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Business

Coakley sues for-profit college operator

Attorney General Martha Coakley filed suit Thursday against a national chain of for-profit colleges alleging they used aggressive and deceptive marketing and loan tactics to increase enrollments and boost profits.

Corinthian Colleges Inc. and Corinthian Schools Inc., a publicly traded industry giant with about 100 campuses in North America, including two in Massachusetts, lured students with misleading promises of employment and pay, and left them burdened with heavy debts, according to the complaint filed in Suffolk Superior Court.

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Corinthian pushed students to take out subprime loans through the school, which charged interest rates as high as 18 percent, so they could qualify for federal student loans, Coakley alleged in the complaint.

“They are promising both quality in education and employment rates that they just can’t deliver on,” Coakley said in an interview. “The only ones who are doing well in this appear to be the investors on Wall Street.”

Corinthian spokesman Kent Jenkins disputed the facts in the complaint and said after a three-year investigation, Coakley’s office had failed to produce a single complaint from a student at either Massachusetts location.

“The Massachusetts Attorney General’s Office disregards substantial, independent evidence that our two schools in Massachusetts have a strong record of offering students a quality education and treating them honestly and fairly,” the company said in a three-page statement. “We will vigorously defend the record of our campuses in Massachusetts.”

The lawsuit against Corinthian is the latest action against for-profit schools by Coakley, whose office been investigating the industry in recent years. In October, Coakley’s office reached a $425,000 settlement to reimburse former students of Sullivan & Cogliano Training Centers, Inc., a Brockton-based for-profit career school, for allegedly misrepresenting job placement numbers and making misleading statements about its medical field training programs.

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The following month, Coakley’s office filed a lawsuit against the Career Institute of Framingham, alleging it falsified student signatures, enrollment records, attendance, and grades to receive proceeds from government-funded student loans. Coakley alleged the schools failed to provide students with course material and training, while leaving them tens of thousands of dollars in debt. The Career Institute, which operated as American Career Institute and shut down last year, denied the allegations. The case is ongoing.

Corinthian is one of the biggest players in for-profit education in the United States, generating $1.6 billion in revenue in 2013, according to its annual report. In Massachusetts, Corinthian operates Everest Institute, which has campuses in Brighton and Chelsea. Corinthian said in its statement that it had stopped enrolling new students at the Brighton campus and is seeking a buyer. Classes there will end in October.

Corinthian subsists largely on taxpayer-backed loans to students and focused on recruiting new students regardless of their qualifications or whether they were likely to complete or benefit from Corinthian’s programs, according to court documents. In Massachusetts, the schools offered training for dental and medical assistants, administration, medical insurance billing and coding, and massage therapy.

The Corinthian case represents the first time Coakley’s office has alleged that a for-profit school, acting as a lender, engaged in a loan scheme. In order to qualify for federal student loans, Coakley said, students had to pay a portion of the schools’ $14,000 to $16,000-a-year tuition themselves. Corinthian offered the students private loans with interest rates as high as 18 percent to help them qualify.

The legal complaint cited unnamed students who said instruction was inadequate. Some students were required to sign a statement that they had landed a job in order to receive their degree, a way for the school to inflate its job placement statistics, according to the complaint.

Toby Merrill, a lawyer at the Legal Services Center of Harvard Law School in Jamaica Plain, said she has offered legal assistance and representation to many former Corinthian students who were dissatisfied with their schooling and unable to repay their loans. She described Corinthian as “a leader in the field” of disgruntled students.

“There’s a lot of high pressure predatory practices and fraud directed at people who are definitionally the least able to understand it, “ she said. “These are people who have not been successful in traditional educational settings.”

Corinthian defended its practices, saying for the last 12 years in Massachusetts, it has provided educational opportunities to nontraditional students such as single mothers by offering flexible class schedules.

About 500 students attend both schools in Massachusetts at any given time, and the company said its graduation rates are about 60 percent, surpassing graduation rates in the state’s community college system. Graduates also land jobs between 57 and 88 percent of the time, depending on the degree.

“Nationwide, Corinthian Colleges has more than 700 career services employees dedicated to helping its graduates find employment,” the company said in its statement. “That’s about one career services employee for every 50 graduates.”

Megan Woolhouse can be reached at megan.woolhouse@globe.com. Follow her on Twitter @megwoolhouse.

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