Calif. Accuses Corinthian Colleges of False Placement Rates, Predatory Ads

October 11, 2013

The State of California sued Corinthian Colleges Inc. on Thursday, accusing the for-profit higher-education company of misrepresenting job-placement rates to students and investors, advertising programs that it does not offer, and unlawfully using military seals in its advertising.

The 33-page lawsuit also accuses the company and its subsidiaries and colleges of inserting unlawful clauses in student-enrollment contracts that purport to bar students from making claims against the company.

The lawsuit says Corinthian deliberately aims its advertising for expensive programs at students with incomes below the poverty line, whom the company in its own documents calls "stuck" and "unable to see and plan well for the future."

The suit cites a program for an associate degree in medical assisting at Corinthian-owned Heald College that costs more than $43,000 for tuition, books, fees, and supplies. It markets to those students, the suit alleges, "through aggressive and persistent Internet and telemarketing campaigns and through television ads on daytime shows like Jerry Springer and Maury Povich."

Among several allegations of false reporting on job placements of graduates, the suit cites a 2011 incident in which it says Everest College counted 39 graduates who had been hired by a temporary staffing agency to work for two days at a health fair as having been placed in jobs.

The lawsuit alleges that many of the practices are "all the more egregious" because they violate the terms of a 2007 permanent injunction against the company obtained through prior legal action by California.

In a news release announcing the lawsuit, California's attorney general, Kamala D. Harris, said, "the predatory scheme devised by executives at Corinthian Colleges Inc. is unconscionable."

In a written statement, Corinthian officials said they had been cooperating with the attorney general's office for nine months and were "disappointed" to learn that a suit had been filed. The company, whose colleges and institutes enroll more than 80,000 students, said, "We are committed to regulatory compliance and have robust processes in place to correctly record and disclose the job-placement information we receive from our graduates and their employers."

The suit seeks civil penalties, disgorgement of profits derived from illegal actions, restitution to stockholders damaged by the company's actions, and other damages.