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More Scrutiny for Career Education Corp.

August 3, 2005

Career Education Corporation quietly announced Monday that officials in Pennsylvania and New Jersey had begun investigations of campuses the company owns in those states. The revelation comes on the heels of a finding last month by a California agency that a Career Education campus there had "willfully" misled students to get them to enroll.

Buried in its quarterly filing (Adobe Acrobat required) with the U.S. Securities and Exchange Commission was news that Pennsylvania's attorney general had alerted the for-profit provider of higher education that it was reviewing the business practices of Lehigh Valley College, which was formerly Allentown Business College.

Career Education, which has managed the college since 1995, said that Pennsylvania's Bureau of Consumer Protection had requested documents "relating to Lehigh's recruitment practices, student complaints, and financial aid policies and procedures."

The company said that the investigation seemed to have been prompted by a series of negative articles that The Morning Call of Allentown published last month, which accused the college of engaging in misleading sales tactics, among other things. Career Education, which denied the newspaper's charges, said in its regulatory filing Monday said that the company planned to cooperate fully with the attorney general's investigation.

The SEC filing also reported that the New Jersey Department of Labor and Workforce Development had followed up on a highly critical "60 Minutes" report -- which focused in part on the company's Sanford Brown Institute campus in Iselin, N.J. -- by demanding in May that the company explain the issues raised in the television report and argue convincingly that the campus "should be allowed to continue to operate." Career Education said in its filing that the college had submitted a formal response to the New Jersey agency last month.

The company faces a long list of other federal and state regulatory inquiries and student and securities litigation, Career Education acknowledged in its filing.

 

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