California Attorney General Files Suit Against For-Profit College

The Attorney General's office for the State of California announced last week that it had filed a lawsuit against Corinthian Colleges, Inc. (CCI). The complaint alleged that the company performed:

"... false and predatory advertising, intentional misrepresentations to students, securities fraud and unlawful use of military seals in advertisements... CCI intentionally targeted low-income, vulnerable Californians through deceptive and false advertisements and aggressive marketing campaigns that misrepresented job placement rates and school programs. CCI deployed these advertisements through persistent internet, telemarketing and television ad campaigns... Corinthian executives knowingly misrepresented job placement rates..."

The complaint also named as defendants Everest, Heald and WyoTech colleges. The announcement said that the complaint cited internal company documents obtained by the Department of Justice. which described the consumers targeted by CCI's marketing activities:

"... as “isolated,” “impatient,” individuals with “low self-esteem,” who have “few people in their lives who care about them” and who are “stuck” and “unable to see and plan well for future.” "

CCI describes itself in its website as:

"... one of the largest for-profit, post-secondary education companies in North America, with more than 81,300 students at over 111 U.S. and Canadian campuses. Our campuses offer short-term diploma and/or degree programs in a variety of popular career fields..."

The complaint alleged that CCI advertised placement rates for its graduates of 100 percent when the reality was the rate was about zero. California Attorney General Harris said:

"The predatory scheme devised by executives at Corinthian Colleges, Inc. is unconscionable. Designed to rake in profits and mislead investors, they targeted some of our state’s most particularly vulnerable people—including low income, single mothers and veterans returning from combat... My office will continue our investigation into the for-profit college industry and will hold accountable those responsible for these illegal, exploitative practices.”

Current or former CCI students should contact the California Attorney General's Office to file a complaint.

It is good to see an attorney general pursue this type of alleged corporate behavior. I hope that stiff fines and punishments result with specific executives named, and not a weak settlement agreement where the company does not admit any wrongdoing. In my opinion, the company should pay the entire debts of its graduates it promised 100 percent placement rates in jobs, and who haven't found work.

Comments

[Chanson de Roland]

Inexplicably by any principle of equity and unsupported by any evidence of widespread or even significant abuse by student debtors that bankruptcy courts could have dealt with using their traditional powers, Congress has made student-loan debt nearly impossible to discharge in bankruptcy, except in extraordinary circumstances, such as physical disability or some circumstance of extreme hardship.

But for students who are victims of fraud in contracting for education also have grounds in U.S. bankruptcy court and perhaps in state courts to void and/or discharge debt incurred to finance a fraudulent education.

Therefore, students of CCI or any post secondary school that employed fraud to induce them to matriculate may be entitled not only to compensation that makes them whole for out-of-pocket expenditures but also discharge of their student loan debt. However, you don't get a windfall: If, for example, CCI pays you damages for all of your tuition, then you'll probably have to use that money to pay your student loans; in fact, that portion of any damages would probably go directly to the lender. If CCI can't, however, make full restitution for your expenses and loans, then the bankruptcy court will combine discharge with contract damages and/or restitution to make you whole and either relieve you of student loan debt or award you damages to pay that debt, which, as I wrote, supra, will go to the lender.

But you won't get a windfall of damages and/or restitution for an education that you financed with debt.