Attorney General Kamala D. Harris Seeks Immediate Halt to Corinthian Colleges’ False Advertising to California Students

SAN FRANCISCO – Attorney General Kamala D. Harris took steps to file additional charges against Corinthian Colleges, Inc. (CCI) alleging that the company is currently violating California false advertising and unfair competition laws and is requesting that a court immediately force CCI to tell prospective students the truth about the company’s dire financial situation and its agreement with the federal government to sell or close all of its schools.

“It is unacceptable yet not surprising that Corinthian Colleges continues to illegally target vulnerable Californians—including low income individuals, single mothers and veterans returning from combat—by lying about its dire finances and failing to tell prospective students that the schools to which they apply will all be sold or closed,” Attorney General Harris said. “My office is seeking expedited action to force Corinthian Colleges to put the interests of its students above its rapidly shrinking profits.”

Attorney General Harris filed a motion Wednesday asking San Francisco Superior Court for permission to move on an expedited basis to file a supplemental complaint enhancing the original complaint Harris filed against CCI in October 2013, which accused the company of false and predatory advertising, intentional misrepresentations to students, securities fraud, and unlawful use of military seals in advertisements. Wednesday’s motion also indicates Attorney General Harris’ intention to subsequently move for a temporary restraining order and/or preliminary injunction against CCI to force the company to immediately cease its misleading advertisements and inform prospective students about its dire finances.

In a filing with the U.S. Securities and Exchange Commission on June 19th, CCI informed investors of its serious financial troubles and plans to close or sell its campuses. This week, CCI signed an agreement with the U.S. Department of Education wherein CCI agreed to close or sell its campuses to third-parties in the near future.

Despite these recent events, according to the proposed supplemental complaint, CCI has failed to inform prospective students about its dire financial condition or its plan to close or sell its schools and is, in fact, actively soliciting prospective students and enrolling new students without disclosing its current financial condition or the future of its schools.

According to the filing, CCI websites and advertisements currently contain misleading statements including:

• “since we've been around for over 150 years, you can count on us to be here when you need it most.”
• “Heald is also a stable and permanent fixture in education communities”
• “at Heald, we're committed to providing career services assistance to our graduates, for life.”

Attorney General Harris’ original complaint alleges that 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. The complaint further alleges that Corinthian executives knowingly misrepresented job placement rates to investors and accrediting agencies, which harmed students, investors and taxpayers.

According to Harris’ original complaint, CCI’s predatory marketing efforts specifically target vulnerable, low-income job seekers and single parents who have annual incomes near the federal poverty line. In internal company documents obtained by the Department of Justice, CCI describes its target demographic 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.”

According to the complaint, CCI advertised job placement rates as high as 100% for specific programs when, in some cases, there is no evidence that a single student obtained a job during the specified time frame. The complaint further alleges that CCI runs millions of online and mobile ads offering ultrasound, x-ray, radiology, and dialysis technician programs at their California campuses—when, in fact, CCI does not offer those programs. CCI’s call center agents are disciplined if they tell callers that CCI does not offer these programs. Additionally, according to the complaint, CCI includes official Army, Navy, Air Force, Marine Corps, and Coast Guard seals in mailings and on web sites without authorization and in violation of California law.

The complaint alleges that CCI committed securities fraud by reporting a nationwide job placement rate of 68.1% in presentations to investors, when senior executives knew this percentage was false. The complaint describes internal audits emailed to CCI executives that show job placement data error rates between 53% and 70%. The complaint references an email from a CCI executive which explains that in 2011, two Everest College campuses (Hayward and San Francisco) paid a temporary employment agency “to place students to meet the accreditation deadline and minimum placement %.” The complaint also states that CCI double-counted job placements and failed to maintain required records of reported job placements.

According to a recent CCI securities filing, the average tuition for a CCI associate’s degree is $40,000 and the average tuition for an online CCI associate’s degree is $34,000.  The average tuition for CCI’s non-degree healthcare programs is $17,000.

CCI is based in Santa Ana and currently operates 24 Everest, Heald and WyoTech campuses in California, 111 total campuses in North America and three online programs. Out of the 72,000 students who attend CCI colleges, approximately one-third are in California.

Federal funds account for almost all of CCI’s annual revenue.