California Sues a Number of Colleges for Doing Bad Stuff

The California Attorney General has filed suit against some recognizable college names claiming they engaged in “false and predatory advertising, intentional misrepresentations to students, securities fraud and unlawful use of military seals in advertisements.” – Source

The complaint names Corinthian Colleges, Heald College, Corinthian Schools, Sequoia Education, Career Choices, MJB Acquisition Corporation, Titan Schools, Rhodes Colleges, Florida Metropolitan, and Everest College Phoenix. The entities operate popular education brands like WyoTech.

The 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’ 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.” It is alleged the schools targeted people meeting these targets through aggressive and persistent internet and telemarketing campaigns and through television ads on daytime shows like Jerry Springer and Maury Povich.

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.

From the Complaint

“CCI is engaging in these unlawful, unfair, and fraudulent practices in connection with the sale of programs that are very expensive. For example, Heald College in San Francisco charges $39,510 in tuition and fees and $3,500 in books and supplies for an Associate of Applied Science degree in Medical Assisting; Fverest College in City of Industry charges $38,341 in tuition and fees and $4,339 in books and supplies for its Criminal Justice Associate’s degree; Wyotech in Long Beach charges $35,000 in tuition and fees and $2,000 in books and supplies for an Automotive Technology with Applied Service Management Associate’s degree; and Everest University Online’s Brandon Campus charges $68,800 in tuition for an online Bachelor’s degree in “Paralegal.” – Source

“The [job] placement rates published by CCI are at times as high as 100 percent, leading prospective students to believe that if they graduate they will get a job. These placement rates are false and not supported by the data, In some cases there is no evidence that a single student in a 12 program obtained a job during the time frame specified in the disclosures.”

“These violations are all the more egregious given senior CCI executives’ firsthand knowledge of the misconduct. More specifically, CCI management knew that CCI had a placement compliance problem:

(a) On or about September 23, 2011, CCI’s CEO, Jack Massimino, e-mailed a presentation that was to be read by the ELT [Executive Leadership Team] in advance of an offsite meeting. One of the slides stated: “We have a placement compliance problem now.”

(b) On or about December 7, 2011, the Accrediting Commission of Career Schools and Colleges (ACCSC) sent a letter to the Campus President of Everest College Hayward noting that “39 of the 167 [medical assistant] students reported as employed in field were employed by the same agency, Select Staffing” and that the documentation provided by Everest “did not clearly demonstrate that the employment at Select Staffing constitutes sustainable employment in a related field.” In response, Everest College Hayward admitted that the positions were health screening fair positions but stated that the positions were valid placements.

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On or about June 6, 2012, ACCSC sent a follow-up letter to the Campus President, noting that “the majority of placements with Select Staffing resulted in two days of employment and did not clearly demonstrate that the employment at Select Staffing constitutes ‘sustainable’ employment for a reasonable period of time in a field related to the graduate’s educational program.”

(c) On or about February 10, 2012, CCI’s Western Division President, Nicole Carnagey, e-mailed the Executive Vice President of Operations, Bob Bosic, to tell him that in 2011 Everest College Hayward and Everest College San Francisco paid a temporary agency, Remedy Temp, “to place students to meet the accreditation deadline and minimum placement %.” Bosic responded, asking her to find the answers to numerous questions regarding the placements and noted “I’his is the [expletive omitted] that got [Everest College] Decatur in trouble and the types of questions that need answering.”

(d) On or about March 20, 2012, An Everest College San Francisco internal audit showing that 53 percent of student placement files reviewed were missing employment verification forms was emailed to the CEO, Jack Massimino, and other senior executives.

(e) On or about April 13, 2012, an Everest Online internal audit presentation emailed to David Poldoian, Executive Vice President of Corinthian Colleges, Inc.’s Online Learning Division, showed a placement file error rate of 53.6 percent to 70.6 percent.

(f) On or about April 27, 2012, CCI’s Executive Vice President of Operations, Bob Bosic e-mailed all division presidents and stated “the placement verification issues we discussed Monday were shared over the last two days and were not well received. We will discuss Monday, but together we’ll need to demonstrate improvement. I will be interested in your thoughts on how we can tighten this up so future audits reflect greater accuracy and completion of documents.”

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(g) On or about May 12, 2012, CCI’s Executive Vice President of Operations, Bob Bosic, e-mailed the Chief Administrative Officer Ken Ord and Carmella Cassetta, Senior Vice President and President, Online Learning a copy of a presentation regarding placcments which stated “No current guidelines and training to define a placement — mistakes are repeated constantly because no clear definition of a placement exists;” and “inconsistent processes on what passes as infield or related [placement].”

(h) On or about May 18, 2012, CCI’s Western Division President, Nicole Carnagey and Executive Vice President of Operations, Bob Bosic exchanged emails regarding the Renton, Washington Everest campus’s failure of an internal audit due to backdating of signatures on placement files. The e-mails discussed how Everest College Gardena (in California) “almost got hit” as well and saying that “If the current RVPO [Regional Vice President of Operations] was there she would have been in a world of [expletive omitted].” The Executive Vice President, Bob Bosic also told the Western Division President, Nicole Carnagey that “you are correct that all the other campuses in yours and other divisions that made it through [verification audits] this time are lucky.”

(i) On or about June 14, 2012, CCI’s Executive Vice President of Operations, Bob Bosic, e-mailed the CEO, Jack Massimino, regarding the findings of an internal review of placeinent procedures and stated that the review found that there was a “Lack of workable definitions for a Placement” and that the lack of specific definitions resulted “in subjective decisions at all levels;” that there “is no consistent process for Placement (or other areas of Career Services) and lack of SOP’s [Standard Operating Procedures] ‘ that there “is generally no training at the process level for Placement (since there is no standard process);” and that “Campus Vue [CCI’s data management system] is not fully utilized [which] [l]eads to poor data or lack of data availability as well as duplication of data across forms and the Placement Verification system,”

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(j) On or about July 13, 2012, CCI’s Vice President of Compliance, Michelle Reed e-mailed Beth Wilson, Executive Vice President, regarding results of a review of Wyotech Long Beach self-employment placements. The review showed that the files for 28 of 74 such placements had missing docuinents, or included Craigslist ads that purported to be from the students in question, but that had in fact been created by CCI. An additional 15 files were suspicious. Despite these known irregularities, as of 8/12/2013, the Long Beach disclosures (published on 7/1/2012) had not been amended to take into account the audit’s findings.

(k) On or about July 16, 2012, CCI’s Assistant Vice President of Student Outcomes e-mailed Division Presidents regarding Career Services Operating Procedures, with a copy to the Executive Vice President of Operations. The emails stated that, “over the past year several campuses have had challenges providing adequate documentation for placements and waivers [emphasis in original]. Issues that have surfaced during audits and Employment Verification reviews are missing key fields such as signatures, inconsistencies with CampusVue / other backup and in some cases, documentation that was never procured or cannot be found.”

(l) On or about August 28, 2012, the results of a third-party audit conducted by Hyper Core solutions on behalf of an accreditor, ACCSC, were e-mailed to CCI’s Executive Vice President and Chief Academic Off icer. The review, which examined a random sample of 330 student records showed substantial issues at each CCI campus examined (Everest campuses including West Los Angeles, City of Industry and Reseda). In particular, the review found that 30 percent of the placements could not be verified and that there were no records to substantiate a further 9 percent of the placements. At Everest College West I.os Angeles, only 30 percent of criminal justice program placements could be verified and 20 percent were identilied as no record found. At the same campus, only 36 percent of dental assistant program placements could be verified and 55 percent were identified as no record found.”

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