April 4, 2016

Massachusetts Sues ITT Tech For Misleading and Harassing Students


Massachusetts Attorney General Maura Healey has sued troubled for-profit college giant ITT Tech for alleged deceptive practices and abuses of students in the state. Healey filed the suit last Thursday in Norfolk, MA, Superior Court, and her office disclosed the action in a press release today, which says that ITT, from 2010 to 2013, was at its Norwood and Wilmington, MA, locations “engaging in unfair and harassing sales tactics and misleading students about the quality of its Computer Network Systems program, and the success of the program’s graduates in finding jobs.”

The complaint asserts that a graduate of the Computer Network Systems program has said of ITT, “[T]hey get so much of your money invested they make it impossible to withdraw without a huge financial loss. They treat students as purely a source of income.”

The release quotes Healey as saying, “These students were exploited and pressured to enroll with the promise of great careers and high salaries, but were instead left unable to repay their loans and support their families.”

According to the complaint, ITT’s admissions representatives told prospective students that 80 to 100 percent of graduates obtained jobs in or related to their field of study, when in fact actual placement rates were 50 percent or less, and those rates included graduates with jobs outside their field of study, internships, short-term jobs, selling computers at a big-box store — in fact any job that required the use of a computer.

In explaining to Healey’s office why ITT counted as placed “a facilities manager whose routine tasks included unclogging drains and ordering janitorial supplies,” ITT’s Vice President of Career Services said, “I see bullets [on the job description] that support the fact that there would be IT systems within the facility” and that “somebody is doing IT work to ensure that those systems are up, operational….”

Healey alleges that ITT admissions representatives were expected to call up to 100 prospective students per day “and were publicly shamed or fired if they failed to meet their quotas.” In addition, “Admissions representatives pressured prospective students to enroll regardless of whether they were likely to succeed in the program.”

Moreover, according to the press release, “ITT also advertised and promoted hands-on training and personalized attention through its program, but students said their experience involved the use of outdated technology, absent teachers, or being told to ‘Google’ the answers to questions.”

Healey also alleges that ITT “steered” students to high-interest student loans that they could not afford to repay.

Healey is seeking to recover from ITT civil penalties of $5000 per violation, injunctive relief, and restitution, including the return of tuition and fees to students.

Last year ITT received $664 million in taxpayer money from federal student grants and loans nationwide, down from a peak of $1.1 billion a few years ago.  ITT has some 130 campuses, with some 50,000 students, in 38 states.

But ITT has a troubling record.

Last May 12, the Securities and Exchange Commission sued ITT, its CEO Kevin Modany, and ITT’s former CFO, charging that the company “made various false and misleading statements and omissions to defraud ITT’s investors by concealing the extraordinary failure” of its student loan programs. The SEC charged that ITT management “engineered a campaign of deception and half-truths that left ITT’s auditors and investors in the dark concerning the company’s mushrooming obligations” regarding its private student loan program.

The Consumer Financial Protection Bureau also has sued ITT, charging in a 2014 complaint that “ITT subjected consumers to undue influence or coerced them into taking out ITT Private Loans through a variety of unfair acts and practices designed to interfere with the consumers’ ability to make informed, uncoerced choices.”

The attorney general of New Mexico has sued ITT for alleged “unfair, deceptive, and unconscionable acts and practices … in connection with the advertising, marketing, and selling of educational services” to prospective students. At least twelve more state attorneys general — from Arkansas, Arizona, Connecticut, Idaho, Iowa, Kentucky, Missouri, Nebraska, North Carolina, Oregon, Pennsylvania and Washington — have been probing ITT.

A federal whistleblower lawsuit unsealed in January added more allegations of awful abuses, such as ITT admitting a blind student to a computer networking program that was unsuited to assisting the student, who dropped out within weeks and got stuck with the bill.

ITT denies it has done anything wrong and is contesting the pending charges.

In February ITT settled a series of lawsuits brought by shareholders that charged ITT with various securities law violations.  Under the agreement, approved preliminarily by Manhattan federal judge J. Paul Oetken on Jan. 29 but still subject to objections by investors, ITT will pay lawyers for the plaintiffs $1.1 million and commit to a series of “corporate governance reforms.

The company is in precarious financial condition. ITT stock trades today at about $2.94 a share, down from $92.30 in July 2011. In October the U.S. Department of Education put delays and new restrictions on the delivery of student aid to ITT, after the Department concluded that ITT had failed to properly account for federal aid money since at least 2009 and failed to comply with prior Department orders to strengthen financial controls. The Department had already, in 2014, placed ITT on a probationary “heightened cash monitoring” status and required the company to post an $80 million letter of credit.

But every single day more students across the country enroll at ITT Tech, lured by the taxpayer-financed grants and loans that the U.S. Department of Education continues to provide.

UPDATE 04-04-16 1:24 pm: ITT Tech released a statement reading in part:

ITT Educational Services, Inc. (ITT/ESI) is disappointed that the Office of the Massachusetts Attorney General recently filed suit. The litigation follows the Office’s wide-ranging fishing expedition that lasted for more than three years. Although ITT/ESI cooperated fully in the investigation, and presented evidence that its conduct was lawful, the Attorney General’s Office has suddenly elected litigation over working with ITT/ESI to address any legitimate concerns it might have about ITT/ESI’s practices.

ITT/ESI also regrets that the Attorney General’s Office, despite its lengthy investigation, provided no notice to ITT/ESI of many of its accusations until days before filing suit. Even then, the Attorney General’s Office withheld all but the vaguest description of its claims and denied ITT/ESI any meaningful opportunity to provide further information that could have addressed those issues.

Moreover, some of the claims rest on a biased and selective portrayal of the facts. For example, the complaint purports to identify “actual” placement rates for graduates of the ITT Technical Institutes but omits any explanation for how the Office calculated those rates. It appears that the Attorney General’s Office generated its own unreliable placement rates based on incomplete information it collected by surveying a small subset of individuals many years after they graduated. ITT/ESI has contemporaneous documentation of the placement rates and has painstakingly explained to the Attorney General’s Office how that documentation was derived and collected.

The complaint also quotes testimony out of context and disregards key facts demonstrating the institution’s genuine commitment to securing outstanding job opportunities for its graduates and to producing reliable and well-documented placement statistics. ITT/ESI is confident that the facts will demonstrate that its policies and practices were sound, and that its representations were both fair and truthful.

The Attorney General’s action is all the more disappointing because it extends Massachusetts’ woeful record of hostility toward career colleges that train non-traditional and underserved students. At a time when Massachusetts is experiencing a severe shortage of technically-trained professionals, this action will have a negative effect on the education and employment climate in Massachusetts.

ITT/ESI will dedicate the necessary resources to defend ourselves against these claims; and the ongoing focus of our more than 10,000 employees across the nation remains on assisting our students’ efforts to complete their programs of study successfully and obtain employment in their chosen fields. We are proud of our work over the last 47 years, and we intend to continue our mission of helping people improve their lives through the pursuit of high-quality, career-based education.

This article also appears on Huffington Post.