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We're here today to announce that my office
has filed
in Jefferson Circuit Court
a consumer protection
lawsuit
against Spencerian College
which is owned by the Sullivan University system and which operates two campuses in
Kentucky. One in Louisville
and one in Lexington.
As I'm certain all of you will recall
this office, a couple of years ago issued civil investigative demands
for seven (7)
of Kentucky's more than 140 for-profit institutions.
The subpoenas were based on a variety of factors
including the number of
complaints we'd received as well as student loan default rates.
As a result of that
investigation and the information we've gleaned
we filed suit against Daymar in July 2011. We've also
filed suit against National College.
We sought to intervene in a federal case
against
the owner of Brown Mackie College.
We are no longer in that suit but the investigation still continues
on that front.
Last summer I led an effort of 20 Attorneys General, a bipartisan group,
to secure a $2-million settlement
from Quinn Street Inc. Quinn Street was a California company
that was operating web site called gibill.com
and acting as a funnel essentially for the for-profit colleges. When people want
to this website it looked like a government website
they were
steered toward for-profit colleges.
It was indicated to them that these were the preferred places
to use their GI Bill benefits.
We found out to be grossly misleading
and under that settlement we not only got the monetary penalty
but we also forced Quinn Street to disgorge itself of gibill.com,
turn gibill.com over to the US Department of Veterans Affairs and stop
using the term GI Bill.
on any of the websites
that it operates.
In this particular lawsuit against Spencerian
we allege that the for-profit school
misrepresented job placement numbers to consumers.
We have a number of charts here
that show what we were able to find
when we looked at the information we received.
As I mentioned to some of you, it's a pretty straightforward case of consumer
protection. The Consumer Protection Act, KRS chapter 367,
makes it illegal for businesses in Kentucky to engage in
false, deceptive, or misleading
advertising practices.
I would submit to you
that when you are spending a significant amount of your resources
to recruit students for your for-profit school,
many of whom, most of whom, are accessing federal and state
education loans,
and your advertising "No recession for Spencerian grads"
and in certain years
Claiming you have 99 percent job placement in their field of
study,
for your Louisville campus,
98 percent
job placement for your Lexington campus, for example,
putting in your promotional materials
that you're at 100 percent or in the high 90s
and then you turn around and in the actual courses which you report to the national
accreditor,
which is not a regional accreditor
(which most of our not-for-profits used), a national accreditor, reporting to them
actual
rates of 40 and 60 percent when you're claiming 100 percent.
We're seeing actual placement rates in field of study
of 30 and 40
percent below
what they're claiming
in their
promotional materials.
In short we don't think Spencerian was telling the truth
to its prospective students.
That it provided students with information
that it knew was false in the hopes of luring them into student loan
arrangements
and to join their
for-profit institution.
The numbers that Spencerian
provided in its promotional and its recruitment materials directly
contradict the data
that it provided to its own accreditors. Spencerian reported placement
rates to students via its website,
via its interview book, and other promotional materials.
Clearly, I've gone through it.
Here's an example, Spencerian at the Louisville branch
touting in its publications an 80 percent placement rate in 2010
for phlebotomy.
Turns around and its actual reported rate
is 40 percent.
For example, in 2008 in the Medical Clinical Specialist program
it told consumers it had a job placement rate of 100 percent.
The actual number reported to its accreditor was about
66.7 percent.
It its Lexington branch in 2009
claimed its Architectural program had a placement rate of 60 percent
but reported to its accreditors a placement rate of
25 percent.
Again in 2009, in its Phlebotomy program, claiming 100 percent
placement rate, the actual placement rate as reported to its accreditors
was 62.5 percent.
After Spencerian received
the civil investigative demand
from the Office of the Attorney General
it removed
its conflicting
graduation placement rates from its website.
We believe Spencerian was more concerned about signing students up for
classes
and getting their hands on federal student loan money and state student loan money
than it was in educating students
and placing them in jobs.
The bottom line is that they went after people
who just wanted to build
better lives for their families in a very tough economy.
Our complaint seeks an injunction against Spencerian
to prohibit further deceptive trade practices.
The lawsuit also seeks
$2000 per violation in recovery of our investigative costs
and attorney's fees.
We think the violations
cover a period of about four years.
At any given time
Spencerian has about two thousand
individuals at both of its campuses so if you do the math it is a significant
claim were making
for penalties under the Consumer
Protection Act.
For students who attended Spencerian college from 2007
until the present and who want to register a complaint and
provide information to the Office of the Attorney General
may visit our website at ag.ky.gov
and they can click on Student Complaints.
We have received 48 complaints from Spencerian students
over the last couple of years.
I think the charts, the information that we've been able to obtain,
clearly lay out
that the claims that there was "no recession for Spencerian grads"
were false and misleading
under the Kentucky Consumer Protection Act.
So with that I'll take any questions that you may have...