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SEC Files Suit Against ITT Educational Services for Fraud

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

"gewg_" writes:

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."

• Some Shack Some Shack (Score: 4, Interesting) by BK on Tuesday May 19 2015, @05:27PM

  by BK (4868) on Tuesday May 19 2015, @05:27PM (#185137)

  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.

  Not that I want to defend it, but how is this any different than the hedge funds' openly paying RadioShack (covering expenses...) to declare bankruptcy in February because how their default swaps were structured? It seems like this is the same thing. They postponed defaults because postponing defaults was cheaper for the company than allowing them. The gamblers investors here don't look like angels at ITT either. Hell, as near as I can tell, students came out winners since ITT was paying down their debt.

  It seems that both actions are fraud, or both are not.

  I know that on SN, nobody wants to root for the private college or the hedge fund, but...

  --
  ...but you HAVE heard of me.

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• Re:Some Shack (Score: 0) by Anonymous Coward on Tuesday May 19 2015, @08:29PM

  by Anonymous Coward on Tuesday May 19 2015, @08:29PM (#185211)

  > how is this any different than the hedge funds' openly paying RadioShack (covering expenses...)
  > to declare bankruptcy in February because how their default swaps were structured?

  Seems like that word in bold might have something to do with it.
  Just sayin.

  Parent