New developments in the class action suit against Le Cordon Bleu have emerged - now it's not just the parent companies being sued, it's the banks as well.
As we reported in October, a class action suit is pending against Le Cordon Bleu's parent companies alleging fraud, claiming the school promises prospective students they'll become chefs, but that most graduates are unable to obtain that position.
We spoke with Michael Louis Kelly yesterday morning of Kirtland & Packard LLP, the firm representing the LCB students, who gave us information on changes to the complaint. The claim now names Sallie Mae, Wells Fargo, Dollar Bank of Pittsburgh and several other loan holders as defendants.
Does this mean the plaintiffs think the banks are responsible? Not exactly. The suit doesn't assert that the loan holders knew of any alleged fraud. The attorneys are naming them because they believe it will further benefit the plaintiffs should the claim succeed. Instead of simply receiving money in a settlement, by involving the banks, the hope is that the students have a better chance of being alleviated of their loans, as opposed to simply receiving a portion of money to put towards them.
This decision was partly made based on the outcome of a similar class action suit waged against Le Cordon Bleu in San Francisco. Those plaintiffs received approximately $110 million in retribution, but were not legally relieved of their loans, Kelly told us.
In addition, should the class action suit fail, Kirtland & Packard has decided it will pursue individual claims, and have even set up a website for client intake. They have nearly 6,000 claimants already.
However, Mark Spencer, a spokesman for Le Cordon Bleu's parent company, Career Education Corporation, seems to see a reason for this pile on. He told us in an email that on January 19, 2011, the Court dismissed the plaintiffs' attempt to assert claims under the Education Code, or the collection of laws that regulate education in the state. "Plaintiffs sought alleged damages under the Education Code claim regardless of whether any students were harmed by the alleged violations. The Court dismissed Plaintiffs' Education Code claim with prejudice, meaning that Plaintiffs cannot attempt to bring claims for alleged violations of the Education Code," says Spencer.
In other words, "In the latest ruling in the case, the Plaintiffs lost their major claim and have now added new Plaintiffs in the case after the original Plaintiffs' depositions revealed significant discrepancies from their original stories," he says.
He went on: "Moreover, in January, our attorneys took the depositions of the two named Plaintiffs and discovered serious discrepancies between what their lawyers alleged in the Complaint and what they said under oath. With these two setbacks, Plaintiffs have scrambled to add new Plaintiffs and new Defendants in what is now their Third Amended Complaint."
Discrepancies? We pressed Spencer for specifics. "All I can say is that there were a number of inconsistencies in their stories," he replied.
What about the validity of this lawsuit in the first place? It's been a hotly debated topic. Do these students have any right to sue at all?
Kelly believes they absolutely do. He explains that while one way to break into the culinary world is to start at the bottom, say, as a dishwasher, and work your way up through the ranks, Le Cordon Bleu promises you can skip all these steps and start as a chef. In most cases, however, Kelly says this turns out not to be true. "The whole premise of this school is flawed. It's based on misinformation and fraud," he says.
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Kelly also provided a bit of number crunching to better illustrate the dilemma some of his clients are in. According to him, most students graduate with approximately $56,000 of debt, and they're told by LCB to expect to pay between $500 and $700 per month - something they should be able to afford on a chef's salary. However, since many of them don't become chefs, they can only pay a fraction of that amount, and with interest ever-accruing, they end up even deeper in debt.
Kelly goes on to say that Le Cordon Bleu preys on those with few options, stating that most students are in their late teens or early 20s with no access to accountants or lawyers who could advise them. He says the the more LCB students he meets, the worse he feels for them.
Says Spencer, "We stand by the quality of the education provided by Le Cordon Bleu. Le Cordon Bleu is a modern classic in the culinary world, offering an exceptional education grounded in the mastery of classic cooking techniques. Our schools provide exceptional hands-on instruction infused with cutting-edge innovation and global perspectives."
Whose side are you on? Tell us your thoughts in the Comments section.