Newport College Strung it Along, Biz Says

(CN) - California-based Newport University tricked a Wyoming company into buying it for $165,000, while selling itself to a third party on the sly, the frustrated buyer, Newport Services, claims in Cheyenne, Wyo., Federal Court.

Newport Services Inc. (NSI) formerly operated as an unaccredited, post-secondary, degree-granting institution in Wyoming under the name Newport International University, according to the complaint.

When Wyoming passed a law in 2006 requiring NSI to become accredited with an institution approved by the U.S. Department of Education, NSI sued and lost and agreed "to wind up its practice" in Wyoming, the complaint states.

It decided to move to California.

As NSI was moving, it says, it learned that Newport University was for sale.

Defendant Juan F. Castro, "owner, officer and director" of Newport University, agreed in March 2009 to sell his school for "approximately $165,000 in the form of cash payments and debt assumption," according to the complaint. NSI also was to pay Castro a $20,000 "consulting fee," the complaint states.

But on March 17 that year, NSI claims, it "learned the College of Communication Arts had entered into a prior sales agreement with Castro and Newport to purchase Newport." NSI says it also learned "that CCA intended to initiate legal action against Newport and Castro to compel Newport's sale to CCA."

NSI says that neither Castro nor Newport University disclosed their contract with CCA. NSI says it also "discovered an additional creditor's claim which may have attached to Newport in the amount of $25,151," in addition to more than $11,000 in debts it already had paid.

NSI says it also "discovered the existence of a Florida corporation also named Newport University, Inc., which Castro incorporated in Florida."

NSI says it went ahead with its purchase anyway, and "deposited $5,000 with Newport on March 27, 2009 so that Newport could resolve its creditor's liabilities."

It says it handed over another $9,000 on April 13, "pursuant to Newport's request, so that Newport could resolve its creditor's liabilities."

Then, NSI says, it learned on April 14 "that Castro and Newport were negotiating the sale of Newport to a third party."

Somewhat inexplicably, NSI claims it handed over another $1,000 to Castro on May 5, 2009, "so that Newport could resolve its creditor's liabilities."

Then it learned "that a third party had represented he was purchasing Newport within the week," NSI says.

NSI says it lost more than $375,000 on the whole deal. "NSI presently does business in Wyoming as an administrative servicing company anyway."

It demands damages for fraud and breach of contract. It is represented by Galen B. Woelk with Aron and Hennig of Laramie, Wyo.

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