Education

Brown Expands Probe into CSU Stanislaus Foundation

April 13, 2010
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

SAN FRANCISCO – Attorney General Edmund G. Brown Jr. announced today that he has launched a broad investigation into the California State University Stanislaus Foundation to include an examination of its finances and the alleged dumping of documents into a university dumpster.

This action follows an inquiry Brown began last week into whether the CSU Stanislaus Foundation violated the California Public Records Act. On April 7, State Senator Leland Yee asked Brown to investigate the refusal of California State University Stanislaus to turn over records, under the Public Records Act, pertaining to the $500-a-plate June 25 speaking engagement of former vice presidential candidate Sarah Palin at the university’s 50th anniversary gala. Palin’s compensation for speaking at the CSU Stanislaus gala hasn’t been disclosed, but she earned $100,000 for speaking in February at a Tea Party convention in Nashville.

The expanded inquiry will seek to determine whether the foundation, which has assets of more than $20 million, is spending its money to benefit the campus, as it promises donors, the university and the public. The CSU Stanislaus Foundation spends more than $3 million each year on university endeavors. The Attorney General is asking university officials to preserve foundation documents.

“We are taking this action to make sure that the money raised goes toward the intended educational purposes and not a dollar is wasted or misspent,” Brown said, “Prudent financial stewardship is crucial at a time in which universities face vastly decreased funding and increased student fees.”

The Attorney General oversees charitable organizations to make sure that they comply with the law. Brown’s office has recently sought records of several foundations following allegations of improprieties including a no-bid contract to a foundation board member, a loan -- with a large loss -- to a former foundation board member, a $1.5 million-dollar loss because of bad debts, a questionable real estate deal and a $200,000 low-interest loan to a university president.

The university foundations provide crucial financial help to state universities, supplementing student fees and state support for scholarships, academic programs, buildings and operating expenses.

Brown said his office would also review documents obtained from Yee today, including part of Palin’s speech contract, which students say they plucked out of a dumpster near the CSU Stanislaus administration building. Investigators will first attempt to determine whether the documents are authentic and how they ended up in the dumpster.

“This is not about Sarah Palin,” Brown said. “She has every right to speak at a university event, and schools should strive to bring to campus a broad range of speakers. The issues are public disclosure and financial accountability in organizations embedded in state-run universities. We’re not saying any allegation is true, but we owe it to the taxpayers to thoroughly check out every serious allegation.”

The assets controlled by 95 auxiliary bodies and foundations associated with the entire CSU system amount to $1.34 billion, according to the CSU chancellor’s office. UC system foundations control another $4 billion in assets.

The Attorney General’s investigation is being conducted by its Charitable Trusts Section, which works with charities to make sure they comply with the law and their articles of incorporation. The Attorney General is also authorized to bring legal actions against charities if they misuse funds under their control.

For more information on the Attorney General’s Charitable Trusts Division, see http://ag.ca.gov/charities.php.

Brown Recovers College Scholarship Funds Raided by Trustee

January 20, 2010
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

Mendocino, Calif—Attorney General Edmund G. Brown Jr. today announced a settlement with James L. Harrison, 62, of Ukiah, after he “looted college scholarship funds” from a Trust intended to benefit female graduates of Ukiah High School pursuing careers in medicine.

Brown’s office, working with the Federal Deposit Insurance Corporation (FDIC) and the California Department of Financial Institutions, recovered both the principal and the interest—totaling over $650,000—owed to the Trust. In the settlement, Harrison agreed to a lifetime ban from serving as a charitable trustee or officer of a public benefit corporation.

“Harrison looted college scholarship funds intended to help women graduating from high school achieve their dreams,” Brown said. “Today’s agreement makes sure that he is never in a position to steal from a non-profit again.”

In 1993, Ukiah residents Viola and Oscar Allen established a Living Trust. It was their wish that upon their deaths, funds from the Trust would be administered as scholarships for female graduates of Ukiah High School interested in pursuing further education in the medical field.

Harrison, who was then Vice President of Savings Bank in Mendocino County, became Trustee in 1993. Instead of funding scholarships for students, he began spending the money for his own benefit. He invested in real-estate ventures and loaned money to friends and family.

In 2005, the FDIC was notified of suspicious activity involving the Trust. The Attorney General’s Office began its own investigation and found that Harrison had diverted hundreds of thousands of the approximately $474,000 in the original Trust.

In February 2007, Brown’s office filed a civil lawsuit against Harrison seeking to remove him from the Trustee position. Brown’s office also filed criminal charges against Harrison in 2008.

In February 2009, Harrison entered no contest pleas to the following felony counts:

• Misappropriation of trust assets (Penal Code sections 487/506)
• Filing willfully false tax returns (Revenue and Taxation Code section 19705(a)(1))
• Admittedly taking in excess of $200,000 (Penal Code section 12022.6(a)(2))

Harrison was sentenced to one year in county jail and three years probation.

As a result of the civil action, a new trustee was appointed to administer the Viola and Oscar Allen Trust and scholarships have been distributed for the last two years to female graduates of Ukiah High School.

A copy of the settlement agreement is attached.

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Brown and 11 States Force Loan Provider to Forgive $112.7 million in Debts of Helicopter Flight School Students

October 27, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

El Cajon—Attorney General Edmund G. Brown Jr. and 11 other state Attorneys General today forced Student Loan Xpress, Inc. to provide $112.7 million in debt relief to students facing a “mountain of debt” for helicopter flight instruction they never received.

Of the $112.7 million, approximately $25.5 million in debt relief will go to California residents who did not receive the training they paid for.

“These students did not obtain the helicopter instruction they were promised, yet Student Loan Xpress insisted that they pay off the full cost of their tuition,” Brown said. “Without this agreement, Silver State flight school students would face a mountain of debt for training they never received.”

Silver State Helicopters was founded near Las Vegas in 2002, and the company quickly grew. At its height, the school comprised 34 campuses in 17 states, and included 2,700 students who paid approximately $69,900 each. In California, Silver State Helicopters operated flight schools in Sacramento, Chino and El Cajon.

In August 2005, Student Loan Xpress became the preferred student loan provider for Silver State Helicopters, lending or servicing some $180 million in student loans.

Yet, even before it made its first loan, Student Loan Xpress had reason to believe that the school was in serious financial difficulty. Students complained of a shortage of instructors, flight simulators and helicopters. Only 10 percent of Silver State students graduated. Ultimately, the school filed for bankruptcy in February 2008.

Many students paid thousands of dollars of tuition, but did not receive the flight training they were promised in return. Regardless of the bankruptcy, Student Loan Express demanded that borrowers repay the full cost of the loans.

Consequently, several state Attorneys General launched an investigation, which determined that the two companies had a close business relationship, and that that Student Loan Xpress had failed to comply with the duty to provide required notices to borrowers. Under the settlement, Student Loan Xpress denied any wrongdoing.

After several months of negotiations, the attorneys general and Student Loan Xpress reached a settlement agreement. The settlement, in tandem with the resolution of a private class action, calls for Student Loan Xpress to restructure approximately $174 million of student debt, based on the number of Federal Aviation Administration (FAA) certifications each student obtained. The fewer certificates obtained, the larger the amount forgiven. The average debt relief for students under this settlement is $46,016.

The company also agreed to:
• Forgive an additional 2.5 percent of the student loan if the adjusted loan is repaid within five years;
• Refrain from providing negative information to credit reporting agencies with respect to any loan restructured; and
• Forgive interest between the dates Silver State Helicopters filed for bankruptcy and approximately the end of 2009.

Student Loan Xpress will also pay $125,000 in legal expenses to the states. The states joining California in today’s settlement are: Florida, Georgia, Idaho, Illinois, Missouri, Montana, Nevada, Oklahoma, Oregon, Utah, and Washington.

The $112.7 in debt forgiveness included in this settlement includes the total relief provided in both the states’ settlement with Student Loan Xpress, and the proposed settlement in a private, nationwide class-action called Holman et al v. Student Loan Xpress, Inc. That class action was filed in federal court in Florida.

Student Loan Xpress borrowers with questions about the settlement are asked to contact the settlement administrator in this matter by e-mail, at settlementquestions@gmail.com.

A copy of the Assurance of Voluntary Compliance is attached.

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Brown and Trutanich Obtain Injunction that Creates 1.4 Square-Mile Gang-Free Zone Around L.A. School

August 25, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

Los Angeles -- Fighting to protect students facing “wanton gang violence,” Attorney General Edmund G. Brown Jr. and Los Angeles City Attorney Carmen Trutanich have won a court-ordered preliminary injunction creating a 1.4 square-mile gang-free zone around Fremont High School in Los Angeles.

This injunction is the first-of-its-kind and would impose significant restrictions on members of four violent street gangs (the Swan Bloods, Florencia 13, the Main Street Crips, and the 7-Trey Hustlers/Gangster Crips) to prevent them from assembling with other gang members and from harassing and intimidating law-abiding citizens.

“Fremont High Students are terrorized by wanton gang violence on a daily basis, as they head back and forth from school,” Brown said. “By creating this gang-free zone, this injunction will shield students from violence and intimidation and help foster a better environment in which to learn.”

A complaint seeking this injunction was initially filed in Los Angeles County Superior Court on Friday, June 12, 2009. The injunction granted today will create the “Fremont Free Passage Safety Zone” to prevent gang activity in the 1.4 square-mile neighborhood surrounding Fremont High School in Los Angeles.

This safety zone will be bounded by Florence Avenue to the north, Central Avenue to the east, Manchester Avenue to the south and the 110 Freeway to the west and extends 100 yards beyond each of these boundaries.

To protect all residents in the Fremont High School neighborhood, gang members must obey a night time curfew from 10:00 p.m. to 5:00 a.m. The injunction also prevents gang members from:

• Standing, sitting, walking, driving, gathering or appearing anywhere in public view, in a public place or in any place accessible to the public, with any other known gang member in the zone;

• Confronting, intimidating, annoying, harassing, threatening, challenging, provoking, assaulting, or battering any person who lives in, works in, visits or passes through the zone;

• Possessing any firearm, ammunition or weapon, whether or not concealed, in a public place or in any place accessible to the public within the zone;

• Selling, transporting, possessing or using, any controlled substance, drug or drug-related paraphernalia within the zone;

• Acting as a lookout by whistling, yelling, or signaling to warn another person engaged in unlawful or nuisance activity of the approach of law enforcement officers within the zone;

• Obstructing, impeding or blocking the free passage of any person or vehicle on any street, walkway, sidewalk, driveway, alley or parking lot within the zone;

• Drinking or possessing an open container of an alcoholic beverage in public within the safety zone;

• Damaging, defacing, marking, painting or otherwise applying graffiti to any public or private property or possessing any item to carry out such acts within the zone;

• Loitering in public for the purpose of tagging graffiti, drug-related activity or any other unlawful or nuisance activity within the zone; and

• Being present in or on the property of another person that is not open to the general public without the owner’s consent within the zone.

This injunction stems from a nine-month investigation into the gang activity of the Swan Bloods, Florencia 13, the Main Street Crips, and the 7-Trey Hustlers/Gangster Crips around Fremont High School. The 77th Division of the Los Angeles Police Department gathered and provided the evidence necessary to take action.

The investigation found that gang members frequently confronted, threatened, intimidated, assaulted, and robbed Fremont High School students traveling to and from school. These gangs also vandalized property, trespassed, loitered and sold and used drugs on sidewalks and streets near the school. For example:

• In April 2009, a young male was shot by a young female in broad daylight right next to Fremont High School on 79th Street and Avalon Boulevard.

• In March 2009, Swan Blood gang members attacked a young woman from behind in broad daylight and stole her necklace at a laundromat adjacent to Fremont High School on 78th Street and San Pedro Street.

• In February 2009, a Main Street Crip gang member armed with a handgun took a family hostage seven blocks from Fremont High School on 84th Street between Main Street and Wall Street after running from an LAPD officer.

• In November 2008, three Swan Blood gang members approached a 16-year-old student from behind, knocked him to the ground, punched and kicked him in the head and face, knocked him unconscious, and took his property. The crime occurred about four blocks from Fremont High School on McKinley Avenue at 80th Street.

• In October 2008, a 7-Trey Hustlers/Gangster Crips gang member shot into crowd of rival Swan Blood gang members with an assault rifle about one block from Fremont High School at 76th Street and San Pedro Street, killing an eight-year-old girl.

• In 2008, Florencia 13 gang members surrounded a Fremont High School student, asked him where he was from, yelled out, “This is Florencia!” proceeded to punch and kick him, and stole his money and electronics. The crime occurred less than one block from Fremont High School at 79th Street and Avalon Boulevard.

• In October 2007, a Florencia 13 gang member tried to stab a 15-year-old student walking home with a screw driver. Five to six gang members then punched and kicked the student, causing an eye abrasion, swelling to both sides of his face, bloody lips, a bump on his head and vomiting.

• In June 2007, a Swan Blood gang member murdered two young men in an alley about six blocks from Fremont High School, near 84th Street and San Pedro Street.

Many of the crimes around Fremont High School go unreported because victims and witnesses face the threat of retaliation and violence if they talk to police.

The complaint contends that this gang activity infringes on the constitutional right of students to obtain a public education on a safe, secure, and peaceful campus and to safely travel to and from school in violation of California’s Tom Bane Civil Rights Act. The Bane Act protects individuals from interference, by use of threats, intimidation, or coercion, with his or her peaceable exercise of their state and federal constitutional rights.

The complaint also contends that this gang activity constitutes a public nuisance pursuant to California Civil Code, sections 3479 and 3480.

To date, traditional law enforcement methods have not eliminated the immediate and continual risk to the lives and property of the people who live in, work, visit and pass through the neighborhood surrounding Fremont High School.

This action builds on Brown’s commitment to cracking down on violent street gangs. In May, Brown announced the arrests of 15 members of the Merced Gangster Crips on charges of conspiracy, drug-trafficking, and weapons sales. Brown also filed 347 felony charges with San Diego District Attorney Bonnie Dumanis against dozens of members and associates of a San Diego street gang for stealing more than $500,000 from the Navy Federal Credit Union, using forged checks and an Indian Casino cash machine.

Brown and Delgadillo File Lawsuit Seeking Injunction that Creates 1.4 Square-Mile Gang-Free Zone Around L.A. School

June 16, 2009
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

Los Angeles -- Fighting to protect the rights of students who have been “indiscriminately terrorized” by gang violence, Attorney General Edmund G. Brown Jr. and Los Angeles City Attorney Rocky Delgadillo today announced that they have filed a lawsuit seeking an injunction that creates a 1.4 square-mile gang-free zone around Fremont High School in Los Angeles.

This injunction would be the first-of-its-kind and would impose a daytime curfew on members of four violent street gangs (the Swan Bloods, Florencia 13, the Main Street Crips, and the 7-Trey Hustlers/Gangster Crips) to prevent them from being on the streets while students walk to and from school, from assembling with other gang members, and from harassing and intimidating law-abiding citizens.

“These brutally violent street gangs have indiscriminately terrorized students who simply wanted to travel to and from school,” Brown said. “This first-of-its-kind injunction would create a gang-free zone around Fremont High School that shields students from violence, intimidation and drug trafficking.”

A complaint seeking this injunction was filed in Los Angeles County Superior Court on Friday, June 12. The injunction would create the “Fremont Free Passage Safety Zone” to prevent gang activity in the 1.4 square-mile neighborhood surrounding Fremont High School in Los Angeles.

This zone will be bound by Florence Avenue to the north, Central Avenue to the east, Manchester Avenue to the south and the 110 Freeway to the west and extends 100 yards beyond each of these boundaries.

Within the zone, police will enforce a strict curfew preventing gang members from being on the streets while students are walking to and from school, from 6:00 a.m. to 9:00 a.m. and from 2:00 p.m. to 6:00 p.m. Also, to protect all residents in the Fremont High School neighborhood, gang members must obey a night time curfew from 10:00 p.m. to 5:00 a.m. The injunction also prevents gang members from:

• Standing, sitting, walking, driving, gathering or appearing anywhere in public view, in a public place or in any place accessible to the public, with any other known gang member in the zone;

• Confronting, intimidating, annoying, harassing, threatening, challenging, provoking, assaulting, or battering any person who lives in, works in, visits or passes through the zone;

• Possessing any firearm, ammunition or weapon, whether or not concealed, in a public place or in any place accessible to the public within the zone;

• Selling, transporting, possessing or using, any controlled substance, drug or drug-related paraphernalia within the zone;

• Acting as a lookout by whistling, yelling, or signaling to warn another person engaged in unlawful or nuisance activity of the approach of law enforcement officers within the zone;

• Obstructing, impeding or blocking the free passage of any person or vehicle on any street, walkway, sidewalk, driveway, alley or parking lot within the zone;

• Drinking or possessing an open container of an alcoholic beverage in public within the safety zone;

• Damaging, defacing, marking, painting or otherwise applying graffiti to any public or private property or possessing any item to carry out such acts within the zone;

• Loitering in public for the purpose of tagging graffiti, drug-related activity or any other unlawful or nuisance activity within the zone; and

• Being present in or on the property of another person that is not open to the general public without the owner’s consent within the zone.

This injunction marks the culmination of a nine-month investigation into the gang activity of the Swan Bloods, Florencia 13, the Main Street Crips, and the 7-Trey Hustlers/Gangster Crips around Fremont High School. The 77th Division of the Los Angeles Police Department gathered and provided the evidence necessary to take action.

The investigation found that gang members frequently confronted, threatened, intimidated, assaulted, and robbed Fremont High School students traveling to and from school. These gangs also vandalized property, trespassed, loitered and sold and used drugs on sidewalks and streets near the school. For example:

• In April 2009, a young male was shot by a young female in broad daylight right next to Fremont High School on 79th Street and Avalon Boulevard.

• In March 2009, Swan Blood gang members attacked a young woman from behind in broad daylight and stole her necklace at a laundromat adjacent to Fremont High School on 78th Street and San Pedro Street.

• In February 2009, a Main Street Crip gang member armed with a handgun took a family hostage seven blocks from Fremont High School on 84th Street between Main Street and Wall Street after running from an LAPD officer.

• In November 2008, three Swan Blood gang members approached a 16-year-old student from behind, knocked him to the ground, punched and kicked him in the head and face, knocked him unconscious, and took his property. The crime occurred about four blocks from Fremont High School on McKinley Avenue at 80th Street.

• In October 2008, a 7-Trey Hustlers/Gangster Crips gang member shot into crowd of rival Swan Blood gang members with an assault rifle about one block from Fremont High School at 76th Street and San Pedro Street, killing an eight-year-old girl.

• In 2008, Florencia 13 gang members surrounded a Fremont High School student, asked him where he was from, yelled out, “This is Florencia!” proceeded to punch and kick him, and stole his money and electronics. The crime occurred less than one block from Fremont High School at 79th Street and Avalon Boulevard.

• In October 2007, a Florencia 13 gang member tried to stab a 15-year-old student walking home with a screw driver. Five to six gang members then punched and kicked the student, causing an eye abrasion, swelling to both sides of his face, bloody lips, a bump on his head and vomiting.

• In June 2007, a Swan Blood gang member murdered two young men in an alley about six blocks from Fremont High School, near 84th Street and San Pedro Street.

Many of the crimes around Fremont High School go unreported because victims and witnesses face the threat of retaliation and violence if they talk to police.

The complaint filed contends that this gang activity infringes on the constitutional right of students to obtain a public education on a safe, secure, and peaceful campus and to safely travel to and from school in violation of California’s Tom Bane Civil Rights Act. The Bane Act protects individuals from interference -- by use of threats, intimidation, or coercion -- with his or her peaceable exercise of their state and federal constitutional rights.

The complaint also contends that this gang activity constitutes a public nuisance pursuant to California Civil Code, sections 3479 and 3480.

To date, traditional law enforcement methods have not eliminated the immediate and continual risk to the lives and property of the people who live in, work, visit and pass through the neighborhood surrounding Fremont High School.

“Too often, street gangs thrive in and around our public schools. We intend to use the powers of the Bane Act to create meaningful safe passages to and from Fremont High School so that the students of that school can study and learn in peace, free from the menace of criminal street gangs,” Delgadillo said. “That is why I am proud to partner with the Attorney General and his office on this historic and creative effort to break the grips of gangs around our public schools.”

This action builds on Brown’s commitment to cracking down on violent street gangs. Last month, Brown announced the arrests of 15 members of the Merced Gangster Crips on charges of conspiracy, drug-trafficking, and weapons sales. Brown also filed 347 felony charges with San Diego District Attorney Bonnie Dumanis against dozens of members and associates of a San Diego street gang for stealing more than $500,000 from the Navy Federal Credit Union, using forged checks and an Indian Casino cash machine.

The complaint for injunctive relief, filed June 12, 2009 in Los Angeles County Superior Court, is attached.

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PDF icon laganginjunctioncomplaint6.57 MB

State Concludes Glenn County Superintendent Investigation

June 18, 2008
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

SACRAMENTO--The California Department of Justice has completed its criminal investigation of former Superintendent of Glenn County Office of Education, Joni Samples, and concludes that there is insufficient evidence to prove that she committed a criminal offense beyond a reasonable doubt.

The department’s investigation focused on a number of public corruption allegations against Samples, including unauthorized use of Glenn County Office of Education’s resources for private business, unauthorized use of Glenn County Office of Education's resources for political campaigning, unauthorized use of Glenn County Office of Education's funds to pay for her personal vehicle, including repairs and equipment for the vehicle, unauthorized use of Glenn County Office of Education's funds to pay for personal travel, and unauthorized use of Glenn County Office of Education's funds to reimburse the office for money embezzled by an employee.

The investigation into this matter included reviewing more than 4,000 documents and interviewing more than 30 witnesses. Based on the documents reviewed as well as the people interviewed, the California Department of Justice has concluded that there is insufficient evidence to prove that Samples has committed a criminal offense beyond a reasonable doubt.

Government Code section 6254, expressly exempts investigatory and security files of the attorney general, including complaints about unlawful practices, from public disclosure. As such, additional details about the state's investigation will not be disclosed.

Construction Company And District Official Indicted For Diverting $3.6 Million From Schools

April 14, 2008
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

SANTA BARBARA--California Attorney General Edmund G. Brown Jr. today announced a 74-count felony indictment against a former Santa Maria-Bonita School District official and three executives from TurnKey, a Temecula-based company, for misappropriating $3.6 million in public money for schools.

'TurnKey squandered public money that was designated for construction costs at sixteen schools in Santa Barbara County,' Attorney General Brown said. 'When TurnKey ran into financial problems, it began taking money from the school district--with knowledge by the assistant superintendent--in violation of state law.'

Between 2000 and 2002, TurnKey signed $62 million in construction management contracts with the Santa Maria-Bonita School District, promising to complete sixteen school projects. Financial records show that TurnKey executives instead used District money to pay for expensive cars, artwork, and to pay cash bonuses to themselves. TurnKey maintained very high overhead costs and began making late payments to its subcontractors.

As early as 2003, TurnKey fell behind in its payments to subcontractors who were building the schools. To service their rising debt, the company began submitting false invoices for services to the District funds, with knowledge from Assistant Superintendent Cynthia Lynn Clark. After the assistant superintendent took a leave of absence in 2004, the District discovered TurnKey's serious financial trouble and refused to continue advancing money to the company.

Only one TurnKey school project, Taylor Elementary, was completed by the time the company went bankrupt in February 2005.

A Santa Barbara grand jury returned the indictment on March 14, 2008 against former company executives Harold Leo Clark III, 46, Michael Patrick Bannan, 43, David Irwin, 39, and former Assistant Superintendent Cynthia Lynn Clark, 54, on 74 counts of Misappropriation of Public Monies, Embezzlement of Public Funds, Diversion of Construction Funds, and Grand Theft of over $3.6 million between June 2004 and September 2004.

The Santa Maria-Bonita School District applied for school construction funding for the state as a hardship district and depended upon funding from the California Office of Public School Construction to pay the costs of the school construction projects. The proposed school projects included: Taylor Elementary, Arellanes Elementary, Arellanes Jr. High, El Camino Jr. High, Fesler Jr. High, Liberty Elementary, Sanchez Elementary, Kunst Jr. High, Adam Elementary, Bruce Elementary, Oakley Elementary, Ontiveros Elementary and Rice Elementary.

The felony indictment, unsealed today, follows a three-year investigation into TurnKey by the Special Crimes Unit of the California Department of Justice with assistance from the Santa Barbara District Attorney's Office. The case will be prosecuted by Deputy Attorney General Patricia M. Fusco in the California Department of Justice Special Crimes Unit. Defendants could serve 38 years in prison if convicted on all counts.

Information about the individuals named in the indictment, unsealed today, includes the following:

  • Harold Leo Clark III, former TurnKey Chief Executive Officer, age 46, of Temecula
  • Michael Patrick Bannan, former TurnKey Chief Operating Officer, age 43, of Vista
  • David Irwin, former TurnKey Vice President, age 39, of Temecula
  • Cynthia Lynn Clark, former Assistant Superintendent for Business Services for the Santa Maria-Bonita School District, age 54, of Cape Canaveral, Florida

The 74-count indictment is attached. The grand jury testimony will be unsealed in 10 days in the Santa Barbara Superior Court. The arraignment is scheduled for May 19, 2008.

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Brown Reaches Antitrust Agreement With Nation's Largest School Bus Operators

September 26, 2007
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

LOS ANGELES – Halting the “anticompetitive effects” of a merger between the nation’s two largest school bus operators, California Attorney General Edmund G. Brown Jr. today announced a settlement with First Group, plc (also known as First Student) and Laidlaw Educational Services. Under the terms of the settlement, the merged company will divest its rights in a bus depot to Riverside Unified School District and agree that Los Angeles Unified School District may terminate certain contracts for school bus services.

Commenting on today’s agreement, Attorney General Brown said, “School districts must be able to choose the best school bus company to ensure that students have rapid and reliable school transportation. Today’s agreement protects school districts and strengthens healthy competition amongst school bus companies.”

Without this agreement, the merged companies would have controlled the majority of the Los Angeles Unified School District private contracts and the only two bus depots in the Riverside Unified School District. In addition to eliminating competition between the two companies, their merger would make it more difficult for competitors to enter the private school bus markets in Los Angeles and Riverside Counties. Today’s settlement will facilitate the entry of new competitors into the areas where the merger’s anticompetitive effects are felt.

Under the agreement, the merged company will transfer its rights to the Franklin Avenue Depot to the Riverside Unified School District and give the Los Angeles Unified School District the right to terminate specific school bus transportation contracts. The parties also agree not to enforce non-competition contracts which would prevent departing employees from starting new school bus transportation companies that would compete with the merged company. The parties will also give the Attorney General notice of any future acquisitions during the next six years and will pay $1.1 million to be divided among the participating states to defray legal fees.

The acquisition of Laidlaw by First Group was first announced in February 2007. FirstGroup, headquartered in Scotland, has operations throughout the United States. It is the second largest school bus operator in the United States. Laidlaw, headquarted in Naperville, Illinois, is the nation’s largest school bus operator.

School districts in California arrange transportation for their students using both in-house and private buses. While many Districts still organize and operate student transportation systems themselves, the practice of contracting with private providers is prevalent. To be eligible to compete for a private contract, bidders must hire personnel and acquire buses, insurance and parking. In many cases, the incumbent bus companies have competitive advantages that make it difficult for new competitors to enter the market.

The California Attorney General, along with ten other states and the U.S. Department of Justice, has been reviewing the proposed acquisition. Under the Clayton Act, Section 7, mergers are illegal if they may substantially lessen competition or tend to create a monopoly. Although the merger did not raise competitive concerns for regular bus services, investigators found that the transaction would significantly lessen competition for home to school and related transportation for Los Angeles Unified School District and Riverside Unified School District.

Brown joined ten other states, Alaska, Connecticut, Illinois, Maine, Massachusetts, Minnesota, Missouri, New Jersey, Rhode Island, and Washington in filing the consent decree agreement with FirstGroup and Laidlaw Education Services today in federal district court in Massachusetts. In agreeing to the consent decree, the merging parties did not admit liability.

The consent decree and the state’s complaint are attached.

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PDF icon Consent Decree313.68 KB
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Brown Reaches Multi-Million Settlement With Corinthian Vocational School

Update: Final Judgment Attached
July 31, 2007
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

LOS ANGELES — California Attorney General Edmund G. Brown Jr. today announced that Corinthian Schools, Inc. and Titan Schools, Inc. will pay $6.5 million, including $5.8 million in consumer restitution, to settle a lawsuit alleging that the for-profit vocational operator engaged in false advertising and unlawful business practices by presenting inaccurate salary and employment information to students.

According to the complaint, Corinthian students pay between $7,000 and $27,000 for vocational courses, which typically take from six months to one year to complete. Corinthian allegedly overstated the percentage of its students who obtained employment from these courses, inflated starting salary information, and used these misrepresentations to convince potential students to enroll. Students wound up paying tuition fees through a combination of government grants, taxpayer-subsidized loans, and private loans arranged by Corinthian.

California Attorney General Brown said: “Corinthian students fully expected that their tuition payments would result in the glowing job opportunities the company promised. Unfortunately, their hopes were dashed as many of the students ended up unemployed and deep in debt. This groundbreaking settlement provides a measure of justice and fair restitution to these students. It also commits Corinthian to reforming its practices for the future.”

The complaint alleges that Corinthian engaged in additional unfair, unlawful or fraudulent business acts and practices, including falsifying records provided to the government, offering vocational programs that did not meet the minimum standards for course completion or subsequent employment, and using provisions in settlement agreements that bar former students from revealing anything about their disputes with Corinthian to government authorities.

Brown submitted the settlement today in Los Angeles County Superior Court, along with the lawsuit it resolves. The settlement, pending judicial approval, provides for a total of $5.8 million in restitution to students, of which $1.5 million is for debt cancellation and $4.3 million is in the form of refunds to former students. The settlement also provides for a payment of $700,000 in civil penalties and costs.

Aside from monetary payments, the settlement requires that Corinthian cease offering a total of 11 substandard programs, including the Pharmacy Technician and Medical Lab Assistant Programs, at various campuses in Anaheim, City of Industry, Gardena, Los Angeles, Ontario, San Bernardino, San Francisco and San Jose. The settlement also enjoins Corinthian from engaging in any of the unlawful business practices alleged in the complaint.

Corinthian, one of the nation’s largest for-profit vocational school chains, offers vocational courses in job occupations such as dental assisting, massage therapy, and medical assisting to thousands of students at its 14 California campuses of Bryman College, Everest College, and National Institute of Technology.
There are approximately 400,000 vocational school students in California. In 1989, the state established a regulatory agency to maintain oversight of vocational schools, today known as the California Bureau of Postsecondary and Vocational Education. This regulation was established, in part, as a response to a rising number questionable vocational schools and “diploma mills,” notorious for pumping out graduates with little education and massive tuition debt.

Consumers who believe they have been victimized by a vocational school can register a complaint by contacting the Public Inquiry Unit of the Attorney General's Office at www.ag.ca.gov/consumers, or by calling (800) 952-5225.

The complaint and judgment are attached.

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PDF icon Complaint69.31 KB
PDF icon Final Judgment703.26 KB

Brown Sues to Aid Swindled Students

May 7, 2007
Contact: (916) 210-6000, agpressoffice@doj.ca.gov

A shuttered San Diego vocational school was sued Monday for allegedly bilking students out of millions of dollars in tuition for computer classes that were not delivered, according to a joint lawsuit by California Attorney General Edmund G. Brown Jr. and San Diego District Attorney Bonnie M. Dumanis.

“Students are saddled with enough debt going to school, and it’s outrageous that they paid for classes that were never taught,” Brown said.
“The school’s owners failed to give refunds and misled students, causing hundreds of complaints to come in to our consumer protection unit,” Dumanis said. “Thanks to the efforts by the attorney general and our office, these students will get their money back.”

The suit, which seeks millions of dollars in fines and restitution, accuses the owners and operators of MicroSkills of charging students about $25,000 in tuition and of closing the San Diego campus without refunding students. The suit accuses the owners and operators of soliciting students to enroll even as the school was going to close October 20. “Defendants continued to sign up new students and receive payments from students for such training during the time defendants intended to close their school,” said the lawsuit, filed in San Diego County Superior Court.

As many as 350 students were affected, and the suit alleges the company falsely promised refunds would be provided for any classes not provided.

“I was trying to better myself and instead this turned out to be a big downfall and now I’m in debt,” said 28-year-old student Kevin Schatte. The Spring Valley resident lost more than $21,000 in tuition.

California law requires when a private for-profit vocational school closes it must refund, within 30 days of closing, tuition for all classes that were not provided. MicroSkills and its owners failed to provide either partial or full restitution.
The lawsuit seeks a permanent injunction, restitution of tuition to as many as 350 former MicroSkills’ students of approximately $2.5 million, and civil penalties of at least $2 million.

The suit targets Firouz Memarzadeh and Farah Memarzadeh, husband and wife of La Jolla, the Memarzadeh Family Trust and others.

The school's address is 7340 Miramar Road #207, San Diego, California. The complaint is attached.

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PDF icon 2007-05-05_Microskillscomplaint.pdf51.41 KB