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Honesty and Ethics in Business Law: Take Care When Filing a New Corporation

When you start a new company, there is more to consider than the filing you choose for the corporation. Your company must take great care to file honestly and ethically.

The case of Santa Ana Corinthian Colleges presents an example of exactly the opposite behavior. In a lawsuit filed by the Attorney General of California, the Colleges have been charged with misleading investors by means of securities fraud, creating false and predatory advertising aimed at low-income students and unlawfully using military logos that gave the impression that the Colleges were affiliated with the United States Armed Forces.
Santa Ana Corinthian Colleges operates 111 campus locations in North America, with approximately one-third of its 81,000 students taking their courses in California. The Colleges aim their advertisements at veterans, low-income individuals and single mothers. Most of the College’s income is derived from tuition, which is funded by the federal loans obtained by its students.

Allegedly, specific, attractive classes were advertised, but when prospective students came to tour the campus, they were told that the program in which they were interested was not available. The Colleges are also accused of placing military logos on websites and direct mail marketing to give the false impression that the school was approved by the U.S. Armed Forces, a distinct violation of California law. Furthermore, the company allegedly committed securities fraud, offering investors falsified information that claimed a 100 percent job placement rate.

The lesson in this debacle? Take care with more than the filing setup of your company. Stay on the right side of the law ethically and legally, no matter the kind of corporation for which you file. The consequences of misleading state regulatory officials and your potential customers can be severe.