNews.com staff CBSNews.com staff

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