ATTORNEY GENERAL OF THE STATE OF NEW YORK BUREAU OF CONSUMER FRAUDS PROTECTION In the Matter of the Investigation by Eric T. Schneiderman, A01) 17-132 Attorney General of New York, of FLATIRON SCHOOL INC. Respondent. ASSURANCE OF DISCONTINUANCE PURSUANT TO EXECUTIVE LAW 63(15) The Office of the Attorney General of the State of New York commenced an investigation into certain business practices of Flatiron School-Inc, whether acting through its directors, of?cers, employees, representatives, agents, af?liates or subsidiaries (?Flatiron? or ?Respondent?) pursuant to Executive Law 6302) and Article of the General Business Law 349. 349-d and 350. This Assurance of Discontinuance (?Assurance?) contains the ?ndings of the investigation and the relief agreed to by NYAG and Respondent (collectively. the ?Parties"). 1. EQINGS 1. Flatiron is a Delaware corporation currently doing business at 11 Broadway, Suite 260, New York, NY 10004 (?Broadway campus") and online. 2. Flatiron is a private, for-pro?t career school that offers web applications and computer coding courses at its brick and mortar Broadway campus. It also o??ers web developer and other courses online. 3. Flatiron currently charges students between $12,000 and $l5,000 for a twelve to sixteen?week class at its Broadway campus and $1,500 a month for online coding classes. which typically last 4-8 months for full time students. .4. Flatiron began operations in 2012. From 2012 to the present, Flatiron has taught more than 1,000 students enrolled in courses at its campuses as well as in its online program. New York State Education Law 5. New York law requires that a private career school such as Flatiron be licensed or be granted candidacy status by the New York State Department of Education in order to operate. See N.Y. Educ. Law 5001, 5004. Candidacy status allows a school to operate unlicensed for an initial period of twelve months during the licensure application process, which may be extended to a maximum, non-renewable period of eighteen months. A school may apply only once for candidacy status. 6. There are a number of substantive requirements a school must meet in order to be granted candidacy status or to obtain a license. Bach requires a separate application, with its own application fee. For example. the candidacy application requires the payment of a $5 .000 candidate school application fee, separate from the $5 .000 school application fee. 7. A school that is applying for candidacy or a license that has a physical presence in New York and wants to teach online courses must obtain approval of its online curriculum for the online courses before offering those courses. (1. Operation ofBrookiyrr Campus 8. Flatiron began operations in October 2012. Prior to operating at its current Broadway campus, Flatiron taught classes at 33 W. 26th Street. 2d Floor New York, NY were and then at 25 Chapel Street. Suite 1006 Brooklyn, NY 11201 (?Brooklyn campus?). - 9. In May 2013. Bureau of Proprietary School Supervision became aware that Flatiron was operating an unlicensed career school. 10. On May 15, 2013. BPSS sent Flatiron a letter advising it that it needed. to obtain a license in order to operate. Flatiron did not apply for a license or candidacy status at that time, although it continued to operate at its Brooklyn campus. 11. After further investigation revealed Flatiron was continuing to operate without a license. on May 30, 2014, BPSS sent a letter to Flatiron requesting a meeting concerning its operations as an unlicensed school. As diacussed in paragraph 16. by this time Flatiron was also operating from its Broadway campus. BPSS was aware that this location was also-operating without a license. 12. On June 18, 2014. Flatiron applied for a license and candidacy statute for its Brooklyn campus. No candidacy or license application was received for Flatiron?s Broadway campus. - I 13. . On July 9, 2014, SED granted Flatiron candidacy slants for'its Brooklyn campus and gave Flatiron until July 9, 2015 to perfect its license application for that 14. On June 17, 2015, Flatiron signed a settlement agreement with BPSS in which Flatiron acknowledged violating Education Law 5001(1), 5002(1) 5002(1Xbx3), 5002(6)(a), 5004( mat) and 5002(6)(a) and accompanying regulations by operating unlicensed schools. (ii) offering unapproved curriculum, offering unapproved training by unlicensed offering enrollment to students by unlicensed agents, and c??ering training without a licensed director on staff. To address these violations, Flatiron agreed, among other ?rings, to pay a penalty of $125,000 to Tuition Reimbursement Account and (ii) cease and desist all training if BPSS found it in violation of the agreement or Article 101 of the Education Law, Part 126 of the Conunissioner?s Regulations. BPSS executed the Settlement Agreement on August 10. 2015 (?2015 Settlement Agreement?). 15. Subsequent to execution of the Settlement Agreement, BPSS gave Flatiron an extension until January 6. 2016 to perfect its application for the Brooklyn campus. but Flatiron ceased operations at the Brooklyn campus before that date. b. Broadway Campus 16.. In or about October 2013, Flatiron began operating classes from their Broadway campus in addition to the Brooklyn campus. . 17. On June 18, 2014, when Flatiron applied for a license and candidacy status for its Brooklyn campus, it did not submit either a candidacy or license application for its Broadway campus. 18. On October 24, 2014, BPSS noti?ed Flatiron that Flatiron has two locations, an application for each location needs to be submimd. If a location is operating without being licensed or being conferred candidacy slams. the location is operating in violation of the New York State Education Law and is subject to maximum penalties.? Despite this notice, Flatiron continued to operate the Broadway campus. l9. Sometime in March 2015. Flatiron submitted by mail an application for a license for its Broadway campus that it had downloaded from the BPSS website. By letter dated March 25, 2015, SED returned this application and informed Flatiron that it had submitted an outdated version of the application and that it needed to submit a proper application. 20. Flatiron continued operating its Broadway campus without a license or candidacy status in violation of N.Y. Educ. Law 5001 and the terms of the 2015 Settlement Agreement which prohibited Flatiron from ?operating unlicensed schools.? Flatiron represents that it made multiple failed attempts to ?le an application online with BPSS between April and mid-June and finally sent to BPSS via Federal Express a license and candidacy application on June 17, 2015. It is not disputed that the June 17 application was never approved by BPSS. 21. On June 3. 2016, Flatiron contacted BPSS by email to inquire about the stamp of its license application for the Broadway campus. 22. On August 22, 2016, BPSS sent Flatiron a letter informing Flatiron that its Broadway campus was operating in violation of the 2015 Settlement Agreement and ordered Flatiron to ?cease and desist from o?'ering all computer training.? Nonetheless, Flatiron continued operating its Broadway campus. 23. On September 11, 2016, Flatiron ?led new applications for candidacy status and a license for its Broadway campus seeking temporary authorization for the school to offer instructional programs. 24. SED denied the application for candidacy status by letter dated September. 16, 2016 ?nding that pursuant to New York Education Law 5001(4) (iv) ?a school that has applied for a private career school license may request candidacy status for one time only." Although SED had previously told Flatiron it was required to submit a separate application for candidacy status at each location, now infomed Flatiron that because Flatiron School was previously granted candidacy status at its Brooklyn campus, it was ineligible to receive candidacy status a second time at another location. As before, Flatiron condoned to operate its Broadway campus in violation of the I Settlement Agreement and N.Y. Educ. Law 5001. 25. In the same letter. SED informed Flatiron that its application for a license for its Broadway campus was missing numerous parts and reminded Flatiron that ?the school should not be operating and operate without a license is a direct violation of Section 5001(1) of the Education Law.? Flatiron was given until May 16, 2017 to perfect certain elements of its application, which it did. and was then provided until Arm 16. 21117 to perfect the remaining_element, which it did as of August 3, 2017. Ultimately, from September 2013 through September 28, 2017. Flatiron operated without candidacy stunts or a license at its Broadway location. c. Online Programs 26. Flatiron began o??ering an online Web Development Program on or about . November 2015. According to Flatiron, the average tuition bill for graduates of the program was approximately $5,600. 27. Since Flatiron did not have a license to operate or candidacy status for its Broadway location, and had not applied for or received curriculum approval for its online program, it was not authorized to operate its online programs. 28. Hadron?s online programs operated without the necessary SED approval from November 2015 through September 28. 2017. ?atiron's Employment Salgy Claims 29. Flatiron made claims on its website concerning the percentage of its graduates who obtain employment after completing Flatiron's courses as well as the average salaries of Flatiron graduates compared to the average salary of individuals who graduated from college. The NYAG ?nds that the section of the webpage where Flatiron makes its "employment rate" and ?average salary? claims do not clearly and conspicuously disclose how these figures are calculated. This information was available by clicking on the ?Download Our Outcomes Report" link in the top right corner of the same screen and entering an email address in cater to download a multi-page report that contains graduate and employment rate information. a. Ehtplayment Claims 30. Between January and June 201?7_g Flatiron claimed that since 2012, Flatiron has ?led the industry in outcomes" with 98.5% of students employed less than 180 days after graduation and 100% of students having accepted software engineering mics. Prior to January 2017, Flatiron also made employment claims on its website. rat-.- Oat-tome s-?iemr Since 2012, we've led the industry in outcomes. 98.5% 100% Stud-ante employ-3d Stude- accented 150 days- :?jto: software engineering graduation roles 31. The NYAG ?nds that Flatiron?s claim that 98.5% of its graduates are employed in the software engineering ?eld within 180 days of graduating, does not clearly and conspicuously disclose that ?employed" includes not only full time salaried positions, but also ppid apprentices, contract employees and self-employedlfreelance employees. This information was available by clicking on the ?Download Our Outcomes Report? link and entering an email address in order to download a multi~page report that contains graduation and employment rate information. The NYAG ?nds that labeling the link ?Download Our Outcomes Report? did not suf?ciently convey that it contains information relevant to the employment calculation. 32. In some cases, such as freelance positions, Flatiron did not always know how long the positions lasted beyond the one-month minimum Flatiron required, except for students who chose to work a shorter amount of time. Some of the positions counted as ?employ were of a duration of less than three months. For example, of the 55 of apprenticeships where Flatiron possessed duration data, 7 of these apprentices held apprenticeships that lasted less than three months. b. "Average Salaries Clams 33. Between January and June 2017. Flatiron claimed that graduams of its New York City programs had an average salary of $74,44'i, at a cost of $12,427; online graduates had an average salary of $67,607. atacostof $5.601; as compared to an I average salary of $50,651 for graduates-of four-year colleges, at a cost of $62,556. Prior to January 2017, Flatiron also made salary claims on its website. ill 9mm 74:: Oct 093mm {insert Education used to be. the best investment one couid make. it can be again. RAH. 1C bi?xLAR?l? AV - ?Mi; '0 it: AVERAGE. -1?-?ear College 710/31 850.6512 52 $62,556:1 Flatiron mo 98% $7444? 3 MONTHS $12,427 937% $57,507 7 $5,501 34. The NYAG finds that the chart creates the impression that the Flatiron gmduatesin populations. The employment rate ?gures in the ?rst column of the chart include all graduates Flatiron counts as employed, yet the average salary column includes full-time employed graduates only (58% of classroom graduates and 39% of on-line graduates respectively). This information was available by clicking on the ?Download Our Outcomes Report? link in the top right corner of the same screen, entering an email address in order to download a multi-page report containing graduate and employment rate information. The NYAG ?nds that labeling the link ?Download Our Outcomes Report" did not sufficiently convey that the report contains information relevant to these calculations. Fla?ron?s Job Gmtee 35. Flatiron advertises a ?Job Guarantee" on its website for three courses: Web Developer Program, NYC Software Engineering Irmnersive and 108 Developer Program. However, Flatiron has multiple terms and conditions in connection to obtaining a refund if the guaranteed job did not arise. 36. According to the job guarantee terms, students must take multiple steps, many on a?eehly gals} These terms and conditions'include, but are not limited to that the student: (1) ?Complete the careers curriculum track material for the relevant program within 30 days of passing the ?nal veri?cation?; (2) ?on a weekly basis, update your job- search tracking pool with a written summary of job seeking activities;? (3) ?Make contact with at least 8 specific individuals at prospective employers within the software development ?eld each week, record evidence of such contact, and furnish it upon request by Flatiron?; (4) ?Submit responses to any code-challenges associated with any job application ctr-time or within one week of receipt if due date is not speci?ed?; and (5) 1 10 ?Post at least 1 technical blog post per week on a public URL that can be venfied by Flatiron 3'7. The NYAG ?nds that, until recently. the website failed to clearly and conspicuously disclose the material terms and conditions associated with this guarantee. In one version of the website, the portion of the page containing A information for a course that offered a job guarantee mentioned the job guarantee but contained no reference to terms and conditions. After scrolling through at least one page of text. and clicking on a link labelled job guarantee, a consumer arrived on a page that prominently stated ?Job Guarantee.? Text on the page under the heading GET JUST AS MUCH AS YOU PUT described keeping up ?your end of the bargain" meaning ?responding to emails, showing up to interviews and getting yourself out there both in per'son and online.? The NYAG ?nds that this information failed to adequately apprise consumers of all of the components stated in the terms of Flatiron?s job guarantee. 38. NYAG ?nds that the practices described above constitute repeated violations of General Business Law Article 22-A, 349 and 350 and Executive Law 63(12). 39. Respondent admits factual Findings in paragraphs 1-37 and neither admits nor denies Finding that Respondent violated any law, rule or regulation. 40. NYAG ?nds the relief and agreement contained in this Assurance and in the public interest. THEREFORE, NYAG is willing to accept this Assumes pursuant to New York Executive Law ?,63(15) in lieu of commencing at 11 smarter-y proceeding for vioiations of Executive Law 6302), GBL 349 and 350 based upon the conduct described above during October 2013 through an 2017. IT IS HEREBY UNDERSTOOD AND AGREED, by and between the parties: II. PRQPECTIVE RELIEF I. arts 41. "Clear and Conspicuous? or ?Clearly and Conspicuously" means that the statement, representation or term being disclosed is of such size, color, contrast and/or audibility and is so presented as to be readily noticed and understood by the person to whom it is being disclosed. If such statement is necessary as a modi?cation, explanation or clari?cation to other information with which it is presented, it must be presented in close proximity to the information it modi?es, in a manner so as to be readily noticed and understood. In addition to the foregoing. in interactive media, the disclosures shall be presented either directly on a webpage or via a hyperlink that is a prominent and direct link to another webpage and that is obvious and appropriately labeled to convey the importance, nature and relevance of the information it leads to. Such interactive media disclosures shall be displayed in an open format that can be retrieved, downloaded, indexed, and searched by commonly-used web search applications. An open format is one that is platform indepudt, is machine readable, and is made public without restrictions that would impede the reuse of that information. 42. ?Graduate" means a student who has accomplished all of the requirements of graduation from a Flatiron program. 12 43. Respondent shall not engage in violations of any applicable law, including but not limited to Education Law 5001, 5002, 5004 and accompanying regulations. Respondent expressly agrees and acknowledges that any such conduct is a violation of the Assurance and that NYAG thexmfaer may commence a ci vil action or proceeding contemplated in paragraph 53, in addition to any other appropn'ate investigation, action or proceeding. 44. Respondent shall not operate any educational institution, including without limitation advertising or soliciting students to attend such institution, without obtaining any necessary licenses from SED and complying with all applicable SED laws. rules, and regulations. 45. In any advertising or in any oral or written disclosure to students, prospective students, the public, or a government entity in which Flatiron discloses its . ?employment rate or the salary of its graduates, it shall Clearly and Conspicuously disclose the method and categories by which the employment rate and average salary were calculated. For example, to the extent that Flatiron counts as employed individuals other than permanent employees, Flatiron shall Clearly and! Conspicuously disclose that employment rates include individuals in non-permanent jobs. Examples of non-permanent jobs include, but are not limited to, apprenticeships, contract positions, self-employment and ?eeladce positions. Such non-permannt positions may only be included if each of the following requirements are met: 13 the graduate has received compensation in return for services provided in connection with the non-pemtanent employment; (ii) the position is anticipated to employ the graduate for a period of no less than three months; the position requires at least 20 work hours per week. In the event that state or federal laws or SED impose different minimum requirements in calculating employment rates, Flatiron shall comply with those requirements. 46. Notwithstanding the requirements in paragraph 45, Flatiron may continue to distribute or otherwise make available to consumers any graduate employment reports that existed prior to the Effective Date of the Assurance, however, Flatiron shall not display any speci?c graduate employment statistic from such report(s) on its website or in emails unless such graduate employment statistic otherwise complies with the above stated requirements. 47. To the extent that Flatiron discloses both its employment rate and the average starting salary of its graduates, Flatiron shall Clearly and Conspicuously disclose the population comprising the average salary calculation and (ii) to the extent that it differs, the population comprising the employment rate calculation. In instance where these disclosures occur in close proximity, such as the chart in paragraph 33 above, the population comprising the average salary calculation must be disclosed in the advertisement itself and not through a hyperlink. l4 43. To the extent that Flatiron advertises a job guarantee, Flatiron shall Clearly and Conspicuously disclose all material terms and conditions of such job guarantee, including but not limited to, speci?c job search requirements. MOEETARY RELIEF 49. In consideration of the making and execution of this Assurance. Respondent will pay by wire to the State of New York the sum of $375,000 payable within three (3) days after the signing of this Assurance. The payment shall be delivered to the State of New York Of?ce of the Attorney General, Bureau of Consumer Frauds and Protection, Attention: AAG Benjamin Lee, Consumer Frauds and Protection Bureau, New York State Of?ce of the Attorney General. 120 Broadway, 3rd Floor, New York, NY 10271. Any payments and all correspondence related to this Assurance must reference Assurance No. 17-132. 50. The $375,000 payment shall be used to provide restitution, if any, in an amount determined appropriate by NYAG, to Flatiron consumers who graduated before the Effective Date of the Assurance and who ?le a complaint with the NYAG within three months of the E??ective Date of the Assurance. Any remaining amounts shall be retained by NYAG as penalties, costs and fees. IV. REPORTING AND RECORD-KEMG REPORTI RE UIREME 51. For a period of three years, Respondent shall provide to the NY AG by September 1, 2018 for the 2016-2017 year and subsequently by September 1 of each subsequent year for the preceding calendar year: an af?davit of compliance with the Assurance; 15 (C) V. MIS representative examples of any advertisement including screen shots from Flatiron's website that include employment rates and average starting salary of graduates; to the extent that Flatiron makes employment rate or salary claims, the reports or underlying data that support such claims; a detailed description of any instances where published employment rates and/or average starting salary were revised after publication; any written complaint from students or graduates related to Flatiron?s ful?llment of its placement guarantee or representations of employment outcomes; and any written complaint. warning or correspondence from any governmental agency regarding Flatiron's non-compliance with governmental rules, regulations or laws?. LL US Subsequent Proceeding; 52. Respondent expressly agrees and acknowledges that a default in the performance of any obligation under paragraphs 43-49, or 51 is a violation of the Assurance, and that the NY AG thereafter may commence the civil action or proceeding contemplated in paragraph 53, supra, in addition to any other appropriate investigation, action, or proceeding. and that evidence that the Assurance has been violated shall constitute prima facie proof of the statutory violations described in paragraph 53, pursuant to Executive Law 6305). 16 53. In any subsequent investigation. civil action, or proceeding by the NY AG to enforce this Assurance, for violations of the Assurance. or if the'Assurance is voided pursuant to paragraph 60, Respondent expressly agrees and acknowledges. a. that any statute of limitations or other time-related defenses are tolled from and after the effective date of this Assurance; b. that the NYAG may use statements. documents or other materials produced or provided by Respondent prior to or after the effective date of this Assurance; c. that any civil action or proceeding must be adjudicated by the Courts of the State of New York. and that Respondent irrevocably and unconditionally waives any objection based upon personal jurisdiction,? Inconvenient forum or venue. . 54. If a court of competent jurisdiction determines that Respondent has violated this Assurance, Respondent shall pay to the NYAG the reasonable cost, if any. of obtaining such determination and of enforcing this Assurance. including without limitation legal fees, expenses, and court costs. .?ects ofAssurancc: 55. All terms and conditions of this Assurance shall continue in full force and effect on any successor, assignee, or transferee of Respondent. Respondent shall cause this Assurance to be adopted in any such transfer agreement. No party may assign, delegate, or otherwise transfer any of its rights or obligations under this Assurance without the prior written consent of NYAG. 56. The President of Flatiron, as signatory to this agreement, agrees to be bound by the terms of this AOD, including, without limitation, the injunctive tent-r in paragraphs 43 to 48 and 51. in connection with any for-pro?t school located in New 17 York or that offers courses to New York students in which he is a principal or owns at least a 15% interest. 57. Nothing contained herein shall be construed as to deprive any person of any private right under law. 58. Any failure by the NYAG to insist upon the strict performance by Respondent of any of the provisions of this Assurance shall not be deemed a waiver of any of the provisions hereof. and the NYAG, notwithstanding that failure. shall have the right thereafter to insist upon the strict performance of any and all provisions of this Assurance to be performed by Respondent. Commgg?cations; 59. All notices. reports. requests. and other communications pursuant to this Assurance must reference Assurance No. 17-132 and shall, unless expressly provided otherwise herein. be given by hand delivery; express courier; or electronic mail at an address designated in writing bytherecipientrfollowed by postage prepaid mail, and shall be addressed as follows: If to Respondent to: Adam Enbar Flatiron School 11 Broadway, Suite 260 New York, NY 10004 888-957-0569 compliance@flatironschool.com 18 if to the NYAG, to: New York State Office of the Attorney General Bureau of Consumer Frauds and Rmtectinn Ann: Benjamin lee, Assistant Attorney General 120 Broadway, 3rd ?oor New York, NY 10271 Telephone: (212) 416-8844 Facsimile: (212) 416-6003 or in his absence, to the person holding the title of Bureau Chief, Consumer Frauds and Protection Bureau. ?gmengg?ons and Entities; 60. The NYAG has agreed to the terms of this Assurance based on, among other things, the representations made to the NYAG and their counsel and the - own factual investigation as set forth in Findings, paragraphs (1) - (37) above. Respondent represents and warrants that neither it nor its counsel has made any material representations to the NYAG that are inaccurate or misleading. Ifany material representations by Respondent or its counsel are later found to be inaccurate or misleading. this Assurance is voidable by the NYAG in its sole discretion. 61. No representation, inducement, promise, undertaking, condition, or warranty not set forth in this Assurance has been made to or relied upon by Respondent in agreeing to this Assurance. 62. Respondent represents and warrants, through the signatures below, that the terms and conditions of this Assurance are duly approved, and execution of this Assurance is duly authorized. 63. Respondent agrees not to take any action or to make or permit to be made any public statement denying, directly or indirectly, any ?nding in the Assurance or 19 creating the impression that the Assurance is without factual basis. region of the Aggment 64. In the event that a federal or state law. rule, regulation or guidance is issued that materially conflicts with any of the provisions in this agreement. Respondent may request modi?cation of those paragraphs that conflict with the new federal or state law, rule. regulation or guidance. The parties by stipulation may agree to such a modi?cation. If Responds-t wishes to seek a modi?cation from the NYAG. it shall send a written request for agreement to such modification to the NYAG. Within 30 days of receipt from Respondent of a written request for agreement to modify, the NYAG shall notify Respondent in writing if the NYAG agrees to the requested modi?cation. The NYAG shall not unreasonably withhold consent to the modi?cation. General Principles: 65. Nothing in this agreement shall relieve Respondent of other obligations imposed by any applicable state or federal law .or regulation or other applicable law. 66. Nothing contained herein shall be construed to limit the remedies available to the NYAG in the event that Respondent violates this Assurance after the effective date. 67. This Assurance may not be amended except by an instrument in writing signed on behalf of the Parties to this Assurance. 68. In the event that any one or more of the provisions contained in this Assurance shall for any reason he held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect, in the sole discretion of the NYAG, such invalidity, illegality, or nnenforceability shall not a??ect any other provision of this Assurance. 69. Respondent acknowledges that it has entered into this Assurance freely and voluntarily and upon due deliberation with the advice of counsel. 70. This Assurance shall be governed by the laws of the State of New York without regard to any con?ict of law principles. '71; The Assurance and all its terms shall be construed as if mutually drafted with no presumption of any type against any party thatmay be found to have been the drafter. 72. This assurance may be executed in counterparts, each of which shall be deemed to be an original, but all of which, taken together, shall constitute one and the same agreement. 73. The Elective Date of this Assurance shall be the day that the Assurance is fully executed. 21 WITNESS WHEREOF. this Assurance is executed by the Parties hereto on the dates set forth below: ERIC SCHNEIDERMAN Attorney General of the State of New York 120 Broadway New York, NY 1027! Jane M. Azia Bureau Chief Bureau of Consumer Frauds Laura J. Levine Deputy Bureau Chief Bureau of Consumer Frauds ism Am Date: 1 t3 i . 7 Benjamin Lee . Assistant Attorney General Flatiron School Inc. Date: 22