Heald College owner slapped with $1.1 billion judgment

The state of California has won a $1.1 billion default judgment against the now-defunct Corinthian Colleges Inc. in a fraudulent business practices case in San Francisco Superior Court.

The judgment, signed Wednesday by Superior Court Judge Curtis Karnow, ends a civil lawsuit filed in 2013 by California Attorney General Kamala Harris.

It finds that the company, once one of the largest for-profit career preparation chains in the nation, engaged in false and misleading advertising, illegal debt collection and other frauds.

The judgment orders $820 million in restitution to students residing or attending school in California since 2010 and $350 million in civil fines. But it is unclear how much, if any, money students or the state will receive as a result.

Corinthian, formerly headquartered in Santa Ana, and its subsidiaries declared bankruptcy on May 4, 2015, a few days after the company closed its remaining schools, including Heald, Everest and Wyotech colleges in California. The company listed debts of $143 million and assets of $19 million.

A liquidation plan approved by a federal bankruptcy judge in Delaware in August distributed Corinthian’s remaining assets, of which $4.3 million was provided for a student trust.

A website for that trust says it will use “the relatively minor amount of cash that was available” to work on ways to obtain cancellation of former students’ loan debts.

In a statement filed in Superior Court in January, lawyers from Harris’s office said that even though Corinthian has been dissolved and its assets distributed, the forthcoming default judgment could help students in obtaining loan forgiveness and in receiving payments from California’s Student Tuition Recovery Fund. The state fund was established to help students whose schools have closed.

Harris press secretary Brenda Gonzalez said Thursday:

“We fully expect that this judgment will be helpful for students and advocates to demonstrate that they should not be held liable for private loans, federal loans, or other purported debts due to Corinthian Colleges Inc.’s illegal conduct.”

Gonzalez added:

 “This judgment also sends a clear message to other for-profit institutions still operating in this industry that there are severe consequences for this kind of misconduct.”

Karnow signed the default judgment after Corinthian’s bankruptcy lawyers failed to respond to Harris’s request for the ruling. The lawyers told Karnow in December they could not respond because Corinthian no longer exists.

Among other findings, the 21-page judgment concluded that Corinthian systematically misstated its job placement rates for students in its advertising.

It also said that Heald and other Corinthian affiliates ran “millions of online and mobile ads” since at least 2010 saying they offered programs in California for training ultrasound, X-ray, radiology and dialysis technicians, but did not in fact offer such programs.

At the time the lawsuit was filed in 2013, about 26,000 of Corinthian’s 80,000 students nationwide were Californians, according to Harris.