LAWFUEL – The Legal Newswire – SAN FRANCISCO, Oct. 1, 2007 — Gallo & Associates today announced that it has filed a class action suit against Career Education Corporation (Nasdaq:CECO) alleging that the company’s profit-oriented approach to education crossed the line into fraud on a massive scale at its California Culinary Academy vocational school, victimizing thousands of students seeking a better life and income as a degreed professional chef.
The litigation, filed in San Francisco Superior Court on Friday by
dozens of former CCA students (for themselves and on behalf of all
others), alleges that CCA misrepresented that its admissions were
selective, its program elite, and its degree prestigious, and that upon
graduation well-paying jobs would be waiting and students’ education
loans would be readily repayable. The Plaintiffs allege none of this
was true when it was said to them, or when they went to look for jobs.
California consumer class action lawyer Ray Gallo, who represents these
former CCA students, said, “CEC claims to offer a high quality
education to approximately 90,000 students at more than 75 campuses
across the world in a variety of career-oriented disciplines. We expect
to prove that the California Culinary Academy, CEC’s once-elite
culinary school in San Francisco, misrepresented and hid the truth of
its increasingly poor reputation and inability to place graduates in
well-paying jobs-and did so acting under CEC’s instructions. We also
expect to prove that CEC, CCA, or their personnel accepted undisclosed
benefits from lenders to place students in loans that exceeded market
rates. I don’t know what’s happened at other CEC schools, but I have
seen reports of similar sounding lawsuits involving other CEC schools,
and I have heard that at least one CEC shareholder is demanding that
CEC refocus its strategy on providing quality education to its
students.”
“CCA’s reputation was good before CEC bought it,” Gallo added, “and
CCA’s recruiters reportedly told students it still was.” But the
Plaintiffs allege that CCA’s increasingly bad reputation in the food
service industry means its nearly $50,000 program (often financed with
high interest loans sold by CCA that, in many cases, will accrue
another $50,000 or more in interest) was essentially worthless in the
job market.
CBS Channel 5 in San Francisco has reported that after purchasing CCA,
CEC quickly quadrupled its enrollment. See
http://cbs5.com/consumer/local_story_271210110.html
In the suit, students allege the following:
* While CCA was once well respected, CEC ended selective admissions,
admitting everyone or nearly everyone, and ended meaningful
graduation requirements, graduating everyone or nearly everyone.
* As a result, students allege, a CCA degree is not prestigious and
does not open doors-many employers even consider it a minus. Even
students who did well at the school often find employment only at
$10 or $12 an hour upon graduation, making their students loans
(often $50,000 or so, plus substantial interest) difficult or
impossible to pay, contrary to what CCA promised them.
* CCA, CEC, or their employees received undisclosed benefits from
lenders to place students in above-market rate loans, and some
students face interest rates of 19%.
Gallo credits the students for coming forward and the San Francisco
Weekly with breaking the case. “My hat is off to the SF Weekly for
paying attention to these students and their plight. Its article
brought this matter to my attention and, as my firm began
investigating, we received reports that suggest systematic fraud in
connection with the ‘recruiting’ process at CCA.”
Gallo notes that recent changes to the bankruptcy laws make even
non-federally guaranteed student loans difficult or impossible to
discharge in bankruptcy.
“This case may also shed some further light into student loan
practices,” Gallo said, “which have been the subject of various civil
and criminal investigations by state and federal prosecutors in the
last couple of years. It looks like something untoward happened here.
Our interviews of numerous former students suggest that CCA was not
helping students find the best loan rates, but instead was pushing
everyone toward one or two favored lenders who, as a consequence, were
free to charge above-market rates.”
About Gallo & Associates
Los Angeles based Gallo & Associates (www.gallo-law.com) is a boutique
law firm that represents and counsels senior managers in
employment-related transactions, trials, and liability and governance
matters. Its clients include current or former Fortune-100 “C”-level
executives. The firm prosecutes public interest and consumer fraud
cases like this one as part of its ongoing commitment to promote
ethical business practices. Ray E. Gallo is its managing principal and
trial counsel.
More information on this and other class actions can be found on the
Class Action Newsline at www.primenewswire.com/ca
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CONTACT: Marketcom PR
Laura Brophy
(203) 364-8657
lbrophy@marketcompr.com
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