Two for-profit college executives have been charged with fraud
(Wikimedia Commons)
The SEC has announced fraud charges against the former-CEO and current CFO of for-profit college ITT Educational Services.
And now shares of ITT are crashing.
In early trade on Tuesday, shares of ITT were down as much as 8% after the SEC announced charges against former ITT CEO Kevin Modany and its current CFO, Daniel Fitzpatrick, for concealing the performance of some student loans guaranteed by the company from investors.
In a release, the SEC said:
The SEC alleges that the national operator of for-profit colleges and the two executives fraudulently concealed from ITT’s investors the poor performance and looming financial impact of two student loan programs that ITT financially guaranteed. ITT formed both of these student loan programs, known as the “PEAKS” and “CUSO” programs, to provide off-balance sheet loans for ITT’s students following the collapse of the private student loan market. To induce others to finance these risky loans, ITT provided a guarantee that limited any risk of loss from the student loan pools.
In a statement, the SEC alleges that, for example, ITT made payments on delinquent student loans to prevent these loans from defaulting, which would have triggered "tens of millions of dollars" of guaranteed payouts.
The SEC adds that the company hid "significant information" from its auditor.
Back in August, shares of the company fell almost 50% in one day after ITT announced that a deal to sell $120 million of real estate assets fell through. In the last year, shares of ITT are down about 85%.
Here's the full release from the SEC.
And the SEC's full complaint can be found here.
More to come ...
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