Jimmy Elias Karam, et al. v. Corinthian Colleges, Inc., et ...securities.stanford.edu/filings-documents/1045/...15 JIMMY ELIAS KARAM, Individually ) 16 and On Behalf of All Others

Case 2:10-cv-06523-GHK -RC Document 1 Filed 08/31/10 Page 1 of 44 Page ID #:63

I Lionel Z. Glancy (#134180)Michael Goldberg (# 188669)

2 And Sohrn (#241388)info lanc aw.com

3 LLPA CY BINKO W & GOLDBERG

4 1801 Ave. of the Stars Suite 311Los Angeles, CA 90097 FILED

5 Telephone: (310) 201-9150 CLERK, U.S. DISTRICT COURT

Facsimile: (310) 201-91606

AUG 3 ffiGregory S. Asciolla .37 ^aTscxolla labaton.com

William - Reiss CENTML DISTNCT OF CALTF4 NIA

8 wreiss Iabaton.com ,e_Y DINLABA ON SUCHAROW LLP

9 140 BroadwayNew York, NY 10005

10 Telephone: (212) 907-0700

11 Facsimile: (212) 818-0477

Attorneys for Plaintiffs and the Proposed12 Classes W w /'

13 IN THE UNITED STATES DISTRICT COURT

14 FOR THE CENTRAL DISTRICT OF CALIFORNIA

15 JIMMY ELIAS KARAM, Individually )16 and On Behalf of All Others Similarly)'17 Situated, ) Case 1® 65 23 —Gp/(

18 Plaintiffs, ) L CCLASS ACTION COMPLAINT

19 vs. }

20 )

21 CORINTHIAN COLLEGES, INC.,JACK P. MASSIMINO, PETER C. ) JURY TRIAL DEMANDED

22 WALLER, MATTHEW A. OUIMET, )23 and KENNETH S. ORD, }

24 Defendants. )

25 }

26

27

28

CLASS ACTION COMPLAINT


1 Plaintiff Jimmy Elias Karam (“Plaintiff”), individually and on behalf of all

2 other persons similarly situated, by his undersigned attorneys, for his Class Action34 Complaint against defendants, alleges upon personal knowledge as to himself and

5 his own acts, and upon information and belief as to all other matters, based on,

6 inter alia, the investigation conducted by and through his attorneys, which78 included, among other things: a review of the defendants’ public documents;

9 conference calls and announcements made by defendants; Securities and

10Exchange Commission (“SEC”) filings; wire and press releases published by and

1112 regarding Corinthian Colleges, Inc. (“Corinthian” or the “Company”); securities

13 analysts’ reports and advisories about the Company; and information readily

14obtainable on the Internet.

15

16 NATURE OF THE ACTION

17 1. This is a securities fraud class action on behalf of all persons who

18purchased or acquired Corinthian securities during the period from October 30,

1920 2007 through and including August 19, 2010 (the “Class Period”). This class

21 action is brought under Sections 10(b) and 20(a) of the Securities Exchange Act of

221934 (the “Exchange Act”), 15 U.S.C. §§78j(b) and 78t(a); and SEC Rule 10b-5,

2324 17 C.F.R. § 240.10b-5.

25 2. Throughout the Class Period, defendants made false and/or

2627 misleading statements, as well as failed to disclose material adverse facts about

28 the Company’s business, operations, and prospects. Specifically, defendants

CLASS ACTION COMPLAINT 2


1 made false and/or misleading statements and/or failed to disclose: (1) the

2 Company overstated its growth prospects b engaging in illicit and improperY g P P Y agg g P P34 recruiting activities, which also had the effect of artificially inflating the

5 Company’s reported results and future growth prospects; (2) the Company’s

6 financial results were overstated in that the Company’s colleges inflated tuition78 costs and its student loan repayment rates were well below levels required for

9 participation in federal loan programs; (3) the Company failed to maintain

10adequate systems of internal operational or financial controls; and (4) based on the

1112 foregoing, defendants lacked a basis for their positive statements about the

13 Company, its prospects and growth.

14

3. On August 3, 2010, the U.S. General Accounting Office (“GAO”)1516 issued a report that concluded that for-profit educational institutions such as

17 Corinthian had engaged in an illegal and fraudulent course of action designed to

18recruit students and overcharge the federal government for the cost of such

1920 education. Thereafter, a Congressional Committee launched an investigation of

21 such practices; the U.S. Department of Education (“DOE”) released data showing

22that the loan repayment rates for Corinthian enrollees were well below the level

2324 required for federal loan program eligibility; and the Company disclosed that its

25 enrollee default rates had significantly increased, and were continuing to do so.

26

274. As a result of these revelations, the Company’s stock fell from $9.25

28 on August 2, 2010 to $4.49 on August 20, 2010 when it declined nearly 17%.



1 5. As a result of defendants’ wrongful acts and omissions, and the

2 precipitous decline in the market value of the Company’s securities, Plaintiff and34 other Class members have suffered significant losses and damages.

5 JURISDICTION AND VENUE

6 6. The claims asserted herein arise under Sections 10(b) and 20(a) of78 the Exchange Act, 15 U.S.C. §§78j(b) and 78t(a), and SEC Rule 10b-5

9 promulgated thereunder by the SEC, 17 C.F.R. §240.10b-5.

10

7. This Court has jurisdiction over the subject matter of this action1112 pursuant to 28 U.S.C. §§1331 and 1337 and Section 27 of the Exchange Act, 15

13 U.S.C. § 78aa.

14

8. Venue is proper in this District pursuant to Section 27 of the1516 Exchange Act, 15 U.S.C. §78aa, and 28 U.S.C. §1391(b). Corinthian is listed on

17 the NASDAQ.

18

9. In connection with the challenged conduct, defendants, directly or1920 indirectly, used the means and instrumentalities of interstate commerce, including,

21 but not limited to, the United States mails, interstate telephone communications

22and the facilities of the national securities markets.

23

24 PARTIES

25 Plaintiff

26

2710. Plaintiff as set forth in his certification attached hereto purchased

28 Corinthian securities during the Class Period and was damaged when the



1 disclosures of the Company’s recruitment practices and student loan repayment

2 rate caused the price of Corinthian shares to decline.3

4 Defendants

5 11. Defendant Corinthian is a Delaware corporation with its principal

6 place of business located at 6 Hutton Centre Drive, Suite 400, Santa Ana,78 California. The aggregate number of shares of Corinthian securities outstanding

9 as of April 29, 2010 is approximately 88 million shares. Corinthian is actively

10traded on the NASDAQ under the ticker symbol “COCO.”

11

12 12. Defendant Jack P. Massimino (“Massimino”) has been the

13 Company’s Executive Chairman of the Board of Directors (“Board”) since July

142009. He served as Chief Executive Officer of the Company from November

1516 2004 through June 2009. In addition, he was Chairman of the Board from August

17 2008 through June 2009.

18

13. Defendant Peter C. Waller (“Waller”) has been the Company’s1920 Chief Executive Officer since July 2009. Waller served as President and Chief

21 Operating Officer of Corinthian from February 2006 through June 2009.

2214. Defendant Matthew A. Ouimet (“Ouimet”) has been the Company’s

2324 President and Chief Operating Officer since July 2009. Ouimet joined Corinthian

25 in January 2009 as Executive Vice President, Operations.

26

2715. Defendant Kenneth S. Ord (“Ord”) has been the Company’s

28 Executive Vice President and Chief Financial Officer since February 2005.



1 16. The defendants referenced above in ¶¶12-15 are sometimes referred

2 to herein as the “Individual Defendants.”3

4 SUBSTANTIVE ALLEGATIONS

5 Background

6 17. Corinthian is a private, for-profit post-secondary education company78 operating in the United States and Canada. As of June 30, 2009, the Company

9 had a student enrollment of 86,088, and operated 89 schools in 24 states and 17

10schools in the province of Ontario, Canada. The Company offers a variety of

1112 diploma programs and associate’s, bachelor’s and master’s degrees. The

13 Company’s training programs include healthcare, criminal justice, mechanical,

14trades, business and information technology. The Company offers online learning

1516 in two categories of students, including those attending online classes exclusively,

17 and those attending a blend of traditional classroom and online courses. As of

18June 30, 2010, Corinthian’s total student population is 110,580. The Company’s

1920 brands include Everest, WyoTech, and Heald College. Everest College Phoenix

21 consists of two ground schools and on online learning unit with about 5,800

22students.

23

24 Defendants’ False and Misleading Statements

25 18. On October 30, 2007, the Company issued a press release

2627 announcing its financial results for the first quarter ended September 30, 2007.

28 The Company reported net revenue of $247.5 million, compared to $222.1 million



1 in the same period of the prior year. The Company also reported net income of

2 $1.95 million, or $0.02 per diluted share, compared to net income of $1.4 million,34 or $0.02 per diluted share in the same period of the prior year.

5 19. In the press release, defendant Massimino represented the following:

6 Our company-wide initiatives to revitalize growth and improve

7 service to students are beginning to produce results.... In particular,

8 more effective advertisements, brand consolidation, and a shifttoward national advertising helped generate positive growth over the

9 past several months. In the first quarter, new student growth

10 increased 13%, and we expect growth of 8% - 9% in fiscal 2008.Over time, we believe that a higher student population will allow us

11 to achieve greater economies of scale, improve facility utilization,

12 and expand margins.

13 20. On November 9, 2007, the Company filed its quarterly report on a

14 Form 10-Q for the first quarter ended September 30, 2007 with the SEC, which1516 was signed by defendants Massimino and Ord. In addition, pursuant to the

17 Sarbanes-Oxley Act of 2002 (“SOX”), the Form 10-Q contained signed

18 certifications by defendants Massimino and Ord stating that the Form 10-Q did1920 not contain any material misrepresentations.

21 21. On January 29, 2008, the Company issued a press release announcing

22 its financial results for the second quarter ended December 31, 2007. The2324 Company reported net revenue of $272.6 million, compared to $235.1 million in

25 the same period of the prior year. The Company further reported net income of

26 $8.11 million, or $0.10 per diluted share for the quarter, compared to net income2728 of $2.58 million, or $0.03 per diluted share in the same period of the prior year.




2 In the second quarter we continued our positive growth trend, posting

3 a 10% increase in new student starts.... More effective marketing,

4coupled with higher employee retention and continued improvementin other key business processes, has helped generate enrollment

5 growth over the past three quarters. We expect that growth to

6 continue in the second half of the fiscal year.

7 23. On February 4, 2008, the Company filed its quarterly report on a

8 Form 10-Q for the second quarter ended December 31, 2008 with the SEC, which9

10 was signed by defendants Massimino and Ord. In addition, pursuant to SOX, the

11 Form 10-Q contained signed certifications by defendants Massimino and Ord

12 stating that the Form 10-Q did not contain any material misrepresentations.13

1424. On April 30, 2008, the Company issued a press release announcing

15 its financial results for the third quarter ended March 31, 2008. The Company

16 reported net revenue of $281.5 million, compared to $241.1 million in the same1718 period of the prior year. The Company further reported net income of $11.82

19 million, or $0.14 per diluted share for the quarter, compared to net income of $12

20 million, or $0.14 per diluted share in the same period of the prior year.21

2225. In the press release, defendant Massimino represented the following:

23 In the third quarter we continued our positive growth trend, posting a

2413.3% increase in new student starts.... Growth was broad-basedacross our U.S. operations, both ground schools and online. More

25 effective marketing, coupled with higher employee retention, better

26service to students and continued operational improvements, hashelped generate strong enrollment growth over the past four quarters.

27

2826. On May 7, 2008, the Company filed its quarterly report on a Form



1 10-Q for the third quarter ended March 31, 2008 with the SEC, which was signed

2 by defendants Massimino and Ord. In addition, pursuant to SOX, the Form 10-Q34 contained signed certifications by defendants Massimino and Ord stating that the

5 Form 10-Q did not contain any material misrepresentations.

6 27. On August 26, 2008, the Company issued a press release announcing78 its financial results for the fourth quarter and year ended June 30, 2008. The

9 Company reported net revenue of $274 million, compared to $231.6 million in the

10 same period of the prior year. The Company further reported net loss of ($0.62)1112 million, or ($0.01) per diluted share for the quarter, compared to net loss of

13 ($8.76) million, or ($0.10) per diluted share in the same period of the prior year.

14 For the year, the Company reported net revenue of $1.069 billion, compared to1516 $919.2 million in the previous year. The Company further reported net income of

17 21.27 million, or $0.25 per diluted share for the year, compared to $7.23 million,

18or $0.08 per diluted share in the previous year.

19

20 28. In the press release, defendant Massimino represented the

21 following:

22Over the past three fiscal years, we have implemented several company-

23 wide initiatives to revitalize growth and improve service to students....

24 These initiatives, which focus on employee retention and development,marketing, regulatory compliance, and other key operational processes, are

25 producing tangible results. For continuing operations, we generated new

26 student growth of 13.0% in fiscal 2008 and began to improve operatingmargins. In fiscal 2009, we believe higher enrollment will allow us to

27 achieve greater economies of scale, improve facility utilization, and further

28 expand margins.



1 29. On August 29, 2008, the Company filed its annual report on a Form

2 10-K for the year ended June 30, 2008 with the SEC, which was signed by34 defendants Massimino, Ord and Waller. In addition, pursuant to SOX, the Form

5 10-K contained signed certifications by defendants Massimino and Ord stating

6 that the Form 10-K did not contain any material misrepresentations.7

8 30. The Form 10-K represented the following in relevant parts:

9 Admissions

10As of June 30, 2008, we employed approximately 1,400 admissions

11 representatives who work directly with prospective students to

12 facilitate the admissions process. These representatives interview andadvise students interested in specific careers and are a key component

13 of our effort to generate interest in our educational services. We

14 conduct quarterly student satisfaction surveys at our campuses in theUnited States in which students have consistently given high marks

15 to our admissions personnel for helpfulness, courtesy and accuracy of

16 information. Because our success is highly dependent on theefficiency and effectiveness of our admissions process, we invest

17 considerable resources to train our admissions representatives in

18 product knowledge, regulatory compliance, and customer service.We also employ various admissions supervisory and monitoring

19 programs, and conduct student surveys which help us ensure

20 compliance with both government regulations and our corporatepolicies.

21

22 One of our objectives in the admissions process is to identify students

23 who have the ability to succeed in our schools. The majority of

24prospective students must pass a standardized admissions test. Mostof our colleges in the United States accept non-high school graduates

25 who can demonstrate an ability to benefit (“ATB students”) from the

26program by passing certain tests which are required by the ED. Webelieve that ATB students can successfully complete many of our

27 diploma programs and our colleges have demonstrated success in

28graduating and placing these students over the years. As of June 30,



1 2008, ATB students accounted for approximately 21.5% of total

2 enrollments in our U.S. schools.

3 ***

4Cohort Default Rates. A significant requirement imposed byCongress is a limitation on participation in the Title IV Programs by

5 institutions whose former students defaulted on the repayment of

6 federally guaranteed or funded student loans at an “excessive” rate(“Cohort Default Rates”). Many institutions, including all of our

7 institutions within the U.S., have responded by implementing

8 aggressive student loan default management programs aimed atreducing the likelihood of students failing to repay their federally

9 guaranteed loans in a timely manner....

10We proactively manage our students’ repayment obligations and have

11 engaged a professional default management firm to assist us in

12 managing the Cohort Default Rates at our U.S. institutions. Webelieve that professional default management services can continue

13 to assist us in managing these Cohort Default Rates.

14 ***

15 In addition to the efforts of our outside professional default

16 management firm, each of our colleges has adopted an internalstudent loan default management plan. Those plans emphasize to

17 students the importance of meeting loan repayment requirements and

18 provide for extensive loan counseling, alongwith methods to increase student persistence and completion rates

19 and graduate employment (placement) rates. Immediately upon a

20 student’s cessation of enrollment, the professional defaultmanagement firm initiates regular contact with the student, maintains

21 regular contact throughout the grace period, and continues this

22 activity through the entire cohort period. The colleges continue towork with the default management firm to maintain accurate and up-

23 to-date information on address changes, marital status changes, or

24 changes in circumstance that may allow the student to apply fordeferments. These activities are all in addition to the loan servicing

25 and collection activities of FFEL lenders and guarantee agencies.

26

2731. On November 5, 2008, the Company issued a press release

28 announcing its financial results for the first quarter ended September 30, 2008.




2 in the same period of the prior year. The Company also reported net income of34 $5.49 million, or $0.06 per diluted share, compared to net income of $1.95

5 million, or $0.02 in the same period of the prior year.

6 32. In the press release, defendant Massimino represented the following:7

8 The first quarter marked our tenth consecutive quarter of start growthin continuing operations, primarily driven by our on-going initiatives

9 to improve marketing and operational effectiveness.... Our end-of-

10 quarter student population increased 11.3% over September 30 lastyear, and we believe continued growth will allow us to leverage fixed

11 expenses and increase operating margins over time.

12

13 33. On November 7, 2008, the Company filed its quarterly report on a

14 Form 10-Q for the first quarter ended September 30, 2008 with the SEC, which1516 was signed by defendants Massimino and Ord. In addition, pursuant to SOX, the


18 stating that the Form 10-Q did not contain any material misrepresentations.19

2034. On February 3, 2009, the Company issued a press release announcing

21 its financial results for the second quarter ended December 31, 2008. The

22 Company reported net revenue of $310.3 million, compared to $270.3 million in2324 the same period of the prior year. The Company also reported net income of

25 $15.08 million, or $0.18 per diluted share, compared to net income of $8.11

26 million, or $0.10 in the same period of the prior year.27

28



1 35. In the press release, defendant Massimino represented the

2 following:3

4Our strong second quarter reflects our continued focus onfundamentals - hiring, developing and retaining the best employees,

5 growing enrollment, improving student outcomes, strengthening

6 business processes, and increasing marketing effectiveness.... Wehave reported increased start growth for eleven consecutive quarters,

7 and the resulting rise in student population is leveraging fixed costs.

8 In addition, our marketing initiatives continue to produce anincreased number of quality leads at a lower cost. We achieved

9 significant operating margin expansion in the quarter and remain on

10 track to meet or exceed our three-year financial goals.

11 36. On February 6, 2009, the Company filed its quarterly report on a

12Form 10-Q for the second quarter ended December 31, 2008 with the SEC, which

1314 was signed by defendants Massimino and Ord. In addition, pursuant to SOX, the


16stating that the Form 10-Q did not contain any material misrepresentations.

17

18 37. On April 30, 2009, the Company issued a press release announcing

19 its financial results for the third quarter ended March 31, 2009. The Company

20reported net revenue of $346.4 million, compared to $279.9 million in the same

2122 period of the prior year. The Company also reported net income of $15.08

23 million, or $0.18 per diluted share, compared to net income of $8.11 million, or

24$0.10 in the same period of the prior year.

25


27

28Our strong third quarter results reflect the continued progress of ourbusiness initiatives as well as some favorable impact from the



1 recession.... We have now reported increased start growth for twelve

2 consecutive quarters, and the resulting rise in student population is

leveraging fixed costs. In addition, increased marketing effectiveness

3 and lower advertising costs are producing higher quality, less

4 expensive leads. Given all of these factors, we achieved significant

operating margin expansion in the quarter and raised earnings

5 guidance for the balance of the fiscal year.

6 39. On May 4, 2009, the Company filed its quarterly report on a Form78 10-Q for the third quarter ended March 31, 2009 with the SEC, which was signed

9 by defendants Massimino and Ord. In addition, pursuant to SOX, the Form 10-Q

10contained signed certifications by defendants Massimino and Ord stating that the

1112 Form 10-Q did not contain any material misrepresentations.

13

1440. On August 25, 2009, the Company issued a press release announcing

15 its financial results for the fourth quarter and year ended June 30, 2009. The

16 Company reported net revenue of $353.5 million, compared to $274 million in the1718 same period of the prior year. The Company further reported net income of

19 $23.19 million, or $0.27 per diluted share for the quarter, compared to net loss of

20 $0.62 million, or $0.01 per diluted share in the same period of the prior year. For2122 the year, the Company reported net revenue of $1.31 billion, compared to $1.07

23 billion in the previous year. The Company further reported net income of 68.76

24 million, or $0.80 per diluted share for the year, compared to $21.27 million, or2526 $0.25 per diluted share in the previous year.

27 41. In the press release, defendant Waller represented the following:

28



1 Our strong fourth quarter and fiscal year results reflect the continued

2 progress of our initiatives to improve the student experience and

increase top and bottom line growth.... We have successfully

3 increased our student population for three consecutive years, and

4 during fiscal 2009, the recession helped increase our growth

momentum. The higher student population has resulted in improved

5 leverage of facility and other fixed costs. Increased advertising

6 effectiveness and lower media costs have improved efficiencies in

marketing and admissions. Given all of these factors, our operating

7 margin and cash flow increased substantially in fiscal 2009, and we

8 expect continued improvement in the current fiscal year.

9 42. On August 26, 2009, the Company filed its annual report on a Form

10 10-K for the year ended June 30, 2009 with the SEC, which was signed by1112 defendants Massimino, Ord and Waller. In addition, pursuant to SOX, the Form

13 10-K contained signed certifications by defendants Waller and Ord stating that the

14Form 10-K did not contain any material misrepresentations.

15

16 43. The Form 10-K represented the following in relevant parts:

17 Admissions

18

19 As of June 30, 2009, we employed approximately 1,700 admissions

20representatives who work directly with prospective students tofacilitate the admissions process. These representatives interview and

21 advise students interested in specific careers and are a key component

22of our effort to generate interest in our educational services. Weconduct semi-annual student satisfaction surveys at our campuses in

23 the United States in which students have consistently given high

24marks to our admissions personnel for helpfulness, courtesy andaccuracy of information. Because our success is highly dependent on

25 the efficiency and effectiveness of our admissions process, we invest

26considerable resources to train our admissions representatives inproduct knowledge, regulatory compliance, and customer service.

27 We also employ various admissions supervisory and monitoring

28programs, and conduct student surveys which help us ensure



1 compliance with both government regulations and our corporate

2 policies.

3 One of our objectives in the admissions process is to identify students

4 who have the ability to succeed in our schools. The majority of

prospective students must pass a standardized admissions test. Most

5 of our colleges in the United States accept non-high school graduates

6 who can demonstrate an ability to benefit (“ATB students”) from theprogram by passing certain tests which are required by the ED. We

7 believe that ATB students can successfully complete many of our

8 diploma programs and our colleges have demonstrated success ingraduating and placing these students over the years. As of June 30,

9 2009, ATB students accounted for approximately 23.8% of total

10 enrollments in our U.S. schools.

11 ***

12 Cohort Default Rates. A significant requirement imposed by

13 Congress is a limitation on participation in the Title IV Programs byinstitutions whose former students defaulted on the repayment of

14 federally guaranteed or funded student loans at an “excessive” rate

15 (“Cohort Default Rates”). Many institutions, including all of ourinstitutions within the U.S., have responded by implementing

16 aggressive student loan default management programs aimed at

17 reducing the likelihood of students failing to repay their federally

18guaranteed loans in a timely manner....

19 We monitor our students’ repayment obligations and have engaged a

20professional default management firm to assist us in managing theCohort Default Rates at our U.S. institutions. We believe that

21 professional default management services can continue to assist us in

22managing these Cohort Default Rates.

23 ***

24 In addition to the efforts of our outside professional default

25 management firm, each of our campuses has adopted an internalstudent loan default management plan. Those plans emphasize to

26 students the importance of meeting loan repayment requirements and

27 provide for extensive loan counseling, along with methods toincrease student persistence and completion rates and graduate

28 employment (placement) rates. The professional default management



1 firm initiates regular contact with the student upon receipt of

2 delinquency notification from the guarantee agencies and continues

this activity through the entire cohort period. The colleges continue

3 to work with the default management firm to maintain accurate and

4up-to-date information on address changes, marital status changes, orchanges in circumstance that may allow the student to apply for

5 deferments. These activities are all in addition to the loan servicing

6 and collection activities of FFEL lenders and guarantee agencies.

7 44. On October 29, 2009, the Company issued a press release

8 announcing its financial results for the first quarter ended September 30, 2009.9


11 in the same period of the prior year. The Company also reported net income of

12$32.91 million, or $0.37 per diluted share, compared to net income of $5.49

1314 million, or $0.06 in the same period of the prior year.


16

17 Our strong first quarter results primarily reflect the continued success

18of our initiatives to enhance the student experience and improveoperational performance.... We have increased our student

19 population for more than three consecutive fiscal years, resulting in

20improved leverage of facility and other fixed costs. Increasedadvertising effectiveness and lower media costs have improved

21 efficiencies in marketing and admissions.

22 46. On October 30, 2009, the Company filed its quarterly report on a

23Form 10-Q for the first quarter ended September 30, 2009 with the SEC, which

2425 was signed by defendants Waller and Ord. In addition, pursuant to SOX, the

26 Form 10-Q contained signed certifications by defendants Waller and Ord stating

2728 that the Form 10-Q did not contain any material misrepresentations.



1 47. On February 2, 2010, the Company issued a press release announcing

2 its financial results for the second quarter ended December 31, 2009. The34 Company reported net revenue of $414.3 million, compared to $318.3 million in

5 the same period of the prior year. The Company also reported net income of

6 $39.4 million, or $0.44 per diluted share, compared to net income of $15.578 million, or $0.18 in the same period of the prior year.


10The continued growth in student population has resulted in improved

11 leverage of facility expenses and other fixed costs.... In addition,

12 marketing and bad debt expenses continued to decline as a percent ofrevenue. Given all of these factors, our operating margin and cash

13 flow from operations improved substantially compared with the prior

14 year. We achieved these results while continuing to make substantialinvestments in graduate employment services and student loan

15 default management.

1649. On February 4, 2010, the Company filed its quarterly report on a

1718 Form 10-Q for the second quarter ended December 31, 2009 with the SEC, which

19 was signed by defendants Waller and Ord. In addition, pursuant to SOX, the

20Form 10-Q contained signed certifications by defendants Waller and Ord stating

2122 that the Form 10-Q did not contain any material misrepresentations.

23

2450. On May 4, 2010, the Company issued a press release announcing its

25 financial results for the third quarter ended March 31, 2010. The Company

26 reported net revenue of $478.3 million, compared to $346.4 million in the same2728 period of the prior year. The Company also reported net income of $39.8 million,



1 or $0.45 per diluted share, compared to net income of $25.3 million, or $0.29 in

2 the same period of the prior year.3


5 The continued growth in student population has resulted in improved

6 leverage of facility expenses and other fixed costs.... In addition,marketing and bad debt expenses continued to decline as a percent of

7 revenue. Given all of these factors, our operating margin and cash

8 flow from operations improved substantially compared with the prioryear. We achieved these results while continuing to make additional

9 investments in graduate employment services and student loan

10 default management.

11 52. On May 4, 2010, the Company filed its quarterly report on a Form

1210-Q for the second quarter ended March 31, 2010 with the SEC, which was

1314 signed by defendants Waller and Ord. In addition, pursuant to SOX, the Form 10-

15 Q contained signed certifications by defendants Waller and Ord stating that the

16Form 10-Q did not contain any material misrepresentations.

17

18 53. The statements referenced above in ¶¶18-52 above were materially1920 false and/or misleading because they misrepresented and failed to disclose the

21 following adverse facts, which were known to defendants or recklessly

22 disregarded by them: (1) the Company overstated its growth prospects by2324 engaging in illicit and improper recruiting activities, which also had the effect of

25 artificially inflating the Company’s reported results and future growth prospects;

26 (2) the Company’s financial results were overstated in that the Company’s2728 colleges inflated tuition costs and its student loan repayment rates were well



1 below levels required for participation in federal loan programs; (3) the Company

2 failed to maintain adequate systems of internal operational or financial controls;34 and (4) based on the foregoing, defendants lacked a basis for their positive

5 statements about the Company, its prospects and growth.

6 The Truth Slowly Begins to Emerge7

8 54. On August 3, 2010, the news media began to circulate an undercover

9 investigative report conducted by the GAO entitled, “For-Profit Colleges:

10Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive

1112 and Questionable Marketing Practices.” The report concluded that (1) certain for-

13 profit schools used deceptive recruiting practices; (2) certain for-profit schools

14“encouraged fraudulent practices” to their students such as falsifying their

1516 financial aid forms to qualify for federal aid; (3) certain for-profit schools

17 substantially inflated their tuition costs; and (3) certain for-profit schools engaged

18in other “troubling” practices. As reported by the Wall Street Journal (“WSJ”),

1920 the GAO accused several colleges of encouraging fraud and engaging in deceptive

21 and questionable marketing practices. By using undercover tests at 15 for-profit

22colleges, the GAO “found that four privately held schools encouraged fraudulent

2324 practices and all 15 made deceptive or otherwise questionable statements to the

25 GAO's undercover applicants.” Further, the WSJ reported the following:

26

27 The GAO report said that four undercover applicants were

28encouraged by college personnel to falsify their financial-aid forms toqualify for federal aid, while other college representatives



1 exaggerated potential salaries after graduation and failed to provide

2 clear information about program duration, costs or graduation rates

despite federal regulations requiring them to do so.3

4 The GAO said in the report that it plans to refer cases of school

officials encouraging fraud and engaging in deceptive practices to the

5 Department of Education's Office of Inspector General, where

6 appropriate.

7 The report is scheduled to be presented as part of testimony

8 Wednesday before the Senate Committee on Health, Education,Labor and Pensions, chaired by Sen. Tom Harkin (D., Iowa).

9

10 "The results of this broad-reaching survey of for-profit schoolrecruiting practices leave little question that these practices occur

11 across the industry and are in no way limited to a few rogue recruiters

12 or even schools," a spokeswoman for Mr. Harkin said.

13

1455. On August 4, 2010, the U.S. Senate Health, Education, Labor and

15 Pensions Committee (the “Committee”) held a congressional hearing on

16 recruitment practices of many of the for-profit educational providers. Senator1718 Tom Harkin, the Committee’s Chairman noted in his remarks at the hearing that

19 the GAO report illustrates that the recruitment process at for-profit educational

20 providers is “specifically designed to do whatever it takes to drive up enrollment2122 numbers, more often than not to the disadvantage of students” and is “disturbingly

23 clear that abuses in for-profit recruiting are not limited to a few rogue recruiters or

24 even a few schools with lax oversight. To the contrary, the evidence points to a2526 problem that is systemic to the for-profit industry.”

27

28



1 56. As a result of the disclosures, Corinthian’s securities dropped more

2 than 16% or $1.44 between August 3, 2010 and August 5, 2010, to close at $7.8134 on August 5, 2010.

5 57. On August 9, 2010, the Company filed a Form 8-K with the SEC

6 disclosing that it received a request for information from the Committee.78 Specifically, the Committee requested information:

9on how the Company recruits and enrolls students, sets program price

10 or tuition, determines financial aid including private or institutional

11 loans, tracks attendance, handles withdrawal of students and return ofTitle IV dollars and manages compliance with the 90/10 rule. The

12 request also seeks information regarding the number of students who

13 complete or graduate from the Company’s programs, how many ofthose students find work in their fields of study, the debt levels of

14 students enrolling and completing programs and how the Company

15 tracks and manages cohort default rates. The Committee has alsorequested that the Company provide a broad range of information

16 about its business, including detailed information relating to financial

17 results, management, operations, personnel, recruiting, enrollment,

18graduation, student withdrawals, receipt of Title IV Program funds,accreditation, regulatory compliance and other matters.

19

2058. On August 13, 2010, the DOE released data showing estimated

21 student loan repayment rates. Under the DOE’s proposed “gainful employment”

22 rule, for-profit educational providers would fully qualify for federal aid in one of2324 two ways: either more than 45% of their former students are paying off principal

25 on loans, or the debt burden of former students is below 8% of total income or

26 below 20% of discretionary income. Accordingly, schools are eligible for federal2728 loans if they prepare their students for "gainful employment in a recognized



1 profession" under the Higher Education Act of 1965. However, schools lose

2 eligibility if repayment rates are below 35% or debt burden is above 12 percent of34 total income and 30 percent of discretionary income.

5 59. As to Corinthian, the DOE data showed that 33 of the 86

6 Corinthian’s Everest colleges had loan repayment rates of less than 20%, and at78 other campuses the rates were less than 10%. As a result, Deutsche Bank AG

9 downgraded Corinthian securities to “hold” from “buy” citing the Company’s

10“lower-than-feared” repayment rates.

11

12 60. Following these additional revelations, shares of Corinthian

13 securities fell $1.44 per share, or 22%, to close at $5.22 per share on August 16,

142010.

15

16 61. On August 20, 2010, the Company issued a press release announcing

17 its financial results for the fourth quarter and year ended June 30, 2010. For the

18fourth quarter, the Company reported net revenue of $482.7 million, compared to

1920 $353.5 million in the same period of the prior year. The Company also reported

21 net income of $33.9 million, or $0.38 per diluted share, compared to net income of

22$24.7 million, or $0.28 in the same period of the prior year.

23

24 62. In the press release, the Company additionally disclosed thefollowing:

25 Regulatory Update

26

27 NPRM- The federal Department of Education, pursuant to its rule-

28making process, recently published two Notices of Proposed RuleMaking (NPRM). The first NPRM, published on June 18, 2010,



1 focused on a range of issues affecting private sector schools,

2 including incentive compensation for admissions representatives,

misrepresentation, and gainful employment disclosures.... The

3 second NPRM, published on July 23, 2010, focuses exclusively on

4 gainful employment....

5 Senate HELP Committee - As part of its review of the private

6 sector education industry, the Senate Higher Education Labor and

Pensions Committee ("Committee") has requested information from

7 approximately 30 private sector education companies, including

8Corinthian. The information requested includes such areas as:recruiting and enrollment practices, pricing policies, student financial

9 aid processes, attendance tracking, student withdrawal policies, 90/10

10 compliance, placement, completion, cohort default rates,accreditation, and company financial results, management and

11 operations. The Committee has requested that a portion of the

12 information be provided by August 26, 2010 and that the remainderbe provided by September 16, 2010. We are in the process of

13 responding to the Committee's request.

14

15 Accreditation Status, Everest College Phoenix - Everest CollegePhoenix (ECP) consists of two ground schools and an online learning

16 division and has approximately 5,800 students. On May 9, 2009, ECP

17 was notified by the Higher Learning Commission of the North

18Central Association of Colleges and Schools (HLC), that ECP hadbeen placed on probation. The probation action primarily focuses on

19 questions about ECP's autonomy and governance as it relates to

20Corinthian's ownership.

21 An evaluation team from HLC visited ECP in May 2010, and, on

22July 27, 2010, issued a Report on a Comprehensive Evaluation Visit.In its report, the team noted that while there had been positive

23 developments, deficiencies in other criteria were not sufficient to

24warrant removal of ECP's probationary status. The evaluation teamhas recommended the withdrawal of ECP's accreditation. We

25 disagree with the evaluation team's recommendation, and intend to

26challenge its findings before the Commission over the next severalmonths. We expect HLC's board to make a determination on ECP's

27 probation status in November. If we disagree with the HLC board's

28decision, we could pursue an appeal that could last for severalmonths beyond that time.



1

2 Cohort Default Management Update

During fiscal 2010, we restructured and expanded our cohort default

3 management program and it was fully operational as of the end of the

4 third quarter. Although we believe that our default management

efforts have slowed the rate of increase for the 2009 cohort, current

5 trend information indicates that cumulative defaults have trended

6 substantially higher for the 2009 cohort of students compared withthe 2008 cohort at the same time last year. Information currently

7 available also indicates that the number of our OPEIDs which could

8 exceed DOE's 25% cohort default rate threshold for the 2009 cohortwill be substantially higher than for the 2008 cohort. In the 2008

9 cohort, nine of our OPEIDs exceeded the 25% threshold.

10

11 We believe that continuing high unemployment, which is particularlychallenging for the demographic we serve, has contributed to higher

12 cohort default rates (CDRs). In addition, major structural changes in

13 the student lending industry over the past two years have negativelyimpacted CDRs. Such changes include: student lender bankruptcies

14 in the wake of the 2008 credit crisis; the sale of distressed student

15 loan portfolios to the federal government by bankrupt lenders orlenders that could no longer fund such loans; the lack of default

16 management on distressed loans; the shift to direct lending and the

17 associated phase out of guaranty agency responsibilities for default

18management.

19 These changes in student lending have reduced data timeliness and

20trend visibility. As more data has emerged, we have gained a moretransparent view of how the changes have impacted the 2009 cohort

21 of students. The most recent federal data indicates that the changes in

22student lending have increased cohort default rates substantially forthe 2009 cohort.

23

24Given the information recently available, we now believe that up tothree of our OPEIDs could exceed the federal threshold of 25% for

25 three consecutive years under the current two-year measurement

26methodology. Under the current two-year methodology, OPEIDswhich exceed the federal threshold of 25% for three consecutive

27 years, or 40% in one year, become ineligible to participate in the

28Title IV student aid program. We remain confident that none of ourOPEIDs will exceed the 40% threshold for the 2009 cohort.



1

2 We expect the higher two-year rates for the 2009 cohort to translate

into elevated three-year rates for the same cohort. We thus expect a

3 majority of our OPEIDs to exceed the 30% threshold under the three-

4year measurement for the 2009 cohort. Schools cannot be sanctionedunder the three-year measurement methodology until 2014 (the year

5 the 2011 cohort data will be final) on either the 30% or 40%

6 thresholds, and we will aggressively pursue default mitigation effortsbetween now and then.

7

8 To help reduce cohort default rates for the 2010 cohort and beyond,and to improve student outcomes, in fiscal 2010 we began to reduce

9 enrollments of students who lack a high school diploma or

10 equivalent. These students attend our schools under the federalAbility to Benefit (ATB) program. At the end of fiscal 2010, ATB

11 students represented 15% of our total student population, down from

12 24% at the same point in the prior year.

13ATB students drop out at a higher rate, are more challenging to assist

14 with career placement, and default on their loans at a higher rate than

15 high school graduates. Although serving ATB students hashistorically been a part of Corinthian's mission, given the anticipated

16 shift to a three-year CDR measurement period, and the impact of

17 structural changes in the student lending environment, we will nolonger be able to serve these students at our U.S. Everest and

18 WyoTech campuses effective September 1, 2010. We will continue

19 to help currently enrolled ATB students finish their programs and

20find employment.

21 63. Moreover, in a conference call with the investing public, the

22 Company postponed its Investor Day scheduled for September 15, 2010 due to

23“potential changes in regulation, the NPRM response and the Senate Committee

2425 information request due shortly and our recent decision to stop enrolling ATB

26 students.”

27

28



1 64. As a result of these additional revelations, Corinthian securities fell

2 an additional $0.91 or nearly 17% and closed at $4.49 on August 20, 2010.3

4 CLASS ACTION ALLEGATIONS

5 65. Plaintiff brings this action as a class action pursuant to Federal Rule

6 of Civil Procedure 23(a) and (b)(3) on behalf of a Class, consisting of all those78 who purchased or otherwise acquired Corinthian securities during the Class Period

9 (the “Class”); and were damaged thereby. Excluded from the Class are

10defendants herein, the officers and directors of the Company, at all relevant times,

1112 members of their immediate families and their legal representatives, heirs,

13 successors or assigns and any entity in which defendants have or had a controlling

14 interest.15

16 66. The members of the Class are so numerous that joinder of all1718 members is impracticable. Throughout the Class Period, Corinthian securities

19 were actively traded on the Nasdaq. While the exact number of Class members is

20 unknown to Plaintiff at this time and can be ascertained only through appropriate2122 discovery, Plaintiff believes that there are hundreds or thousands of members in

23 the proposed Class. Record owners and other members of the Class may be

24 identified from records maintained by Corinthian or its transfer agent and may be2526 notified of the pendency of this action by mail, using the form of notice similar to

27 that customarily used in securities class actions.

28



1 67. Plaintiff’s claims are typical of the claims of the members of the

2 Class as all members of the Class are similarly affected by defendants’ wrongful34 conduct in violation of federal law that is complained of herein.

5 68. Plaintiff will fairly and adequately protect the interests of the

6 members of the Class and has retained counsel competent and experienced in class78 and securities litigation. Plaintiff has no interests antagonistic to or in conflict

9 with those of the Class.

10

69. Common questions of law and fact exist as to all members of the1112 Class and predominate over any questions solely affecting individual members of

13 the Class. Among the questions of law and fact common to the Class are:

14• whether the federal securities laws were violated by defendants’

15 acts as alleged herein;

16 • whether statements made by defendants to the investing public

17 during the Class Period misrepresented material facts about the

18business, operations and management of Corinthian;

19 • whether the Individual Defendants caused Corinthian to issue

20false and misleading financial statements during the Class Period;

21 • whether defendants acted knowingly or recklessly in issuing falseand misleading financial statements;

22• whether the prices of Corinthian securities during the Class Period

23 were artificially inflated because of the defendants’ conduct

24 complained of herein; and

25 • whether the members of the Class have sustained damages and, if

26 so, what is the proper measure of damages.

27 70. A class action is superior to all other available methods for the fair

28



1 and efficient adjudication of this controversy since joinder of all members is

2 impracticable. Furthermore, as the damages suffered by individual Class34 members may be relatively small, the expense and burden of individual litigation

5 make it impossible for members of the Class to individually redress the wrongs

6 done to them. There will be no difficulty in the management of this action as a78 class action.

9 71. Plaintiff will rely, in part, upon the presumption of reliance

10established by the fraud-on-the-market doctrine in that:

11

12 • defendants made public misrepresentations or failed to disclosematerial facts during the Class Period;

13•

14the omissions and misrepresentations were material;

15 • Corinthian securities are traded in efficient markets;

16 • the Company’s shares were liquid and traded with moderate to

17 heavy volume during the Class Period;

18 • the Company traded on the Nasdaq, and was covered by multiple

19analysts;

20 • the misrepresentations and omissions alleged would tend toinduce a reasonable investor to misjudge the value of the

21 Company’s securities; and

22• Plaintiff and members of the Class purchased and/or sold

23 Corinthian securities between the time the defendants failed to

24 disclose or misrepresented material facts and the time the truefacts were disclosed, without knowledge of the omitted or

25 misrepresented facts.

26 72. Based upon the foregoing, Plaintiff and the members of the Class are2728 entitled to a presumption of reliance upon the integrity of the market.



1 CLAIMS FOR RELIEF

2COUNT I

3

4 (Against All Defendants For Violations of

Section 10(b) And Rule 10b-5 Promulgated Thereunder) 5

673. Plaintiff repeats and realleges each and every allegation contained

7 above as if fully set forth herein.

8 74. This Count is asserted against defendants and is based upon Section

910 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5 promulgated

11 thereunder by the SEC.

12 75. During the Class Period, defendants engaged in a plan, scheme,

1314 conspiracy and course of conduct, pursuant to which they knowingly or recklessly

15 engaged in acts, transactions, practices and courses of business which operated as

16 a fraud and deceit upon Plaintiff and the other members of the Class; made

17various untrue statements of material facts and omitted to state material facts

18

19 necessary in order to make the statements made, in light of the circumstances

20 under which they were made, not misleading; and employed devices, schemes and2122 artifices to defraud in connection with the purchase and sale of securities. Such

23 scheme was intended to, and, throughout the Class Period, did: (i) deceive the

24 investing public, including Plaintiff and other Class members, as alleged herein;2526 (ii) artificially inflate and maintain the market price of Corinthian securities; and

27 (iii) cause Plaintiff and other members of the Class to purchase Corinthian

28 securities and options at artificially inflated prices. In furtherance of this unlawful



1 scheme, plan and course of conduct, defendants, and each of them, took the

2 actions set forth herein.3

476. Pursuant to the above plan, scheme, conspiracy and course of

5 conduct, each of the defendants participated directly or indirectly in the

6 preparation and/or issuance of the quarterly and annual reports, SEC filings, press78 releases and other statements and documents described above, including

9 statements made to securities analysts and the media that were designed to

10influence the market for Corinthian securities and options. Such reports, filings,

1112 releases and statements were materially false and misleading in that they failed to

13 disclose material adverse information and misrepresented the truth about

14Corinthian’s finances and business prospects.

15

16 77. By virtue of their positions at Corinthian, defendants had actual

1 7 knowledge of the materially false and misleading statements and material

18omissions alleged herein and intended thereby to deceive Plaintiff and the other

1920 members of the Class, or, in the alternative, defendants acted with reckless

21 disregard for the truth in that they failed or refused to ascertain and disclose such

22facts as would reveal the materially false and misleading nature of the statements

2324 made, although such facts were readily available to defendants. Said acts and

25 omissions of defendants were committed willfully or with reckless disregard for

2627 the truth. In addition, each defendant knew or recklessly disregarded that material

28 facts were being misrepresented or omitted as described above.



1 78. Defendants were personally motivated to make false statements and

2 omit material information necessary to make the statements not misleading in34 order to personally benefit from the sale of Corinthian securities from their

5 personal portfolios.

6 79. Information showing that defendants acted knowingly or with78 reckless disregard for the truth is peculiarly within defendants’ knowledge and

9 control. As the senior managers and/or directors of Corinthian, the Individual

10Defendants had knowledge of the details of Corinthian internal affairs.

11

12 80. The Individual Defendants are liable both directly and indirectly for

13 the wrongs complained of herein. Because of their positions of control and

14authority, the Individual Defendants were able to and did, directly or indirectly,

1516 control the content of the statements of Corinthian. As officers and/or directors of

17 a publicly-held company, the Individual Defendants had a duty to disseminate

18timely, accurate, and truthful information with respect to Corinthian’s businesses,

1920 operations, future financial condition and future prospects. As a result of the

21 dissemination of the aforementioned false and misleading reports, releases and

22public statements, the market price of Corinthian securities was artificially

2324 inflated throughout the Class Period. In ignorance of the adverse facts concerning

25 Corinthian’s business and financial condition which were concealed by

2627 defendants, Plaintiff and the other members of the Class purchased Corinthian

28 securities at artificially inflated prices and relied upon the price of the securities,



1 the integrity of the market for the securities and/or upon statements disseminated

2 by defendants and were damaged thereby.3

4 81. During the Class Period, Corinthian securities were traded on an

5 active and efficient market. Plaintiff and the other members of the Class, relying

6 on the materially false and misleading statements described herein, which the78 defendants made, issued or caused to be disseminated, or relying upon the

9 integrity of the market, purchased shares of Corinthian securities and options at

10prices artificially inflated by defendants’ wrongful conduct. Had Plaintiff and the

1112 other members of the Class known the truth, they would not have purchased said

13 shares and options, or would not have purchased them at the inflated prices that

14were paid. At the time of the purchases by Plaintiff and the Class, the true value

1516 of Corinthian securities and options were substantially lower than the prices paid

17 by Plaintiff and the other members of the Class. The market price of Corinthian

18securities and options declined sharply upon public disclosure of the facts alleged

1920 herein to the injury of Plaintiff and Class members.

21 82. By reason of the conduct alleged herein, defendants knowingly or

22recklessly, directly or indirectly, have violated Section 10(b) of the Exchange Act

2324 and Rule 1 0b-5 promulgated thereunder.

25 83. As a direct and proximate result of defendants’ wrongful conduct,

2627 Plaintiff and the other members of the Class suffered damages in connection with

28



1 their respective purchases and sales of the Company’s securities during the Class

2 Period.3

4 COUNT II

5 (Violations of Section 20(a) of the

6 Exchange Act Against The Individual Defendants)

7 84. Plaintiff repeats and realleges each and every allegation contained in

8 the foregoing paragraphs as if fully set forth herein.

9

1085. (a) During the Class Period, the Individual Defendants

11 participated in the operation and management of Corinthian, and conducted and

12 participated, directly and indirectly, in the conduct of Corinthian’s business1314 affairs. Because of their senior positions, they knew the adverse non-public

15 information about Corinthian’s misstatement of income and expenses and false

16 financial statements.17

18(b) As officers and/or directors of a publicly owned company, the

19 Individual Defendants had a duty to disseminate accurate and truthful information

20 with respect to Corinthian’s financial condition and results of operations, and to2122 correct promptly any public statements issued by Corinthian which had become

23 materially false or misleading.

24

25 (c) Because of their positions of control and authority as senior

26 officers, the Individual Defendants were able to, and did, control the contents of

2728 the various reports, press releases and public filings which Corinthian



1 disseminated in the marketplace during the Class Period concerning Corinthian’s

2 results of operations. Throughout the Class Period, the Individual Defendants34 exercised their power and authority to cause Corinthian to engage in the wrongful

5 acts complained of herein. The Individual Defendants therefore, were

6 “controlling persons” of Corinthian within the meaning of Section 20(a) of the78 Exchange Act. In this capacity, they participated in the unlawful conduct alleged

9 which artificially inflated the market price of Corinthian securities and options.

10

86. Each of the Individual Defendants, therefore, acted as a controlling1112 person of Corinthian. By reason of their senior management positions and/or

13 being directors of Corinthian, each of the Individual Defendants had the power to

14direct the actions of, and exercised the same to cause, Corinthian to engage in the

1516 unlawful acts and conduct complained of herein. Each of the Individual

17 Defendants exercised control over the general operations of Corinthian and

18possessed the power to control the specific activities which comprise the primary

1920 violations about which Plaintiff and the other members of the Class complain.

21 87. By reason of the above conduct, the Individual Defendants are liable

22pursuant to Section 20(a) of the Exchange Act for the violations committed by

2324 Corinthian.

25

26

27

28



i1 PRAYER FOR RELIEF

2WHEREFORE, Plaintiff demands judgment against defendants as follows:

3

4A. Determining that the instant action may be maintained as a clas

5 action under Rule 23 of the Federal Rules of Civil Procedure, and certifyin ji

6 Plaintiff as the Class representative; f

7 i

8 B. Requiring defendants to pay damages sustained by Plaintiff and the

9 Class by reason of the acts and transactions alleged herein;

10C. Awarding Plaintiff and the other members of the Class prejudgmen

11

12 and post judgment interest, as well as their reasonable attorneys' fees, expert fees

13 and other costs; and

14D. Awarding such other and further relief as this Court may deem just

15

16 and proper.

17 DEMAND FOR TRIAL BY JURY 18

Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure,

19 !

20 Plaintiff hereby demands trial by jury of all issues that may be so tried.

21 Dated: August 31, 2010 Respectfully submitted,

22

23 B f

24Lionel Z. Glancy (SBN 13)4-^ 1)Michael Goldberg (SBN `::669)

25 Andy Sohrn (SBN241388)

26 GLANCY BINKOW & GOLDBERGLLP

27 1801 Ave. of the Stars, Suite 311

28 Los Angeles, CA 90067



1 Telephone: (310) 201-9150

2 Facsimile: (310) 201-9160

[email protected]

4 Gregory S. Asciolla

William V. Reiss5 LABATON SUCHAROW LLP

6 140 Broadway

New York, NY 100057 Telephone: (212) 907-0700

8Facsimile: (212) [email protected]

9 [email protected]

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28


Certification of Plaintiffase 2:10-cv-06523-GHK -RC Document 1 Filed 08/31/10 Page 38 of 44 Page ID #:10

1. 1, Jimmy Karam, make this declaration pursuant to Section 101 of the PrivateSecurities Litigation Reform Act of 1995 as required by Section 21 D (a) (2) of Title I of theSecurities Exchange Act of 1934.

2. 1 have reviewed a Complaint against Corinthian Colleges, Inc. ("COCO"), andauthorize a filing of a comparable complaint on my behalf.

3. 1 did not purchase my COCO securities at the direction of plaintiffs' counsel or inorder to participate in any private action arising under Title I of the Securities Exchange Act of1934.

4. 1 am willing to serve as a representative party on behalf of a class as set forth in theComplaint, including providing testimony at deposition and trial, if necessary. I understand thatthe Court has the authority to select the most adequate lead plaintiff in this action and that thePomerantz Firm will exercise its discretion in determining whether to move on my behalf forappointment as lead plaintiff.

5. To the best of my current knowledge, the attached sheet lists all of my purchasesand sales in COCO securities during the Class Period as specified in the Complaint.

6. During the three-year period preceding the date on which this certification is signed,I have not sought to serve as a representative party on behalf of a class under the federalsecurities laws, except as follows:

7. 1 agree not to accept any payment for serving as a representative party on behalf ofthe class as set forth in the Complaint, beyond my pro rata share of any recovery, except suchreasonable costs and expenses (including lost wages) directly relating to the representation ofthe class as ordered or approved by the Court.

8_ The matters stated in this declaration are true to the best of my current knowledge,information and belief.

I declare under penalty or perjury that the foregoing is true and correct.

Executed 8/27/2010 , at San Diego, CA (Date) (City, State)^f

J

f

(Signature)

Jimmy Elias Karam

(Tvpe or Print Name)

Summary of Purchases and Sales ase 2:10-cv-06523-GHK -RC Document 1 Filed 08/31/1 0 Page 39 of 44 Page ID #:10

DATE TRANSACTION TYPE: NUMBER/ PRICE OF SECURITYPURCHASE OR SALE TYPE OF SECURITY

8/3/2010 Purchase COCO 500 @ $9.0596

8/3/2010 Purchase COCO 500 @ S8.7196

8/3/2010 Purchase CQCO 500 @ $8.7196

8/19/2010 Sale COCO 1,500 @ $5.2204


UNITED STATES DISTRICT COURTCENTRAL DISTRICT OF CALIFORNIA

NOTICE OF ASSIGNMENT TO UNITED STATES MAGISTRATE JUDGE FOR DISCOVERY

This case has been assigned to District Judge George King and the assigned discoveryMagistrate Judge is Rosalyn M. Chapman.

The case number on all documents filed with the Court should read as follows:

CV10- 6523 GHK (RCx)

Pursuant to General Order 05-07 of the United States District Court for the CentralDistrict of California, the Magistrate Judge has been designated to hear discovery relatedmotions.

All discovery related motions should be noticed on the calendar of the Magistrate Judge

NOTICE TO COUNSEL

A copy of this notice must be served with the summons and complaint on all defendants (if a removal action isfiled, a copy of this notice must be served on all plaintiffs).

Subsequent documents must be filed at the following location:

[XI Western Division U Southern Division U Eastern Division312 N. Spring St., Rm. G-8 411 West Fourth St., Rm. 1-053 3470 Twelfth St., Rm. 134Los Angeles, CA 90012 Santa Ana, CA 92701-4516 Riverside, CA 92501

Failure to file at the proper location will result in your documents being returned to you.

CV-18 (03/06) NOTICE OF ASSIGNMENT TO UNITED STAVES MAGISTRATE JUDGE FOR DISCOVERY


Name & Address: ! !: rMichael Goldberg (##188669)GLANCY BINKOW & GOLDBERG LLP1801 Avenue of the Stars, Suite 311Los Angeles, CA 90067Telephone: (310) 201-9150

f


JIMMY ELIAS KARAM, Individually and On Behalf CASES NOMEER

of All Others Similarly Situated,

V. 4L";V 10" 6 5 2 3 CORINTHIAN COLLEGES, INC., JACK P.MASSIMINO, PETER C. WALLER, MATTHEW A.OtMAET and KENNETH S. ORD, SUMMONS

DEFENDANT(S).

i

TO. DEFENDANT(S). CORINTHIAN COLLEGES, WC., JACK P. MASSIMINO, PETER C. WALLER, MATTHEW A. OUIMET and KENNETH S. ORD.

A lawsuit has been filed against you.

Within 21 days after service of this summons on you (not counting the day you received it), youmust serve on the plaintiff an answer to the attached C1rcomplaint q amended complaint0 counterclaim q crass-claim or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answeror motion must be served on the plaintiff's attorney, Michael Goldberg ,whose address is1801 Avenue of the Stars, Ste 311, Los Angeles, CA 90067 If you fail to do 5fl,

judgment by default will be entered against you for the relief demanded in the complaint. You also must fileyour answer or motion with the court..,

Clerk, J.S, D' o

Dated: 1 AUG 2MO By: MARILY). "D ► ISuty .Clerk

(Seal of the Court)

'Use 60 days if the defendant 4r the United States or a United States agency, or is an officer or employee of Yhe United States. Allowed60 days by Rule 12(a)(3)].

CV-01A (12!€17) SUMMONS


Name & Address: iMichael Goldberg (#188669) FGLANCY BINKOW & GOLDBERG LLP1901 Avenue of the Stars, Suite 311Los Angeles, CA 90067 sTelephone: (310) 201-9150


JIMMY ELIAS KARAM, Individually and OR Behalf CASE NUMBER

of All Others Similarly Situated,

PLAINTIFF(S)

V. r ^► .

CORINTHIAN COLLEGES, INC., JACK P.MASSIMINO, PETER C. FALLER, MA1"PHEW A.OUIMET and KENNETH S. ORD, SUMMONS

DEFENDAN'r(S),

TO: DEFENDANT(S): CORINTHIAN COLLEGES, INC., JACK P. MASSIMINO, PEI'ER C. WALLER, MATTHEW A. OUIMET and KENNETH S. ORD.

A lawsuit has been filed against you.

Within 21 days after service of this summons on you (not counting the day you received it), youmust serve on the plaintiff an answer to the attached 4complaint q amended complaintq counterclaim q cross-claim or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answeror motion must be served on the plaintiffs attorney,. Michael Goldberg , whose address is1801 Avenue of the Stars, Ste 311, Los Angeles, CA 90067 If you fail to do so,

judgment by default will be entered against you for the relief demanded in the complaint. You also must fileyour answer or motion with the court.

Clerk, U.S. District CountI

IDated: AL16 20 By: r(1

Deputy

Clerk

(Seal of the Court)

[Use 60 days tf the defendant is the United States or a United States agency, or is an officer or employee of the United States. Allowed60 days by) ?We I2(a)(3)].

CV-01A (12107) SUMMONS

Case 2:10-cv-06523-GHK -RC Document 1 Filed 08/31/10 Page 43 of 44 Page ID #:105rb ;_ 1i

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIAC1vlL COVER SHEET

I (a) PLAINT)"S (Check box if you are representing yourselrl) DEFENDANTSCorinthian Colleges, lac., lack P. Massintiuo, Peter C. Waller, Matthew A.

Jimmy Elias Karam, Individually and On Behalfof All Others Similarly Oulmet and Kenneth S. OrdSituated,

(b) Attorneys (Firm Naute, Address and Telephone Nambm Ifyou am repress Ling Attorneys (If Known)yourself, provide same.)

Michael Goldberg (SBN 188669)GLANCY BINKOW & GOLDBERG LLP1801 Avenue of the Stars, Suite 311 Los Angeles, CA Tel: (310) 201-9150

11, 13AS1S OF JURISDICTION (Place an X in one box only.) Ill. CI'r=NSB1fP OF PRINCIPAL PARTIES - For Diversity Earns Only(Place an X in one box far plaintiff and one for defendant.)

q 1 U.S. Government Plaintiff ^3 Federal Question (U.S, PT'F DEL? PTF DEF,Ciovc„micnt Not aParty) CitizenoflhisState 01 01 Incorporated orPrintipalPlace; 04 b4ofBnsiness In this Start

q2 U.S. Oovernment Defendant Cl 4 Diversity (Indicate Citizenship Citizen of Anotherstate 132 q 2 Incorporated and Principal Place q 5 05ofPartiee in item III) of Business in Another SWc

Citi=n or Subject of a Foreign Country (33 q 3 foreign Nation 0 6 [361V. ORIGIN (Place an X in one box only.)

N1 Original 02 Rcrnoved from E33 Remandad from 04 Reinstated or 05 Transferal from another district (specify): q 6 Multi- 07 Appeal to DistrictProceeding State Court Appollato Court Reopened District Judge fromLitigation Magistrate Judge

V. REQUESTED IN COMPLAINT. JURY DEMAND: I(Yes q No (Check 'Yes' only ifdemanded in complaint.)CLASS AMON underFILC.P. 23: ff

/ Yca 0 No IdMONEY I114114ANDED IN COMPLAINT: s To be Proved

VI. CAUSE OF ACTION (Cite the U.S. Civil Statute under which you are filing and write a brief statement oftaase. Do not citc jurlsdiatiaMat statutes unless dlvetsity.)i

i Vil. NATURE OF SUIT (Place an X iu one box only.)

wd e: .atf , } F• t = Q. Ye aaa rte± J;`. ,.= ii., n-. -- - •TJ:-vr"=bxe^. x' ,T.,^:.> .-

hilt xcR.°q 400 State Respportionmcut q 710 lasutu<aec P.I?1 S"6J 1AE [N]URY' '. :.°:.;4 3fSOk Oil :._ :. ,fakh? q 710 Fair Labor Standardsq 410 Antitrust 0 120 marine 0310 Aitplana - _ 11r1lkriY q 510 Motions to Actq430 Banco; and Banking E3 130 Miller Act 0315 Airplane Product Q '370 Other Fraud Vacate Sentence q 720 LRbor/Mgmt. jq450 Commerce/!CC 0 140 Negotiable Instrument Liability 0•371 Truth in Lending Habeas Carpus RelationsRatrs/etc. q 150 Recovery of 0 320 Assault, Libel & q 380 Other Personal q 530 General 13730 Labor/Mgmtq460 Deportation Overpayment & Slander`I'°Property Damage q 535 bealft Penalty Reporting &10470 Racketeer Influenced Fsuforcomant of 13330 Fed. Employers' q 385 Property Damage q 540 Mandamus! Disclosuue Actoral Corrupt Judgment Liabilityd5 Product Other q 740 'Railway ActOrganizations Cl 151 Medicarre Act q 3dA Marina g 0% q 550 Civil Rights q 790 Other LaborII345 MarineProduetEl 48p Consumer Credit D ]52 ltecovety ofDeli<uruLted q 472 Appeal 28 USC q 555 Prison Condition Litigation0490 CableJSatTVLinbility11910 Selective Service

Student Loan ( i3sci. q 350 Motor Vehicle 158 ' eel i i.. — 0791 Empl. ReL Inc.Veterans fi=r „ ,IMC850 0355 Motor Vehicle 13423 f yithdtawai28 s11 Ea- SecttrE Act850 Secudfies/Cornmoditles/ 0153 Recovery of Product Liability USC: 157 q 610 AgricultureExchange Overpayment or'D Copyrights13360 OtharPersonal ffl — , 0620 Other Food & 820 Co0 875 Customer Challenge 12 Veteran's Benoftts

injury 1344 E Voting Drug Q 830 Patent ,USC 3410 0 160 Stockholders' Suits q 362 Persnal ltnmY- q 442 Employment Cl 625 Drug Related q 840 Thddemark13890 Other Statutory Actions 0190 Other Contract q 443 Houain ^,•12891 Agricultural Act q 195 Contract Product

bled Malpractice g/Acoo- IWper y 2 jy s.s ^ (3. q 36S Personal Injury- mtnodalioas Prnperty2i USC q $61 IIIA (J395rf)13892 P.eonotnioStabilization Liability ProduetUablilty 0 44 Welfare 881 17852 Black Lung (923)Act q 196 Franchise 0368 AsbestosPersottal 13445 Amer'teRnwith q 630 Liquor Laws 0863 DIWC/DIWW13993 Pnvironmental Matters "^ ^^ fgjtiry Product Disabillties - 0644 R.R &Track (40-5(9))q 894 Energy Allocation Act 0 210 Land Condemnation Liability Employment 0 650 Airline Regs 0 B64 SSID Title XVI0 895 Freedom of Info. Act 01220 Foreclosluta`^ R q 446 American with q 660 Occupational 0 865 RSI (40SEl 9N Appeal of Fee Determi- 13230 pent Lease & Ejectment q 462 Naturalization Disabilities - Safety /liealth

nation Under Equal D 240 Tarts to Land Application Other E7 690 Other 0 870 Taxes (U.S. PlaintiffAccess to Justice q 245 Tart Product Liebllity 11463 Habeas Corpus- q 440 Other Civil or Defendant) i11950 Constitutionality of 13290 Ail Other Rea[ Property Alien Detainee ghts q 871 IRS-Third Pe 26State Statutes q 465 Other Enmtigratiun

Rights Party I i

Actions USC 7609i{

FOR OFFICE USE ONLY: Case Number CV10 65-21 3

AFTER COMPLETING THET FRONT SIDE OF FORM CV -71, COMPLETE THE INFORMATION MUF-S'1'E1113RLOW.

CV-71 (05/08) CIVIL COVER SU'RET Page 1 of 2


UNITED STATES DISTRICT COIWU, CENTRAL DISTRICT OF CALIFORNIACIViL COVE it SITE RIT

VIII(a). IDENTICAL CASES: Has this action been previonsly fled in this court and dismissed, remanded or closed? [ %(No 0 YesIf yes, list case numbcr(s):

VIII(b). IL1CI.ATED CASES- Have any cases beer previously filed in this taint that we tctated to the present case? b(No O YesIf yes, list case nuurbcr(s):

Civil cases ire deemed related if a previously filed case and the prewitt case:(Check all boxes that apply) Ci A. Arise tinm the same or closely related transactions, happenings, or events; or

Cl H. Cull for determination of the same or substantially related or similar questions of law and fact; or I(3 C. For other reasons would entail substantial duplication of labor if heard by different judges; or 1

LID, Involve the same patent, trademark or copyright, and one ofthc factors identified above in a, b or c also is present.

IX. VENUE: (When completing the following information, nsc an additional sheet if necessary.)

(a) List the County in this District; California County outside of this District; State Waller than California; or Foreign Country, in which EACIi named plaintiff resides.© Check here if the -overnmcnt, its a.-cncies or ern to ees is a teamed .laintiff. If this box is checked, go to item (b),

County in this Bish'iat: a

California County outside of this District; Slate, if other than California; or Foreign Country

Plaintiff Jimmy Elias Karam - San Diego County

b) List the County in this District; California County outside of this District; State ifother than Califomia; or Foreign Country, in which EACH named defendant resides.Cl Check here if the government, its agcn ,its or employees is a named defendant. If this box is checked, go to item (e).

County in this District:*

California County outside of this District; State, ifother than Cnli€omia; or Foreign Country

Corinthian Collages, fne. - Orange County, CAJack P.1vlassintino, Peter C. Waller, Matthew A. Ouimel & Kenneth & Ord -Orange County, CA

c) List the County in this District; California County outside of this District; State ifother than California, or Foreign Country, in-which EACH claim arose.Note: In land condemnation cases, use the location of the tract of land involved.

County in ihis District:*

Califomia Caunly outside of this District; Slate, if other than Califomia; or Foreign Country

San Diego County

ii

* Los Angeles, Orange, San Bernardino, Riverside, Ventura, Santa Barbara, or San Luis Obispo CountiesNote: In land condemnation cases, use the location of the tract of land involved i

X. SIGNATURE OF ATTORNEY (OR PRO PER M ^ ^ Date August 31, 2010 i

Notice to CounsvitFurtles: The CV-71 (15-44) Civil Cover Sheet and the, information contained herein neither replace norsuppletnent the filing and service ofpleadingsor otherpapors as recpiireci by law. This form, approved by the dudiciat Con Terence of the Uni led States in September 1974, is required pursuant to Local Rule 3 -I is not filed

but is used by tbo Cleric of the Court for the purpose of statistics, venue and initiating the civil docket sheet. (For more detailed instructions, see separate instructions sheet.) i

Key to Statistical codes relating to Social Security Casts:

Nature of Suit Code Abbreviation Substantive Statement of Cause of Action

861 HJA All claims for health insurance bone fits (Medieare) under Title 18, Part A, of the Social Security Act, as amended.Also, include claims by hospitals, skilled nursing facilities, etc., for certification as providers ofservices under theprogram. (42 U.S.C. 1935FF(b))

862 I11, All claims for "Black Lung" benefits under Title 4, Part B, of the Federal Coal feline Health and Safety Act of 1969.(30 U.S-C- 923)

963 DIWC All claims filed by insured workers for disability insurance benefits tinder Title 2 of the Social Security Act, asamended; plus all claims filed for child's insurance benefits based on disability. (42 U.S.C. 405(g))

863 DIW W All claims fried for widows or widowers insurance benefits based on disability under Title 2 ofthe Social SccuarityAct, as amended. (42 U.S.C- 405(g))

864 SS1D All claims far supplemental security income payments based upon disability filed under Title 15 of the Social SecurityAct, as amended.

965 RSI All claims for retirement (old age) and survivors benefits under Title 2 of the Social Security Act, as amended. (42U.S.C,(g))

CV-71 (05108) CIVIL COVER SIIEET Page 2 of 2

Documents

Jimmy Elias Karam, et al. v. Corinthian Colleges, Inc., et ...securities.stanford.edu/filings-documents/1045/...15 JIMMY ELIAS KARAM, Individually ) 16 and On Behalf of All Others