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Corinthian Legal Troubles Expand

08/16/2014

Inside Higher Ed. August 14, 2014. By Michael Stratford.

Federal prosecutors have ordered Corinthian Colleges to turn over a range of documents relating to job placement, graduation rates, advertising and marketing materials, and student loan defaults.

The embattled for-profit education company disclosedWednesday that it received a grand jury subpoena last week from the U.S. attorney’s office in Los Angeles.

Corinthian “is evaluating the subpoena and intends to cooperate fully with the request,” the company said.

The company also disclosed that state regulators in Virginia, Florida, New York, and Illinois have suspended Corinthian’s ability to enroll new students using veterans’ benefits. California has said the company cannot accept veterans' benefits for new or existing students in that state, the filing said.

Corinthian said it is fighting those restrictions but warned that “suspensions and possible withdrawals of approval to train veterans, if not reversed, could negatively affect the sales process for the company’s sales schools in the affected state.”

Continuing Dispute over Documents

Corinthian’s troubles deepened in June when the U.S. Department of Education, citing the company’s failure to adequately produce requested documents, imposed a 21-day waiting period on its access to federal student aid.

That limitation set off a liquidly crisis at the company, which then negotiated an agreement with the Education Department to close or sell off its 107 campuses across the country.

But Wednesday’s disclosure indicates that Corinthian’s dispute with department officials over requested documents is ongoing, as are its liquidity concerns.

The Education Department said in a July 23 letter that the company’s production of documents continued to be inadequate and “would appear to be a serious and significant violation” of its operating agreement with the department, according to Corinthian.

Corinthian also said it needs to obtain additional sources of liquidity, which it will seek through cost reduction, accelerated sales of assets, and new financing.

“There can be no assurance that the company will be able to obtain any such additional needed liquidity on a timely basis, on terms acceptable to it, or at all,” Corinthian said.