Foster City-based Internet marketing company QuinStreet has agreed to hand over one of its websites to the federal government and pay $2.5 million to settle claims it violated consumer protection laws by deceptively marketing for-profit colleges to military veterans.
California Watch first reported earlier this month that Kentucky Attorney General Jack Conway was leading an investigation of QuinStreet together with attorneys general in several states.
The investigators claimed QuinStreet websites were preying on veterans by giving the appearance of being owned or endorsed by the government or the military, when in fact the company was using the sites to generate leads for the company's for-profit college clients.
Under the terms of the voluntary settlement agreement announced yesterday, QuinStreet will transfer the website GIBill.com to the Department of Veterans Affairs and will post several disclosures on the hundreds of other websites it operates.
"We felt it was important to do this," Conway said. "We’ve had some of these schools engage in false and deceptive advertising to try to get leads and to try to get their hands on these benefits. ... What I just don’t understand is, when did taking taxpayer dollars to pay for education of those who have served us – when did that cease to be a public trust?"
The amount of federal military education benefits going to for-profit colleges has increased significantly in part because the benefits don't count toward the cap on the percentage of revenue a college can get from federal sources.
According to company filings, QuinStreet generates nearly half of its business from education clients, and nearly all of its education clients are for-profit education providers. The company operates an estimated 700 education websites, Conway said, including more than a dozen military-related websites that advertise "military friendly" colleges and "GI Bill schools."
QuinStreet collected and sold people's personal information as leads to for-profit college clients, Conway said.
A QuinStreet official did not respond to a request for comment. But in a filing posted yesterday with the U.S. Securities and Exchange Commission, the company said it had cooperated with investigators in order to provide more clarity and to avoid a potentially lengthy legal process. The company denied wrongdoing.
"QuinStreet, long a leader in ethical marketing practices online, does not engage in deceptive marketing practices and does not believe that its websites were misleading prior to the Agreement," the filing said.
Conway said his office began looking into QuinStreet nine or 10 months ago after hearing complaints about GIBill.com. Together with Holly Petraeus, assistant director for service member affairs at the Consumer Financial Protection Bureau, Conway's staffers examined more than 8,000 emails from people who had submitted personal information through GIBill.com.
"It was pretty clear they thought they were interacting with government," Conway said. "You could see that they were assuming that the website had access to veterans benefit information."
Visitors to military-related QuinStreet sites could search for schools that fit their interests, but the sites would provide lists featuring only QuinStreet's for-profit clients, Conway said.
Amy Fairweather, director of policy for the San Francisco-based nonprofit veterans group Swords to Plowshares, said QuinStreet's marketing tactics were disheartening.
"It’s just reprehensible to me that people are sort of seeing dollar signs and swooping in and taking advantage of people for their own ends," she said. "It’s taking advantage of a vulnerability ... they’ve been busy in the military, they’ve been at war."
Under the agreement, QuinStreet agreed not only to give up GIBill.com and related Facebook and Twitter accounts within 10 days but also to stop using the term "GI Bill" in any of its URLs. QuinStreet also operated the sites militarygibill.com and gibillamerica.com, both have which have already been taken down.
The company still has 15 other military-related education websites that QuinStreet will have to modify in the next several months.
Each site requires a disclaimer that it is not affiliated with any government agency. Each has to refer visitors to the official U.S. government website for veterans. Each needs a frequently answered questions page that describes how the website collects, uses and discloses personal information.
People who represent themselves as military bloggers for the websites have to disclose their retired status and list information about their branch and dates of service.
For the hundreds of nonmilitary-related education websites QuinStreet operates, the company can't imply that the sites are neutral or unbiased unless they have information from a truly independent source. The sites also can't make claims that schools are the "best" or "top" or "right for you" without independent sourcing.
Any of the states that signed on to the deal can go after QuinStreet if it violates the terms of the agreement, but only after giving the company time to respond.
The states are Alabama, Arizona, Arkansas, Delaware, Florida, Idaho, Illinois, Iowa, Kentucky, Massachusetts, Mississippi, Missouri, New York, Nevada, North Carolina, Ohio, Oregon, South Carolina, Tennessee and West Virginia.
California did not participate in the agreement. Conway said he had talked to Attorney General Kamala Harris about the issue and that California was very close to signing on, but that Conway decided to move forward with the 20 states that agreed to participate right away.
A spokeswoman for Harris' office did not respond to a request for comment.
The $2.5 million will be split among the 20 states to cover the costs of the investigation and negotiation process. The amount represents what QuinStreet made off of GIBill.com last year, Conway said.
QuinStreet officials said in the filing that GIBill.com has never been a material contributor to the company's revenue, which totaled $403 million in 2011, according to its annual report. The company told shareholders that the new disclosures and disclaimers could negatively affect the number of leads it gets, but that the company doesn't expect the effect on revenues to be material.
Conway is leading a group of 30 states examining the for-profit college industry, and the group will continue to look at lead generation, recruitment practices, false advertising and more, he said.