The U.S. for profit college corporation, Career Education Corp. has settled for $10 million against the state’s claim that the education company deceived students by advertising fake job placement rates. Eric Schneiderman, New York Attorney General announced the settlement with Career Education Corp. The total settlement agreement was for $10.25 million that included a $1 million penalty with a guarantee that the school will pay $9.25 million in restitutions to students who were misled from 2009-2010 and 2011-2012. According to the Huffington Post, the company “admitted no wrongdoing.”
The investigation into the statistics and released numbers published by Career Education Corp was two years in the works. The New York Attorney General’s office found that Career Education was dishonest with its numbers, and that it falsified the job placement rates in communications to prospective students and regulators. The company used a marketing technique that boosted their enrollments and revenues in recent times. The real rates of job placement were an average of 44 percent while they actually advertised an average of 67.5%.
The schools operated and affected by Career Education Corp include Sanford-Brown Institute, Briarcliffe College, and Colorado Technical University. The career services employees received bonuses when they achieved job placement rates, and so employees were incentivized to cut corners in documenting how many students got jobs after graduation. Incentivized employees lied and fudged the truth. The settlement goes on to say that high-authority managers at career services encouraged gimmicks to boost the placement numbers. In this way, the college avoided scrutiny from accrediting groups.
Other problems outlined by the Attorney General’s office said that Career Education Corp didn’t notify students that “certain degree programs wouldn’t allow them to take state licensing exams after graduation, significantly hindering a students ability to get jobs in fields like medical ultrasound.” When auditors looked into the situation, there were so many issues that the CEO Gary McCullough resigned. And 15 career services employees were fired. McCullough received more than $3.6 million in severance.
A spokesman for Career Education Corp commented, “this agreement closes an important chapter and allows us to move forward with a heightened focus on student outcomes,” Spencer said. “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.”
An independent auditor will now work with the school to make all significant changes to get the school back on track towards servicing students and helping them to be prepared for their careers. This settlement is one of the largest restitution funds for students defrauded by a for-profit college and enrollments at Career Education Corp have plummeted according to securities filings.