Education

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.

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.

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.

California Attorney General Edmund G. Brown Jr. demanded two California student-loan businesses produce records concerning their financial relationships with public and private universities, and vocational schools in California as part the Department of Justice’s ongoing probe into the student-loan industry.

The companies are Education Finance Partners Inc. of San Francisco and Student Loan Xpress Inc. of San Diego.

“Schools and universities in California must be above reproach, and no further burdens should be visited upon students who are already weighed down by escalating student-debt responsibilities,” Brown said.

The Department of Justice is seeking the information to determine whether the lenders made unlawful payments to schools or university personnel.

The department is investigating whether any schools have improperly chosen some lenders in preference to others, and whether unlawful payments have been made to schools from the student lending institutions.