Tuesday, November 13, 2012

Another for profit, Career Education Corp., announces closings and layoffs


Only days after Career Education Corporation’s (CEC) shares plummeted and its CEO resigned, one of the nation’s largest for profit college chains announced that it would close 23 of 90 campuses and lay off 900 employees. CEC’s  Sanford Brown campus in Milwaukee is among those that will be shuttered.

The CEC has been hit hard by what a company official called "new market realities." It has seen its total and new student numbers dip by roughly 22 percent compared to last year and reported an operating loss of $110 million for the year through October.

Career Education Corp. is also facing increased scrutiny from its accreditors. The Accrediting Commission of Career Schools and Colleges, established to provide accreditation to for-profit colleges that cannot achieve regional accreditation, has asked the company to "show cause" for why accreditation should not be withdrawn from 10 of its institutions. The inquiry stems from the company's acknowledgment that it lacked sufficient documentation for some job placement data.
The CEC is no stranger to controversy.

Just a year ago its Chief Executive Officer resigned after corporate profits significantly fell and allegations were made involving inflated student placement statistics. Several lawsuits were filed by investors who claimed they were defrauded while CEO Gary McCullough was paid nearly $9.8 million in 2011.

The CEC had previously been investigated by the United States Securities and Exchange Commission for various issues of non-compliance in 2005. In January 2008, CEC reported that the SEC has closed its investigation and would take no action against the company. A Department of Justice investigation began in 1994 and was terminated in April 2007, with the DOJ declining prosecution. Another investigation on a different matter was begun by the Civil Division of the DOJ in June 2006 and is currently ongoing.

In June 2005, the U.S. Department of Education prohibited CEC from expanding until it had resolved issues with financial statements and program reviews connected with Collins College and Brooks College two CEC schools. In January 2007, the U.S. Department of Education lifted its restrictions on the company opening new schools or acquiring existing ones.

CEC's division, American InterContinental University, was placed on probation in December 2005 with its accrediting agency, SACS. The probation status was reviewed after one year, in December 2006, and extended an additional 12 months. On December 11, 2007, CEC announced that SACS has removed AIU's probation and that the university's accreditation remains in good standing.

Brooks College, a CEC owned school, was the subject of an unfavorable examination of for-profit trade schools in the CBS news magazine 60 Minutes which focused on alleged misrepresentations by admission representatives to prospective students. A CBS producer with a hidden camera visited several CEC schools in the New York area, including the Katharine Gibbs School. In June 2007, Career Education Corporation announced that it will close both campuses of Brooks College.

In January 2007, the New York State Education Department reported deficiencies at the Katharine Gibbs School's New York campus. The problems related to faculty qualifications and remedial course offerings. Career Education has since closed Katharine Gibbs School's New York campus.

The California Culinary Academy, which was purchased by CEC in 1999, was the subject of an unfavorable article in the San Francisco Weekly focusing on misrepresentations and omissions made to prospective students to enroll them in the school. According to the Chronicle of Higher Education, a lawsuit was filed over the matter.

Before this week, the Career Education Corporation has 80,000 students and more than 90 campuses that located throughout the United States and in France, the United Kingdom and Monaco. Those institutions include, among others, American InterContinental University. ("AIU"); Brooks Institute; Colorado Technical University ("CTU"); Harrington College of Design; INSEEC Group ("INSEEC") Schools; International University of Monaco ("IUM"); International Academy of Design & Technology ("IADT"); Le Cordon Bleu North America ("LCB"); and Sanford-Brown Institutes and Colleges.

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