Tighter Oversight of ITT

Education Department steps up scrutiny of ITT's finances in wake of SEC charges, while two states ban company's eligibility for GI benefits.

June 1, 2015
 

The U.S. Department of Education increased its monitoring of ITT Educational Services last month after the Securities and Exchange Commission filed civil fraud charges against the for-profit college giant and two executives, the company disclosed Friday.

Education Department officials have required ITT to provide cash flow projections every two weeks, along with other information about “important financial transactions,” planned school closures and anticipated new program offerings.

The company also must provide the department with a monthly roster of its approximately 51,000 students, detailing their anticipated graduation date, enrollment status and individual contact information.

“We intend to compile the requested information and submit it to the [Education Department] according to the schedule specified,” the company told investors.

ITT already was operating under the more restrictive conditions on its access to federal money known as heightened cash monitoring, which the Education Department imposed last year after the company failed to file annual financial and compliance audits on time. The company said Friday it anticipated that its “institutions will be subject to [heightened cash monitoring] until at least Nov. 4, 2019.”

The new monitoring requirements don’t change the heightened cash monitoring status, but they do provide Education Department officials more real-time information about the company’s finances.

Officials said last year that they were caught off guard when aid restrictions on Corinthian Colleges sent that company into a liquidity crisis. The department has also been criticized for not having the proper systems in place to monitor the finances of large, publicly traded for-profit education companies like ITT.

ITT also said Friday that regulators in New York and California had suspended their ability to enroll student veterans receiving GI Bill benefits in those states. And the company faces an ongoing legal challenge from the Consumer Financial Protection Bureau, which has sued ITT over allegations of predatory lending practices.

Senator Dick Durbin, an Illinois Democrat, has criticized ITT in the wake of the SEC's charges (and prior to their filing). Last week he said the company was being hypocritical by complaining that its time in court to defend itself was long overdue, while ITT simultaneously continues to prohibit students from filing suit in court against the company.

ITT's CEO, Kevin Modany, fired back at Durbin on Friday in a lengthy written statement. Modany, who along with another ITT official, was charged personally in the SEC's lawsuit, reiterated that the company would fight both the SEC and CFPB allegations. "I want to make clear that we could not more vehemently disagree with the substance and the basis for these two unjust complaints," he said.

-- Paul Fain contributed to this article.

 

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