California files suit against for-profit college

The state of California is suing a for-profit college (PDF) for using false job placement rates in its advertising as part of a "predatory scheme" to lure vulnerable students. The state said the practice has resulted in harm to investors and thousands of students.

The lawsuit, filed Thursday by the office of state Attorney General Kamala Harris, accuses the Santa Ana, Calif.–based Corinthian Colleges, Inc., which operates 24 campuses in the state and a total of 111 in North America, of advertising 100 percent job placement rates for some of its programs when those claims were "false or not supported by the data." Harris alleged that the company once paid a temporary employment agency to hire graduates to boost placement figures. 

"The predatory scheme devised by executives at Corinthian Colleges, Inc. is unconscionable. Designed to rake in profits and mislead investors, they targeted some of our state's most particularly vulnerable people — including low income, single mothers and veterans returning from combat," Harris said in a release on the AG's website.

The complaint also named three subsidiaries of Corinthian — Heald, Everest and WyoTech colleges, all of which have campuses in California. 

For-profit colleges have been under sharp government scrutiny and pressure for months, with critics accusing them of putting profit ahead of student achievement. Some graduates have found that their degrees don't win them jobs and that they are left saddled with large student debts. Enrollments in for-profit colleges soared during the recession as job seekers tried to improve their credentials. 

The state alleged that top officials at the institutions, which offer degrees for a variety of positions including medical technicians and dental assistants, were aware of the misconduct involving the job placement figures, which were used as a selling point to prospective students.  

Emails cited in the lawsuit indicate that Everest College paid a temporary employment agency, Remedy Temp, to hire graduates for two days in order to increase job placement figures. 

The complaint said that in addition to employing "fraudulent practices," the schools charged high tuition while targeting single-parent families who had incomes near the poverty level.

Among the expenses cited in the lawsuit were those for Heald College in San Francisco, which charged $39,510 in tuition and fees, in addition to $3,500 for books and supplies, for an associate of applied science degree in medical assisting.

Internal company documents cited in the complaint and obtained by subpoena described the target demographic of the institutions as "isolated" and "impatient" individuals and those with "low self-esteem." Harris also accused Corinthian of illegally using official U.S. military seals in its advertising to attract veterans who have tens of thousands of education dollars available because of their service.

Harris is seeking unspecified damages, including reimbursements for many students who, she said, were duped into attending one of the colleges. The attorney general's office confirmed to Al Jazeera that after filing the suit on Thursday, it had already received student complaints by Friday. 

Corinthian paid $6.5 million in 2007 to settle a lawsuit that made similar allegations; it was filed by Gov. Jerry Brown when he was California attorney general.

The complaint also said that Corinthian, a publicly traded corporation with more than $1 billion in assets, and its subsidiaries committed securities fraud by reporting during presentations to investors that their nationwide job placement rate in 2011 was 68.1 percent, despite knowing the percentage was false.

The state alleges that the college's own data and files suggested that "the actual rate is much lower and has been subject to manipulations and assumptions not disclosed to investors."

Kent Jennings, a spokesman for Corinthian, told Al Jazeera in a statement that the institution would "vigorously defend against this complaint," saying Corinthian had been "cooperating extensively with the Attorney General's office for nine months." 

"We are committed to regulatory compliance and have robust processes in place to correctly record and disclose the job placement information we receive from our graduates and their employers," the statement read. 

The lawsuit comes as Harris continues to investigate the San Diego–based Bridgepoint Education. Bridgepoint has about 80,000 students, the vast majority of them online, but the school also has students at Ashford University in Iowa and the University of the Rockies in Colorado.

Philip J. Victor contributed to this report, with wire services