According to a press release dated April 25, 2006, Corinthian Colleges, Inc. announced that the United States District Court for the Central District of California has granted the Company's motion to dismiss the third amended federal securities class action complaint. The complaint was dismissed with prejudice and will not be heard again by the district court. The plaintiff has the right to appeal the decision to an appellate court.
As summarized by the Company’s FORM 10-Q For The Quarterly Period Ended December 31, 2005, from July 8, 2004 through August 31, 2004, various putative class action lawsuits were filed in the United States District Court for the Central District of California by certain alleged purchasers of the Company’s common stock against the Company and certain of its current and former executive officers. On November 5, 2004, a lead plaintiff was chosen and these cases are now consolidated into one action. A first consolidated amended complaint was filed in February 2005. On September 6, 2005, the court granted the Company’s motion to dismiss, without prejudice. On October 3, 2005, the lead plaintiff filed a second consolidated amended complaint. On January 23, 2006, the court granted the Company’s motion to dismiss with respect to the plaintiff’s second consolidated amended complaint, without prejudice.
The original Complaint alleges that Corinthian, and certain of its officers and directors issued materially false statements. Specifically, Corinthian knew but failed to disclose: (i) that Corinthian manipulated financial aid documents to boost loan amounts available to students, thereby fraudulently receiving additional funds from the federal government; (ii) that Corinthian used the fraudulently obtained funds to boost its revenues and stock price; and (iii) that as result of the illegal practices, Corinthian's earning and net income were materially inflated and in violation of Generally Accepted Accounting Principles ('GAAP').
The complaint further alleges that on or around June 24, 2004, Corinthian announced that a division of the US Department of Education ('USDE') had uncovered violations in obtaining federal loans at Corinthian's Bryman College campus, in San Jose, California. As a result, USDE revoked the school's ability to receive advance payments on its student loans. On this news, shares of Corinthian fell $2.55 or 10.18% to close at $22.51 on June 24, 2004.