Career Education has agreed to reimburse $9 million to 5,000 former students. This comes after New York’s attorney general accused the for-profit educational company of inflating its success rate in placing graduates into jobs in an effort to get students.
New York Attorney General Eric Schneiderman announced the settlement totals $10.25 million, which includes a $1 million penalty and assures that the school will establish a $9.25 million restitution fund for students who were misled from the 2009-2010 school year through the 2011-2012 school year. The company has admitted no wrongdoing in the dispute.
The state of New York’s claim focuses on the company systematically deceiving students by advertising bogus job placement rates at its career-oriented schools. According to the findings included in the court settlement documents, Career Education lied not only to prospective students but also to regulators when advertising the percentage of students who were successfully being placed in jobs after graduation from the school’s programs. It was a marketing technique that allowed the company to boost enrollment and revenues to record highs. The settlement also claims that the company advertised job placement rates of 55 to 80 percent at its New York schools when rates were actually ranging from 24 to 64 percent.
Schools included in the dispute were Sanford-Brown Institute, Briarcliffe College and the online learning institutions American Intercontinental University and Colorado Technical University, according to settlement documents. Career services employees at the company were given bonuses if they could achieve specified job placement rates, which created incentives for employees but cut corners when it came to documenting how many students actually found employment after graduating, according to court records.
As an example, career services counted a student as being placed if they participated in a one-day community health fair even if they weren’t hired at the fair. Records indicate that a criminal justice graduate who worked as a data processor for a company that handled parking tickets was considered as employed in his field because the graduate worked with the courts when processing parking ticket data, the documents indicate.
In the settlement, there are allegations that “high-level” career services managers at the company’s headquarters “condoned and even encouraged” gimmicks that were designed to boost placement rates. By inflating the job numbers, the educational company could avoid scrutiny from outside college accrediting groups, which require schools to meet certain requirements. Accreditation is detrimental in a school remaining eligible for federal grant funds and for federal student loan money, which is crucial, especially to the for-profit firms.
In the settlement, it alleges that Career Education Corp. also failed to tell students that degrees from certain programs would not enable them to take the appropriate state licensing exams after graduation, which was a significant hindrance to the ability to get jobs in fields like medical ultrasound. The job placement scandal has led to major changes at the company. After the New York Attorney General’s office issued a subpoena in 2011, the company hired an outside legal firm to audit its career placement office. Reports indicate that auditors found countless problems that led to the resignation of the company’s chief executive, Gary McCullough in November 2011 and culminated with 15 career services employees being fired. Regardless, records indicate McCullough received $3.6 million severance.
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