The Education Department says it will fine Heald College $30 million, alleging the Corinthian Colleges subsidiary engaged in egregious misconduct and misled students.
Corinthian, a massive for-profit educational institution, collapsed last summer amid a cash shortage and fraud allegations.
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The department alleged that Heald, based in San Francisco, had shown a pattern of falsifying post-graduation employment data. In one instance, the department said, the company's Honolulu campus declared that a graduate had found work in her chosen field of accounting — even though administrators knew she was working at Taco Bell. In other instances, the Education Department said, the company actually hired its own graduates for temp jobs in order to inflate its job placement rate.
Corinthian spokesman Joe Hixson said in an emailed statement that the government's proposed penalty was a travesty that "further threatens Heald's future by potentially imposing added financial and operational hurdles to prospective buyers."
Heald schools now comprise the bulk of Corinthian's former empire, a mix of physical and online institutions attended by more than 70,000 students during the final year Corinthian operated them. Most of the company's former schools have been transferred to Zenith Education Group, a nonprofit controlled by a student loan debt collection firm that cannot be held liable for Corinthian actions.
Corinthian had tried to sell Heald off as well, but was blocked by California attorney general Kamala Harris' refusal to provide prospective buyers with a similar release from liability. On Tuesday, Harris praised the Education Department for its proposed fine and urged it to go further.
"Now that the department has found that Heald engaged in illegal conduct, I urge the Department to act quickly to relieve these students from their student loan debt burdens," she said in a statement.
A wider group of former Corinthian students has petitioned the department to waive their federal student debt based on similar alleged misconduct at Corinthian's other educational chains, WyoTech and Everest. Though the exact amount of federal student loan debt owed by former Corinthian students is unknown, Corinthian's own filings say the company's schools generated $1.2 billion in government loans during its final year. Much more debt is likely outstanding.
Under the terms of the Education Department's loan program, the government could pursue claims against Corinthian for any student debt it forgives due to Corinthian's misconduct. In the case of Corinthian, however, that may not do much good. Most of the company's assets have been sold, and Corinthian's once billion-dollar stock is virtually worthless.