NJ Cosmetology School Under Fire for Fraud, Failure to Meet State License Requirements
Acting Attorney General Matthew J. Platkin announced June 7 that the State of NJ has filed a lawsuit against New Jersey cosmetology school Capri Institute and, in a separate action filed with the State Board of Cosmetology and Hairstyling (“the Board”), is also seeking the immediate suspension of the school’s licenses to operate in the state, amid allegations that the school defrauded students, engaged in substandard business practices that financially harmed students, and failed to meet regulations and curriculum requirements for cosmetology schools.
The actions against Capri Institute of Hair Design, and related entities that operate the school’s programs at campuses in Paramus, Clifton, Kenilworth, and Brick, stem from an investigation launched by the Division of Consumer Affairs after Capri abruptly closed in December 2021 with less than 48 hours prior notice to its roughly 250 enrolled students.
According to the State’s allegations, in the weeks following the shutdown, the school refused to respond to students' questions about the closure and refused to provide students with their official transcripts or tuition refunds, making it virtually impossible for them to transfer to another cosmetology school.
Despite representing to students and advertising on its website that campuses would reopen in 30 days, it was 45 days before Capri began “haphazardly” reopening certain campuses, according to the State’s allegations.
Ultimately, Capri restored classroom-based instruction at three campuses but failed to reopen clinics attached to the schools, thereby violating curriculum requirements for beauty schools in New Jersey, and preventing students from obtaining the clinical hours required to become licensed as cosmetology and hair styling professionals in the state. The fourth Capri campus, in Brick, remains closed.
“Capri’s students paid thousands of dollars in tuition – or incurred thousands of dollars in student loan debt – in an effort to obtain a professional cosmetology and hairstyling license to improve their quality of life. As a result of the school’s alleged unlawful conduct, that dream has been put on hold – perhaps permanently,” said Cari Fais, Acting Director of the Division of Consumer Affairs. “The actions announced today [June7] seek to hold the defendants accountable and provide relief and a pathway forward for affected students. We will continue working with our professional and occupational licensing Boards to protect consumers from this kind of financial fraud and abuse.”
On December 1, 2021, teachers and staff at Capri locations verbally advised students that Capri was shutting down its campuses on December 3, 2021.
Following a flood of complaints from students, the Division’s Office of Consumer Protection and the Division’s Enforcement Bureau for the professional licensing boards launched a joint investigation that led to the school’s actions.
The State is pursuing those actions in two ways:
- a lawsuit filed in Superior Court in Union County on Friday (June 3) that alleges Capri and its associated entities violated the Consumer Fraud Act and advertising regulations.
- a Verified Complaint filed before the Board on Friday, seeking the immediate, temporary suspension of the Board-issued licenses that allow Capri to operate programs at the four campuses.
In the Superior Court action, the State alleges that Capri Corporate Management, Inc., Capri Training Centers, Inc. (a.k.a. Capri Institute and Capri Institute of Hair Design), and Capri’s president Lorelei K. Muenster violated the State’s Consumer Fraud Protection Act and advertising regulations by engaging in conduct that includes:
- systematic and continuing failure to provide students with Board-mandated books and supplies that were included in the cost of tuition.
- failure to provide prior written notice to students or the Board of Capri’s closure.
- failure to provide refunds or official transcripts to students after Capri announced its closure.
- failure to maintain its telephone lines or answer and/or respond to students’ questions about the closure.
- failure to provide timely and accurate records to the Board regarding the number of hours students had completed.
- failure to properly maintain the facilities at the Brick and Kenilworth campuses.
- failure to refund students who had overpaid on their accounts.
- misrepresenting their operating status to the public.
- reopening programs at three campuses that failed to meet Board curriculum requirements.
- advertising on the Capri website that federal tuition assistance is available to students after Capri lost its eligibility to obtain such funding from the federal Department of Education.
- failure to inform students before they returned to Capri that they would have to pay out of pocket for tuition that was no longer covered by federal financial aid even though Capri lost the funding as a result of its own substandard business practices.
- advertising on the Capri website that classes would start on January 11, 2022, when all four campuses remained closed through that date.
In addition to seeking restitution on behalf of defrauded consumers, the State’s suit seeks to impose the maximum statutory civil penalties for the defendants’ alleged unlawful and deceptive commercial practices, misrepresentations, and advertising violations, to terminate Capri’s business registration, to recover attorney’s fees and investigative costs, to bar any ongoing or future violations of the CFA and advertisement regulations, and to personally find Lorelei K. Muenster responsible for Capri’s violation of the CFA and advertising regulations.
In the Verified Complaint filed before the Board, the State alleges that Capri is engaging in professional or occupational misconduct by:
- failing to provide a clinical education component at the three reopened Capri school locations, in violation of Board curriculum requirements.
- canceling the bonds it had posted with the State – in the amount of $40,000 per campus –effective June 30, 2022, in violation of Board regulations.
- failing to comply with a subpoena ordering Capri’s principal, Muenster, to appear for sworn video testimony before the Board for an investigative inquiry.
In addition to seeking immediate, temporary suspension of the licenses held by Capri, pending a plenary hearing in the Office of Administrative Law, the State is asking the Board to mitigate the harm Capri visited upon its vulnerable student population through the following remedial measures:
- ordering Capri to provide to the Board a list with all known contact information of any current student or prospective student that includes the specific amount they paid to Capri and the manner in which those funds were paid.
- ordering Capri to provide without cost updated transcripts reflecting all completed credit hours to any student who requests it and to provide the Board with copies of those transcripts.
- having Board staff, with assistance of additional staff from the Division, contact each student to inform them of the temporary suspension of Capri’s licenses and to assist their transition to another cosmetology and hairstyling school and, ultimately, licensure by the Board.
- relaxing or waiving (as permitted by law) any Board rule or regulation applicable to student transfers as to minimize any harm visited upon students by Capri’s conduct.
Investigators in the Office of Consumer Protection within the Division of Consumer Affairs conducted the investigation for the Division.
Investigators in the Enforcement Bureau within the Division of Consumer Affairs conducted the investigation on behalf of the Board.
Deputy Attorneys General Renee Cadmus and Ana Atta-Alla of the Consumer Fraud Prosecution Section within the Division of Law’s Affirmative Civil Enforcement Practice Group are representing the State in the matter before the State Superior Court.
Assistant Section Chief David Puteska, of the Professional Boards Prosecution Section within the Division of Law’s Affirmative Civil Enforcement Practice Group, is representing that State in the matter before the Board.