Failed For-Profit College Operator Ordered To Pay $1.1 Billion For Predatory Practices

Corinthian Colleges Inc. — which formerly ran for-profit education chains like Everest University, Heald College, and WyoTech — may have collapsed and had its remnants sold off, but the lawsuits against the failed company continue to loom. This week, a California judge ordered the defunct company to fork over $1.1 billion to the state for lying to students, investors, and regulators.

California Attorney General Kamala Harris sued CCI back in Oct. 2013, accusing the company of a panoply of predatory practices — none of which the company challenged, resulting in a default judgment being entered this week against CCI.


That lawsuit [PDF] alleged that CCI deliberately targeted low-income Americans with the promise of a good-paying job after graduation.

Some CCI programs claimed to have placement rates of 100%, but the California investigation not only found that the real placement rates were significantly lower, but that — for some programs — investigators could not turn up evidence that even a single graduate found a job in their field within a reasonable amount of time.

CCI didn’t just lie to prospective students about job-placement rates. The company misled investors, reporting a nationwide placement rate of 68.1% in investor presentations, even though internal audits demonstrated that the company was well aware that this information was not accurate.

Prosecutors said that CCI faked placement stats with the aid of a temp agency, which was paid “to place students to meet the accreditation deadline and minimum placement percentage.” Some job placements were counted twice to further fudge the numbers.

Recently released testimony in the lawsuit one woman says that CCI actively recruited her and her fiancé, even though the couple made it clear that they were homeless and living in a tent at the time. However, recruiters used placement stats to convince them that better days were in their future, leading them to take out private student loans to pay for tuition.


Starting in at least 2010, and continuing on until CCI’s 2015 collapse, the company advertised educational tracks — including ultrasound, x-ray, radiology, and dialysis technician programs — that its schools didn’t offer.

When a prospective student would contact the school about one of these programs, CCI call center employees were allegedly told they would face discipline if they disclosed that these programs were fictional.


In addition to the misleading job-placement stats, CCI also misled students in California about the likelihood that the credits earned in CCI programs would transfer to other schools.

In fact, ads run in the state promised that all or most of the credits earned at CCI’s Heald College campuses would transfer to “partner colleges,” including those in the California state university system. But only a fraction of Heald credits were deemed acceptable for transfer to Cal state schools. Those with only a diploma, certificate, or Associate of Applied Science degree from Heald would not even be eligible to transfer to 3/4 of these so-called parter programs in the state.


In an effort to bolster its marketing to military personnel, CCI illegally used the official seals of the Army, Navy, Air Force, Marine Corps, and Coast Guard on websites and in emails. The company also failed to make the required disclosures that these government agencies had not endorsed or approved these messages.


At the time of the lawsuit, the company’s various schools ran more than 100 campuses nationwide with around 81,000 total students, many of them paying upwards of $40,000 a year to remain enrolled. California residents represented around one-third of all CCI students.

When a student enrolled at a CCI school, they were forced to sign an agreement that exempted the company from responsibility for “any and all claims of any kind whatsoever.” The legal equivalent of “not it!” and a violation of the California Civil Code’s prohibition against representing that a transaction “confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law.” Similarly, another California state law invalidates “All contracts which… exempt any one from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent.”


For the company’s final four years of existence, CCI paid third-party debt collectors that engaged in unlawful collection practices like:
• Attempting to collect from students in the middle of class.
• Blocking students who were behind on their payments from attending classes.
• Barring these same behind-on-payment students from participating in externships.

CCI also failed to disclose to students that the company had a financial relationship with the entities on the list of preferred private student loan lenders.


With CCI not putting up any sort of legal fight against California, the court granted the state’s request for a default judgment and ordered the company to pay $820 million back to students, along with civil penalties totaling more than $350 million.

Californians affected by CCI’s illegal practices can get more information on the Attorney General’s website.

In a statement, Harris says, “For years, Corinthian profited off the backs of poor people – now they have to pay. This judgment sends a clear message: there is a cost to this kind of predatory conduct.”

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