-O7207-JMC-7A DOC 2696 Filed 07/10/18 EOD 07/10/18 11:47:22 Pg 17 0f 30 Under Secretary Ted Mitchell Borrower Defense Unit Date: January 10, 2017 Re: Recommendation for ITT Borrowers Alleging That They Were Guaranteed Employment California Students (W5) 1. Summary of lTT?s Representations to Borrowers Promising Employment -O7207-JMC-7A DOC 2696 Filed 07/10/18 EOD 07/10/18 11:47:22 Pg 18 of 30 ment Representations Consistent in Nature B. Guaranteed Employment Representations Pervasive Throughout (W5) -O7207-JMC-7A DOC 2696 Filed 07/10/18 EOD 07/10/18 11:47:22 Pg 19 Of 30 -O7207-JMC-7A DOC 2696 Filed 07/10/18 EOD 07/10/18 11:47:22 Pg 20 of 30 Applications alleging guaranteed ion Applications reviewed 42. l% 40.00% 13 33% 12.5% 4] .66% 26.09% 35.29% 27.78% 14.29% 20.00% 33.33% 23.53% 27.27Anaheim CA Rancho Cordova CA 8 CA Arnold Green?eld Knoxville Portland Richardson Arl Hei Nmammwmaq w?w-b?nw Getzville 10 10% 9 33.33% Various 84 9 .43% AL 20 102 1.90% (W57 C. Guaranteed Employment Representations Constant Across Years (W5) -O7207-JMC-7A DOC 2696 Filed 07/10/18 EOD 07/10/18 11:47:22 Pg 21 Of 30 [2006]: ?l was told that I would be able to make about 64K once I graduated because I was going into a Bachelors program degree. I got promised the stars and the sky.?36 [2007]: was also led to believe that what Iwas going to school for would be a surcjob after graduation?? [2009]: ?1 was told that i would de?nitely have a job ifI enrolled?? 0 [2011]: ?We were told that there would be no problem getting a job and they would help. - [20l3]: was told I would obtain a job in the ?eld upon graduation, easily with a high salary. u39 n40 As further discussed below, these claims are supported by corroborating evidence from former employees and spanning the period of at least 2005 to the school?s closure. D. Statements of Former Employees Corroborate Guaranteed Employment Claims borrower defense claims based on guaranteed employment misrepresentations are substantiated by the af?davits, interviews, and testimony of former employees at campuses nationwide. This former employee evidence establishes that, in response to oral directives from management, recruiters from at least 2005 through closing led prospective students to believe that employment was guaranteed. orally directed staff to present recruitment documents in a manner that guaranteed or otherwise assured employment. ITT employees were trained to provide these oral promises of employment despite the existence of written documents to the contrary.?I For example, one former employee explained that ?[w]ritten instruction from headquarters was contradicted by oral instructions from the District Manager or a Senior Vice President . . . was interested in getting students into the school no matter what it took to do 503?? Another former employee, in testimony before the National Advisory Committee on Institutional Quality and Integrity (NACIQI), explained that recruiters ?hvere consistently trained . . . to go verbally around the requirements? and that, even if recruiters did not expressly guarantee employment, ?it was taken that way?? As a result, former employees at consistently report that staff guaranteed or otherwise assured employment. Some employees guaranteed employment expressly. For example, one former employee stated, ?[m]arketing told students not to worry about prior felonies and they would get placed in jobs.?M Another stated, heard recruiters assure students that they would get a great job that would enable them to pay back 3? BD156228 (ITT?Sylmar). 3? BD1659496 (I'IT-Rancho Cordova). ?8 30157549 ?9 BD156506 Creek). 801 54555 (lTT-Murray). State of New Mexico v. I 77? Educational Services, Inc, Civil Action D-202-CV-2014 (D.N.M) (hereinafter AG Case?), Training Document entitled ?The Importance of our language: Comments to Avoid," dated July 18, 201 l, 0006448 (Feb. 26, 2014) (explaining that disseminated a document on ?Comments to Avoid,? which barred personnel from promisingjob placement and stated, do not guarantee jobs to any student or graduate?). ?2 CFPB Case, Interview of Wendy Maddox-Wright, former employee from April 2005 to August 201 i, lTT-Louisville (Jan. 28, 2014). See also id., Interview of Amy St. Clair Lachman, former employee, FIT-Johnson City (April 9, 20l4) (?[Ejmployees knew what ITT wanted and it was not about helping people. Rather, it was abont how many people ITT could get into a chain?). ?3 Transcript of Testimony of Recruiter Matthew Mitchell before NACIQI at 217 (June 23, 2016) (Mitchell was employed as a recruiter in 2013). I 4? CFPB Case, Interview of former employee Sarah (employed from late 2005 to 2009) at 6 (TIT-Louisville, Feb. 26, 20 I4). -O7207-JMC-7A DOC 2696 Filed 07/10/18 EOD 07/10/18 11:47:22 Pg 22 Of 30 II. Evidence of the Falsity of the Alleged Representations (W5) -O7207-JMC-7A DOC 2696 Filed 07/10/18 EOD 07/10/18 11:47:22 Pg 23 Of 30 -O7207-JMC-7A DOC 2696 Filed 07/10/18 EOD 07/10/18 11:47:22 Pg 24 Of 30 B. California Students Making Guaranteed Employment Allegations Have A Valid L?taim Under the ?Unlawful? and ?Fraudulent? Prongs of the California UCL California?s UCL prohibits unfair competition, providing civil remedies for ?any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by [the false advertising law]?64 Here, lTT?s statements leading prOSpective students to believe that they were guaranteed employment constitute ?unlawful? and ?fraudulent? business practices under the UCL. l. The Unlawful Prong The UCL bars ?anything that can properly be called a business practice and that at the same time is forbidden by law?? Thus, if a business practice violates any law, this is per se a UCL violation.? Corporate ?3 20 mama). 5? 34 can. 5? At the time of closing, ITT operated fourteen campuses in California. No other state operated more than nine. Similarly, enrolled 4,482 California residents, over 1,100 more than Texas, the state with the second largest student population. 6' Mazza v. Am. Honda Motor Co., 666 F.3d 531, 593-94 (9th Cir. 2012). See also Hernandez v. Burger, [02 Cal.App.3d 795, 802, 162 Cal. Rptr. 5 64 1980), cited with approval by Abagados v. 7: Inc, 223 F.3d 932, 935 (9th Cir. 2000) (holding that the state with ?the predominant interest? is the state ?where the wrong occurred?) Indiana treats a consumer protection claim as recovery in tort. See McKinney v. State, 693 65, 72 (ind. 1998) (?nding that, despite the fact that ?brand is not an element of? an IDCSA claim, ?the action is nonetheless based on fraud?). Under Indiana law, the choice-of-law rule governing tort actions is {ex loci delicti??the law of the place where the tort was committed is the law of the resulting litigation.? Eby v. York-Din, Borg-Warner, 455 623, 626 (Ind. Ct. App. 1955). 6? Restatement (Second) of Con?ict of Laws 145 (1971) (?Subject only to rare exceptions, the local law of the state where conduct and injury occurred will be applied to determine whether the actor satis?ed minimum standards of acceptable conduct and whether the interest affected by the actor's conduct was entitled to legal protection?). 6? CAL. BUS. PROF. CODE ?l7204, Kwikse! Corp. v. Superior Court, 51 Cal. 4'h 310, 320 (Cal. App. Ct. 20l see also Cal-Tech Communications v. Los Angeles Ceiiular Telephone Co.. 973 P.2d 527, 540 (Cal. 1999). 65 Bank of the West v. Superior Court, 2 Cal. 4th 1254, l266 (1992) (citations omitted). -O7207-JMC-7A DOC 2696 Filed 07/10/18 EOD 07/10/18 11:47:22 Pg 25 Of 30 -O7207-JMC-7A DOC 2696 Filed 07/10/18 EOD 07/10/18 11:47:22 Pg 26 Of 30 -O7207-JMC-7A DOC 2696 Filed 07/10/18 EOD 11:47:22 Pg 27 Of 30 11 -O7207-JMC-7A DOC 2696 Filed 07/10/18 EOD 07/10/18 11:47:22 Pg 28 of 30 D. Eligible Borrowers - E. Full BD Relief Should Be Provided to Eligible Borrowers, Subject to Reduction for 12 -O7207-JMC-7A DOC 2696 Filed 07/10/18 EOD 07/10/18 11:47:22 Pg 29 Of 30 13 -O7207-JMC-7A DOC 2696 Filed 07/10/18 EOD 07/10/18 11:47:22 Pg 30 of 30 duct has also led to actions against HT by the Departments? and as well as to numerous negative ional news stories.93 Given this extensively well-documented, pervasive, and highly publicized misconduct, the Department determined that the value of an ITT education?like Corinthian?is likely either negligible or non-existent. In a court proceeding, ITT would very likely be unable to produce any persuasive evidence showing why the amount of recovery should be offset by value received by the borrowers from ITT education so as to preclude full recovery. Accordingly, it is appropriate for the Department to award eligible borrowers full relief. CONCUR: (W5the General Counsel Date 061n the years leading up to its closure, the Department increased ?nancial oversight over HT and required it to increase its cash reserves to cover potential damages to taxpayers and students. The nature and scope of the Department?s actions against ITT are contained within a series of letters item the Department to ITT dated: August 19, 20M, August 2014, May 20, 2015, June 08, 2015, October 19, 2015, December 10, 2015, June 6, 2016, July 6, 2016, and August 25, 20l6. 97 See Letter from Roger Williams (Interim President, to Kevin Modany (President and CEO, ITT) re: Continue Show-Cause Directive (Aug. 17, 20 I6). 93 See, eg. Mary Beth Marklein, Jodi Upton and Sandhya Kambhampati, ?College Default Rates Higher Than Grad Rates,? USA TODAY (July 2, 2013) (listing more than 50 111? campuses as ?red flag? schools because student loan default rates were higher than graduation rates); Kim Clark, ?The 5 Colleges that Leave the Most Students Crippled by Debt? Timecom (Sept. 24, 2014) (ranking ITT second on the list of schools that leave the most students crippled by debt). 14