State Alleges Fraud in Suing United Education : Consumers: The suit claims that a unit of the company misled students in ads and offered shoddy education. The Encino firm had no comment.

California Atty. Gen. John Van de Kamp has slapped United Education & Software with a $24-million lawsuit that says one of the institutions run by the Encino-based trade school operator misled its students and provided shoddy education.

The consumer protection action, filed Wednesday in Los Angeles Superior Court, seeks $22 million in restitution, a $2-million fine and an injunction against National Technical Schools, a Los Angeles computer mail-order school run by United Education & Software.

The complaint says National Technical Schools violated state advertising laws by falsely claiming that graduates of its program would qualify for entry-level computer jobs, that student loans wouldn’t have to be repaid until the graduates obtained jobs, that the school’s dropout rate was far below the actual dropout rate of up to 91% and that students would receive a free computer. It also said students were promised prompt assistance by dialing a toll-free number but that calls were often returned days or weeks later.

In a prepared statement, Van de Kamp blasted the school for preying on low-income students and victimizing taxpayers who ultimately pay for government-guaranteed student loans that go into default. “This flagrant abuse of the government-guaranteed student loan program must end immediately, and full restitution must be paid,” he said.

A United Education & Software spokesman said the company would not comment on the attorney general’s action until its lawyers finish studying the suit. United Education & Software’s president and chief executive, Aaron Cohen, is also named as a defendant.

Jerry Smilowitz, deputy attorney general, said the state would immediately seek a temporary injunction against National Technical Schools, preventing the school from continuing its “misrepresentative practices” until the suit goes to trial. The $22 million in restitution sought by the state would cover all loans taken out by the 9,800 students who enrolled in the school since August, 1987. The money would be repaid to students, lenders and agencies that guaranteed the loans.

Smilowitz declined to say whether any of United Education & Software’s 25 other schools were under investigation. But, he said, “We are looking at the (United Education & Software) enterprise as a whole.”

The complaint is the latest setback for the troubled trade school operator. A U.S. Department of Education audit released last month found that students attending National Technical Schools from August, 1987, to November, 1988, didn’t qualify for government-guaranteed loans because the school didn’t meet minimum federal standards.

The audit said courses at National Technical Schools were too short, the school didn’t make proper refunds on loans after students dropped out, students who were academically unprepared were admitted and costs were misrepresented.

In response to the audit, the California Student Aid Commission, the state agency that administers the federal student loan program, banned National Technical Schools from receiving new federal loan money. The U.S. District Court in Los Angeles has since granted a temporary restraining order to United Education & Software, preventing the state agency from implementing the ban until a hearing is held Nov. 13.

The company last week said it and a Minnesota student loan agency, the Higher Education Assistance Foundation, agreed to suspend any legal action against each other until the Department of Education makes a final decision about whether National Technical Schools should continue to be eligible for the student loan program.

United Education & Software is also embroiled in a lawsuit stemming from problems uncovered last year at its former student loan processing subsidiary.

A federal probe found widespread bungling at the loan processing unit, including failure to notify delinquent borrowers. Bank of America said that it and several other banks that backed the loans could lose as much as $650 million because the federal government said it would not honor the loans. The banks have since sued Bank of America, which was the trustee for the loans, and United Education & Software was named as a third-party defendant.