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California AG Sues Corinthian, Heald College Group For False Advertising

SAN FRANCISCO (CBS/AP) - California's attorney general filed a lawsuit Thursday accusing a for-profit college company of misrepresenting job placement rates, false advertising and other deceptive practices to lure low-income residents to take out student loans to attend its schools.

The lawsuit against Corinthian Colleges Inc. was part of a larger investigation of the entire for-profit college industry, state Attorney General Kamala Harris said in San Francisco.

Santa Ana-based Corinthian operates Everest, Heald and WyoTech colleges, which have a combined 81,000 students nationwide and 27,000 students in California.

Harris said the majority of those students are minorities in their mid-20s with annual incomes of about $20,000. Many are single mothers, Harris said.

"Corinthian College was serving not as an educator but as a predator of some of the most vulnerable people in our community," Harris said.

Company spokesman Kent Jenkins said Corinthian was disappointed that Harris filed the lawsuit because it has been cooperating with the attorney general's office for nine months. He said the company will fight the lawsuit.

"We are proud of the career and technical education that our 15,000 employees provide to more than 80,000 students in the United States and Canada," he said.

Harris has also demanded records from San Diego-based Bridgepoint Education as part of her investigation. Bridgepoint has about 80,000 students—the vast majority online—in Ashford University in Iowa and the University of the Rockies in Colorado.

Harris declined to name other companies under investigation.

Harris also accused Corinthian of illegally using official U.S. military seals in its advertising to attract veterans who have tens of thousands of education dollars available because of their service.

The company's schools offer advance degrees for a variety of positions, including medical technicians and dental assistants.

Corinthian paid $6.5 million in 2007 to settle a similar lawsuit that Gov. Jerry Brown filed while serving as California attorney general. It made similar allegations.

The New York attorney general and attorneys general in several other states have launched similar investigations in recent years involving a number of for-profit colleges amid complaints about misrepresentation during high-pressure sales calls and TV advertising.

Harris said Corinthian falsely boasted of 100 percent placement rates in some of its programs and overstated such rates in other programs.

For-profit colleges have been under sharp government scrutiny and pressure for months. Critics accuse them of putting profit ahead of student achievement, noting the operations generally had higher marketing budgets and lower graduation rates than not-for-profit private and public universities.

Some graduates find that their degrees don't win them jobs, leaving them saddled with large student debts.

Enrollments in for-profit colleges soared during the recession as job-seekers tried to improve their credentials. The trend reversed after the federal government announced it was putting in place new performance criteria and rules.

In the lawsuit filed Thursday in San Francisco Superior Court, Harris also accused publicly traded Corinthian of securities fraud in misrepresenting its placement rate to investors as well as students.

In a presentation to investors, Harris said company officials boasted that 68.1 percent of its graduates found jobs. The attorney general said the company's own internal audits show its advertised placement rates were exaggerated.

The company operates 111 campuses in North America and offers three online programs.

Harris is seeking unspecified damages, including reimbursements for many students who the attorney general said were duped into attending one of the colleges.

(Copyright 2013 by CBS San Francisco and Bay City News. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

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