College To Pay More Than $1 Billion In Compensation For Misleading Students

A judge from California has ordered a now-defunct commercial motive college chain to pay more than $1 billion Wednesday over complaints that the college misled its students and investors.

The ruling comes as the ultimate judgement to a suit filed against Corinthian Colleges and its California subsidiaries by California Attorney General Kamala Harris in 2013. The long document, which has more than 20 pages, ordered the school to make payments of $820 million to the victim students and pay $350 million in civil penalties.

California attorney Kamala D. Harris emerged victorious in the lawsuit, which was worth more than $1.1 billion, after a San Francisco judge finally declared that the advertising malpractice of the college misled students and violated the law.

The judgment was inevitable for the college, as San Francisco Superior Court Judge Curtis Karnow found that Corinthian Colleges provided exaggerated and often misleading information about graduates’ job placement rates, duping both students and investors, and that the Santa Ana-based company unlawfully used U.S. military seals in advertisements, among other claims.

It’s not a tit for tat for students, as the students are unlikely to be getting the money from the college. The company filed for bankruptcy and listed assets of $19.2 million. A judge later approved a plan for the company to liquidate its assets.

The college, which was profit-oriented, filed for bankruptcy protection in May and was also found at fault for advertising programs and degrees that it didn’t offer. The college was offering training programs for X-ray and dialysis technicians despite having no resources, according to court papers.

The judgment, despite a rather euphemistic punishment, can still help students in another way, said Ben Miller, the senior director for postsecondary education at the Center for American Progress, a left-leaning think tank.

It could serve as evidence of Corinthian’s wrongdoings for former students who are applying to the federal government to have their loans forgiven because they believe the school violated state law, it would seem like if there are programs within California that didn’t have sufficient evidence for borrower discharge yet, I would think this judgment gives what’s necessary.”

In a statement, Harris said her office will do “everything in our power” to make sure former students get access to all available relief.

The bankruptcy came after years of accusations from Harris and others that Corinthian had used inflated graduation and job placement rates to attract students to their college.

The company also gave the impression of an affiliation with the U.S. military. The college included various military seals on its mailings, the documents say.

Furthermore, the school representatives pulled students out of class when they were behind on the private loans issued through the school to get them to pay up, the document added.

The news site ProPublica flagged other documents filed by Harris’s office as part of the suit last week. The document also accused the school of recruiting homeless students and targeting students with low self-esteem for its programs.

Attorneys for Corinthian avoided the hearing, according to court documents. According to Marketwatch, Evan Borges, a former lawyer for the company, said Corinthian “ceased to exist back in September,” a fact that his firm advised the court of. The firm also filed motions with the court to withdraw as the company’s counsel.

The meltdown of the school with the false premises drew attention to the plight of students who took on debt to attend college based on misleading promises from their schools. The Department of Education expanded options for debt relief for certain groups of former Corinthian students last year, Marketwatch reported.

The whole situation has put the Department of Education, which is going through a rule-making process, in a position of having to detail when and how to forgive the loans of students who accuse their schools of violating state laws when recruiting them.

“(The judgment) is yet another admission that this is a deeply flawed company and the fact that it’s not around to pay this anymore stresses the importance of upfront protections for students,” Miller said.

[Image Via Justin Sulivan/Gettyimages]