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Attorney general accuses Corinthian Colleges of 'predatory' ads

October 10, 2013|By Shan Li
  • California Atty. Gen. Kamala D. Harris gestures while standing by a display showing the target demographic of Corinthian Colleges during a news conference.
California Atty. Gen. Kamala D. Harris gestures while standing by a display… (Eric Risberg / Associated…)

California Atty. Gen. Kamala D. Harris filed a lawsuit Thursday against Corinthian Colleges Inc. and its subsidiaries, accusing the company of false and predatory advertising, securities fraud and intentional misrepresentations to students.

The Santa Ana company, one of the world's largest for-profit college businesses, allegedly targeted low-income Californians through "aggressive marketing campaigns" that inaccurately represented job placement rates and school programs, the complaint said. The complaint also accused Corinthian Colleges of unlawfully using military seals in its mailers and on its website in violation of California law.

The company, which also offers job training programs under the names Everest, Heald and WyoTech, is also accused of reporting false work placement rates to investors and accrediting agencies. 

Harris said Corinthian executives devised a "predatory scheme" that is "unconscionable."

"Designed to rake in profits and mislead investors, they targeted some of our state's most vulnerable people -- including low income, single mothers and veterans returning from combat," she said in a Thursday statement.

The lawsuit followed the company's June disclosure that the Securities and Exchange Commission had issued a subpoena for information about its recruitment, degree completion, student loan defaults and job placement data. In January, the company said California's attorney general's office issued a subpoena looking for similar data. 

Kent Jenkins, a spokesman for Corinthian Colleges, said the company was "disappointed to learn" of the lawsuit.

"We have been cooperating extensively with the Attorney General's office for nine months, as we had previously disclosed," he wrote in an e-mail. "We were not given advance notice of today's complaint and have not had the chance to review it in detail."

Jenkins said Corinthian is "committed to regulatory compliance" and has "robust processes in place" to record and disclose accurate job placement information from its graduates.

According to internal documents obtained by the Justice Department, the company described its core demographic with words like "isolated," "low self-esteem" and "impatient," the complaint said. Target customers include those with "few people in their lives who care about them" and people "unable to see and plan well for the future."

Through online, phone and TV ads, the company sometimes advertised job placement rates as high as 100% for certain programs, although not a single student could be found that had found work in that time frame, the complaint alleges.

Corinthian also advertised programs that it does not actually offer, the complaint said. It also used official military seals in mailers and online in violation of California law.

The attorney general is seeking civil penalties and an injunction or other court order to stop Corinthian from engaging in allegedly unfair competition and also to restore money or property gained by those practices.

Founded in 1995, Corinthian has about 81,000 students enrolled at 111 schools in 25 states and Canada.

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Follow Shan Li on Twitter @ShanLi

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