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Corinthian Colleges Ordered To Pay Nearly $1.2 Billion For False Advertising

SAN FRANCISCO (CBS SF) -- A San Francisco Superior Court judge is awarding California a nearly $1.2 billion default judgment against the for-profit college operator Corinthian Colleges, Inc.

Santa Ana-based Corinthian closed all its campuses in April and filed for bankruptcy in May leaving thousands of its students in the lurch and saddled with debt.

California Attorney General Kamala Harris filed a lawsuit in October 2013 against Corinthian and its subsidiaries, including Everest and Heald colleges, claiming that the company used illegal predatory practices that left tens of thousands of students with large debts and useless degrees.

Superior Court Judge Curtis Karnow on Thursday ordered $820 million in restitution to the students and over $350 million in civil penalties. Karnow ruled that Corinthian engaged in false advertising that exaggerated job placement rates, along with other illegal behavior.

Karnow states in the judgment that Corinthian has "engaged in conduct that is immoral, unethical, oppressive, unscupulous and /or substantially injurious to consumers."

While it remains unclear if the state will be able to collect the nearly $1.2 billion default judgment, Harris said in a statement released Thursday that the judgment could help former students pay off loans through aid programs.


The California Attorney General's Office is recommending former Corinthian students to visit the Attorney General's Interactive Tool for information regarding potential relief and resources.

"For years, Corinthian profited off the backs of poor people – now they have to pay. This judgment sends a clear message: there is a cost to this kind of predatory conduct," Harris said in a statement Thursday.

Harris' original complaint alleged that Corinthian intentionally targeted low-income, vulnerable Californians, and did so with deceptive, false and aggressive marketing campaigns.

Harris' complaint also alleged that the company misrepresented job placement rates to investors and accrediting agencies.

Judge Karnow's ruling states that Corinthian's job placement rates were indeed lower than the company advertised and that the rates were not substantiated by Corinthian's internal data and files.

Karnow states that the company also fed false graduation job placement rates to investors and that the company's internal documents suggest the actual placement rate was far lower.

Corinthian, Karnow ruled, also advertised programs to potential students that did not exist, including ultrasound technician programs, x-ray technician programs, radiology technician programs, or dialysis technician programs in California.

Karnow writes in the ruling:

"Corinthian Colleges, Inc. nevertheless ran millions of online and mobile ads stating that they do [offer those programs]...The fact that these false ads misled students was known by Heald, Corinthian..."

The ruling also found that Corinthian unlawfully used the official seals of the U.S. Department of the Army, the U.S. Department of the Navy, the U.S. Department of the Air Force, the U.S. Marine Corps, and the U.S. Coast Guard, to solicit the purchase of or payment for a product or service.

Karnow also found Corinthian in violation for the inserting unlawful clauses into enrollment agreements, such as exempting Corinthian of responsibility from "any and all claims of any kind whatseover."

Additionally, Karnow found Corinthian had practiced unlawful debt collection, failed to disclose its business and financial relationship with a private lending program, misrepresented the transferability of credits and the company's financial stability to students.

Corinthian did not return a request for comment on the judge's default judgment Thursday, but a note to students on the Corinthian website from chief executive officer Jack Massimino states, "We believe that we have attempted to do everything within our power to provide a quality education and an opportunity for a better future for our students."

Karnow states in the ruling, however, that Corinthian's unlawful business practices "caused students to pay tens of thousands of dollars, undertake huge credit obligations, and/or spend years of their lives in educational programs because they hoped to get a job - and believed they would get a job - based on Defendants' untrue and misleading representations."

By Hannah Albarazi - Follow her on Twitter: @hannahalbarazi.

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