Kentucky attorney general sues Spencerian College, alleging deceptive practices

bmusgrave@herald-leader.comJanuary 16, 2013 

FRANKFORT — Kentucky Attorney General Jack Conway filed a lawsuit Wednesday against Spen cerian College, alleging the for-profit college deceived students by misrepresenting its job placement numbers.

"In short, we don't think Spencerian was telling the truth," Conway said during a news conference. "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 consumer-protection lawsuit, filed in Jefferson Circuit Court, comes after a two-year investigation into the business practices of for-profit colleges. It's the fourth time Conway has attempted to take legal action against the for-profit college industry.

Spencerian College has campuses in Lexington and Louisville and is a subsidiary of Sullivan University. A lawyer for the university system said Wednesday that it planned to defend itself vigorously.

The lawsuit alleges that Spencerian College has advertised inflated job-placement rates for its college degrees since at least 2007. The job-placement rates advertised on its website were different from the numbers it reported to a national accrediting agency, the complaint alleges.

For example, Spencerian College advertised that its placement rate for phlebotomy was 80 percent at its Louisville campus, but it reported only a 40 percent placement rate to the national accrediting agency, according to Conway.

The complaint seeks an injunction against Spencerian to stop further deceptive practices. Conway said his office would seek civil penalties of $2,000 for each violation, in addition to attorney fees and other costs associated with bringing the lawsuit.

Spencerian removed some of the conflicting graduation placement rates from its website after receiving a civil subpoena from Conway's office last year, Conway said.

Grover Potts Jr., a lawyer for Spencerian and Sullivan, said Conway's office received thousands of pages of documents from Spencerian in February 2011 — after the university had received a subpoena from Conway's office — and never communicated with Spencerian that its placement rates were a problem.

"After a cursory review of the lawsuit, Spencerian College believes that the discrepancies alleged by the attorney general, if there are any, may be the result of different reporting periods with respect to job-placement rates or as a result of the exclusion of program graduates who chose not to avail themselves of the career placement service," Potts said. "Some job-placement rates have been reported by Spencerian College on a calendar-year basis, and other job-placement rates have been reported on a fiscal year basis."

Potts said Spencerian had provided quality career education for 120 years. It is apparent, he said, that Conway "believes that all proprietary institutions do not provide worthwhile educational products."

Conway countered that his office had been "selective and fair" in its investigation of the for-profit college industry. Although there are more than 140 for-profit college programs in Kentucky, civil subpoenas were issued to only seven, he said.

The Spencerian lawsuit follows other allegations by Conway's office against Daymar College and National College, among others.

Conway sued Daymar College in July 2011 over allegations that the school deceived and misled students about textbooks and financial aid. Conway alleged that students were forced into buying higher-priced books and supplies from Daymar.

He sued National College in September 2011, alleging that the for-profit school misrepresented job-placement numbers for its graduates.

Conway said Wednesday that the lawsuits against National College and Daymar College remained open.

In August 2011, Conway filed a motion to intervene in a federal whistle-blower suit against Education Management Corp., the parent company of Brown Mackie College, but a federal judge denied that motion.

In addition, Conway and 19 other attorneys general obtained a $2 million settlement from QuinStreet Inc., which operated a website called GIBill.com. The site claimed to be affiliated with the military, but it was funneling students to for-profit colleges.

Conway declined to say Wednesday whether there would be additional lawsuits against other for-profit colleges.

He said his office had received 48 complaints from Spencerian students about the for-profit college's practices. Students who attended the college from 2007 to the present may file a complaint through the attorney general's website.

Conway said he hoped the lawsuits, if successful, would result in enough money to create a fund that would benefit harmed students.

Conway's efforts to investigate the for-profit college industry also resulted in allegations of campaign finance law violations by Sullivan University in 2011.

A special prosecutor was named in August 2011 to examine allegations that Sullivan University might have coerced employees to make campaign donations to Republican Todd P'Pool, who tried to defeat Conway in 2011.

Employees said that during a two-day seminar, Sullivan University Chancellor A.R. Sullivan and Jim Crick, the school's vice president for enrollment management, asked a roomful of employees to support P'Pool. The meeting came after Conway's office had issued civil subpoenas for information from Spencerian College, a subsidiary of Sullivan University.

Conway recused himself and his office from investigating the complaint. Jim Crawford, the commonwealth's attorney in Carroll County, was appointed special prosecutor in the case. Crawford said Wednesday that the matter remained under investigation.

"We are still looking at it. Whether this will result in anything, I don't know," Crawford said.

Attorneys for Sullivan University have denied there was any attempt to force employees to give to P'Pool.

Beth Musgrave: (502) 875-3793. Twitter: @BGPolitics. Blog: Bluegrasspolitics.bloginky.com.

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