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California Sues Bridgepoint to Get Data on Sales Tactics

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July 24 (Bloomberg) -- Bridgepoint Education Inc., the college company majority-owned by Warburg Pincus LLC, was sued by California for information about its sales efforts, in the state’s investigation of the for-profit education industry.

Bridgepoint, based in San Diego, has refused to produce data from a computer system that collects information about its telemarketing efforts, state Attorney General Kamala Harris’s office said today in a petition filed in state court in Sacramento.

Harris subpoenaed the information in January, according to a court filing. In today’s filing, she asked the court to order the company to produce it.

“This information is critical to evaluating whether Bridgepoint has violated California law by making false or misleading statements during telephone calls, including telemarketing calls and in other marketing and sales communications,” Deputy Attorney General Angela Munoz said in the petition, a copy of which was supplied by her office.

For-profit colleges have faced scrutiny by Congress and state and federal prosecutors who allege that the schools use high-pressure sales tactics to mislead applicants about costs and job-placement, leaving them with loans they can’t repay.

The U.S. Senate Education Committee found “exorbitant tuition, aggressive student recruitment and abysmal student outcomes,” Senator Tom Harkin, an Iowa Democrat, said last year.

400,000 Recordings

Bridgepoint digitally records its telemarketing calls and has stored more than 400,000 recordings of calls to Californians, Munoz said in the petition.

Company lawyers argued it would be unduly burdensome to comply with the subpoena for those records because students would have to notified, she said.

“Bridgepoint further argues that providing widespread notice would be both bothersome and harmful to Bridgepoint’s reputation, potentially causing a “public relations disaster,” Harris said.

The company has offered to produce 800 recordings that have been selected, reviewed and redacted, Munoz said.

Marianne Perez, a Bridgepoint spokeswoman, declined to comment on the state’s action.

Bridgepoint fell as much as 1.4 percent on the news. The stock rose 4 cents to $16.32 at 4:07 p.m. in New York Stock Exchange composite trading.

The company disclosed in January that it had received a subpoena from California officials, and has received similar investigative demands from Iowa, North Carolina and New York, according to the petition.

The case is People of the State of California v. Bridgepoint Education Inc., 34-2012-00147260, California Superior Court, Sacramento County (Sacramento).

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net.

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net.

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