Career Education Corp. to Pay $10-Million in Settlement With N.Y. State Over Job Data

August 20, 2013

Career Education Corporation will pay more than $10-million in a settlement with the State of New York to resolve an investigation into its misrepresentation of data about the job placements of its graduates.

The settlement was announced on Monday by New York's attorney general, Eric T. Schneiderman, who is among the attorneys general of several states who are now scrutinizing Career Education and other for-profit higher-education companies.

In the settlement, the company also agreed to abide by a new set of guidelines for reporting its job-placement statistics which go beyond what accreditors, states, and the federal government require: For three years, the company will hire an outside company to verify the job-placement data recorded by its employees.

The new guidelines also require Career Education to wait until graduates have worked in a job for at least 18 days before counting them as placed, "to ensure that job placements are real and provide permanent employment," according to a news release from Mr. Schneiderman's office. The rules that accreditors set allow a college to count graduates as being placed in a job after just one day of employment, the news release says.

Career Education first disclosed the misrepresentation two years ago, while responding to demands for data from investigators for the New York attorney general's office. The investigation found that the company had inflated its job-placement rates by, among other tactics, counting students as "employed" for taking part in one-day health fairs, some of which were held at the request of the company.

The investigation also found that in the 2008-9 and 2009-10 academic years, some of company's colleges in New York State reported job-placement rates of 54.9 percent to 80.2 percent when in fact the figures were 24.1 percent to 64.1 percent. The company's chief executive at the time, Gary McCullough, initially blamed the discrepancies on "rogue" employees. Within four months, with the company also facing declining enrollments and falling profits, Mr. McCullough resigned.

In New York, Career Education operates several Sanford-Brown Institutes and Briarcliffe College campuses. Its two institutions with extensive online operations, American Intercontinental University and Colorado Technical University, also operate there.

Under the settlement, Career Education will pay $9.25-million in restitution to students and a $1-million penalty.

The settlement "allows us to move forward with a heightened focus on student outcomes," said Mark Spencer, the company's director of corporate communications, in a written statement. "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."

Yet scrutiny of the company is hardly over. As it reported to investors this month, it remains under investigation by attorneys general in Florida, Illinois, and Massachusetts, and is facing several lawsuits filed by former students.