California Sues Corinthian Schools for Second Time
The California attorney general on Oct. 10 sued Corinthian Colleges, Inc. (CCI) for, among other things, false advertising, alleging that the for-profit markets its schools to low-income, vulnerable people by misrepresenting programs and job placement rates.
The Old Bait and Switch
Attorney general Kamala Harris says that CCI subsidiaries that operate Everest, Heald and WyoTech colleges use deceptive and false advertisements and aggressive marketing campaigns to attract prospective students.
By targeting low-income single mothers and veterans returning from combat, CCI and the subsidiaries allegedly go after vulnerable populations that include “isolated” and “impatient” individuals with “low self-esteem,” who have “few people in their lives who care about them,” according to the Harris’ statement.
“CCI advertised job placement rates as high as 100% for specific programs when, in some cases, there is no evidence that a single student obtained a job during the specified time frame,” according to the attorney general. Students pay an average of $40,000 for a CCA associate’s degree, $34,000 for an online associate’s degree, and $17,000 for its non-degree health care program
The complaint also alleges that CCI runs millions of online and mobile ads offering ultrasound, x-ray, radiology, and dialysis technician programs when, in fact, its schools do not offer those programs. She is also alleging intentional misrepresentations to students.
The company also illegally uses U.S. military seals in its mailings and on its website and has “committed securities fraud by reporting a nationwide job placement rate of 68.1% in presentations to investors, when senior executives knew this percentage was false,” alleges Harris.
Same Song, Different Verse
This is not the company’s first brush with the law.
“Harris is interested in Corinthian Colleges, Inc., because California believes that the company is flouting a previous settlement with the state,” explains LaJuana Davis, a law professor at Cumberland School of Law in Birmingham, Ala. In addition, she says the complaint indicates that some of the company’s investors and students have pending lawsuits against CCI.
In 2007, CCI agreed with then-Attorney General Jerry Brown to settle a similar suit with the state, paying $6.5 million in fines and giving students their money back after having deceived them with false advertising, Davis says. “California feels that Corinthians is not living up to the terms of the 2007 settlement, because the schools’ ads continue to mislead students, investors, and regulators about job settlements and student default rates.”
Students go to CCI’s schools specifically to get jobs, and the new suit alleges that the company deceives them into taking on huge debts that they end up defaulting on when they cannot actually get those jobs.
“Corinthian Colleges, Inc., is one of the largest for-profit post-secondary ‘career education’ companies in North America, and to that end, it is believable to me that California is tired of this business giving degrees to students that they cannot use,” she says, “and causing students to take on student loan debt that is not dischargeable in bankruptcy.”
Additionally, says Davis, “Corinthians has been under the microscope by [federal] congressional committees because students at for-profit higher education institutions have loan default rates at much higher rates than the national average.”
A Magnet in a Bad Economy
Fly-by-night for-profit schools represent a real problem for consumers — especially now.
“Lawsuits like these brought by a state are not brought casually or frequently, but with the bad economy driving unemployed students back to school, governments are seeing an uptick in more advertising and bigger promises made by for-profit technical schools,” Davis observes.
While public schools have more people monitoring their operations, for-profit institutions like CCI present a challenge.
“Watching for-profit schools is harder, particularly when those schools are opening and closing at the rate that Corinthians’ schools have been lately,” Davis says. “In 2011–12 for example, Corinthians announced closures of affiliated schools in Washington; Chicago, Illinois; Ft. Lauderdale, Florida; Decatur, Georgia; and Arlington, Texas.”
“The federal government does try to curb the worst abuses,” she adds, pointing to regulations passed by a range of federal agencies and to hearings and investigations led by U.S. Sen. Tom Harkin, chairman of a Senate education committee.