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posted by cmn32480 on Tuesday May 19 2015, @04:23PM   Printer-friendly
from the money-makes-you-crooked dept.

The Center for American Progress reports:

One of the most recognizable brands in the for-profit education industry is now facing fraud charges after the Securities and Exchange Commission (SEC) filed a civil complaint in an Indiana federal court on [May 12].

The agency claims that ITT Educational Services, Inc. and a pair of executives intentionally misled investors and financial analysts about the failure of ITT's private student loan programs. The court filing asserts that ITT even went so far as to start secretly making payments on behalf of students who were in default so as to avoid having to make far larger payments to the investors who had backed the loans. It's an unusual twist on a common story in the for-profit industry, where reliance on federal tax dollars for revenue means that companies have significant incentive to manipulate statistics about how their students fare.

An SEC victory would bring relief to ITT's investors, who suffered losses when the student loan information eventually came to light and sent the firm's stock price tumbling. But ITT's students and graduates, whose inability to repay their loans on time is the prime mover behind the alleged fraud, won't see their debts alleviated or their job prospects enhanced.

The company disputed the fraud charge in a statement Tuesday, calling it an "unfair case" and welcoming the chance "to have the court clear our reputation that has been unnecessarily endangered by the SEC's action."

 
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  • (Score: 1, Interesting) by Anonymous Coward on Tuesday May 19 2015, @07:16PM

    by Anonymous Coward on Tuesday May 19 2015, @07:16PM (#185191)

    An SEC victory would bring relief to ITT's investors, who suffered losses when the student loan information eventually came to light and sent the firm's stock price tumbling.

    Oh My! Poor, poor investors... my heart bleeds for them! Clearly these people didn't get an economics degree at ITT which would or wouldn't have explained to them that investing is risky and that this is the reason you get dividends. It's a compensation for the risk you as an investor take on.
    The downside of getting a dividend is that one day the dividend may stop and even the initial investment may be lost.

    But who am I kidding... I'm sure these poor, poor investors would not be able to feed themselves if they lost the money they invested in ITT. So let's all bail out/bring relief to those poor investors!

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  • (Score: 0) by Anonymous Coward on Tuesday May 19 2015, @07:26PM

    by Anonymous Coward on Tuesday May 19 2015, @07:26PM (#185195)

    Also... free market!

  • (Score: 0) by Anonymous Coward on Tuesday May 19 2015, @10:22PM

    by Anonymous Coward on Tuesday May 19 2015, @10:22PM (#185232)

    Clearly these people didn't get an economics degree at ITT which would or wouldn't have explained to them that investing is risky and that this is the reason you get dividends. It's a compensation for the risk you as an investor take on.
    The downside of getting a dividend is that one day the dividend may stop and even the initial investment may be lost.

    Maybe an ITT economics degree would tell them this, but that would be appropriate because it's so wrong.

    Dividends are not in compensation for the risk. Dividends are merely one of the mechanisms used to transfer money from a company to the owners for whatever reason. Buying back stock is another mechanism. Risk affects the valuation of the company and thus indirectly affects the dividend/price ratio, but that's like saying the purpose of a computer is to generate heat and the better the computer you have the more heat you'll generate.