Career Education Corp. Settles for $10 Million After Investigation On Inflated Job Placement Rates

We all tell lies every once in a while. But what happens when lying extends beyond people? What happens when companies and corporations lie to your face? What happens when educational institutions lie to your children to give a false sense of serenity, with the only purpose in mind being to increase their enrollment and revenue records?

That is exactly what happened in New York, and a settlement was just reached on Monday, between one of the largest U.S. for-profit college corporations and New York Attorney General Eric Schneiderman, on behalf of the state of New York after a more than two-year investigation by the Attorney General’s office.

Career Education Corp. agreed to a $10.25 million settlement agreement, $1 million of which is a penalty and assurances that the school will create a restitution fund worth $9.25 million, which will go towards the students who were victims of these false statistics and facts during the 2011-2012 school year. However, although Career Education agreed to this settlement agreement, they admitted no wrongdoing.

The New York Attorney General’s office were investigating “misleading advertisements” and “inflated job placement statistics” found at Career Education Corp., which operates over 90 campuses world-wide. The Chicago-area company, as well as other for-profit colleges are under heightened government scrutiny over the past several years, as the result of the increase in student debts and lack of jobs for newly-graduated students.

Career Education produced false statistics in their advertisements, leadings prospective students to believe that their job placement rates were between 55 and 80 percent, whereas in reality, their job placement rates were only between 24 and 64 percent. As a result of these inflated job placement numbers, Career Education was able to boast a record high in enrollments and revenues. But at what expense?

The other schools that puffed up statistics were Sanford-Brown Institute, Briarcliffe College, and online enrollments through American intercontinental University and Colorado Technical University.

How could a school just ignore their morals and induce students to act on a false future, you may be asking? We’re not sure, but the fact that the career services employees would earn bonuses based on certain job placement rates doesn’t help.

For instance, when determining whether a student “placed” into a job after graduation, some employees would consider a “placement” if the student participated in a one-day community health fair, regardless of whether that student was hired after the job fair. One criminal justice graduate was a data processor at a parking-ticket company, and was considered “placed” in the field simply because the parking ticket data processing deals “with the courts,” according to settlement documents.

The settlement continues, “high-level” career services managers at company headquarters “explicitly condoned and even encouraged” these incentive-based tactics to boost the placement rates.

Career Education was able to avoid scrutiny from outside college accrediting groups to meet certain thresholds because of their high job numbers (which were only high because they inflated them). The reason this is important is because the college wants to keep their federal student loan and grant money, so they must remain accredited.

However, a school may not be accredited in all the fields they offer. In other words, a student may be able to take a course or major in a certain field at a school, but that doesn’t necessarily mean that the program is accredited with the proper state institution that recognizes the degree as valid. So, Career Education advertisements were also found to fail to inform the students that degrees from certain programs at their school would not allow the student to take a state licensing exam after graduation, which would create a sever delay to the student’s ability to directly enter the workforce. For instance, a student graduating from a Career Education college would not be able to enter the medical ultrasound field.

Since the subpoena was issued by the New York Attorney General’s office in 2011, Career Education has hired an outside legal firm to audit its career placement office, and the auditors found widespread problems. Not long after, Career Education’s chief executive, Gary McCullough, resigned in November 2011, as did the loss of 15 career services employees.  McCullough still received more than $3.6 million in severance.

Mark Spencer, Career Education Corp. spokesman, wrote in an email after the settlement Monday that the company was “pleased to have reached a settlement. This agreement closes an important chapter and allows us to move forward with a heightened focus on student outcomes. We remain committed to continually advancing our culture of adherence to legal, regulatory and accreditor requirements, and we’re a stronger organization for having addressed these concerns.”

Career Education also agreed to hire an outside auditor to independently verify all job placement rates for the next three years at its New York schools, and then they are to report back to the New York Attorney General’s office. As far as the state of New York is concerned, Career Education must provide new disclosures for the New York programs that clearly state job placement rates, and must phase out any New York programs which the degrees will not be valid for students that want to take licensing exams after they graduate.

Finally, Career Education is providing a list of the students who attended certain programs in the state of New York from the 2009 to 2012 school years, and they will be entitled to their portion of the $9.5 million settlement fund stemming from the settlement.

This settlement is one of the largest restitution funds created for students who were defrauded by a for-profit college. In 2007, Corinthian Colleges Inc. agreed to a $5.8 million restitution fund offered to them by the California Attorney General’s office.

Enrollment has plummeted down to below 76,000 at the end of last school year, compared to the over 114,000 student figure from the end of the 2010 school year. Maybe it’s time Career Education starts fluffing up it’s statistics again.

What do you think about this article? Feel free to comment on this blog post. For more information, contact a Gacovino Lake attorney at 1-800-246-HURT (4878).

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