Career Education Corp.’s revelation that some of its for-profit schools cooked the books on job-placement rates delivers more bad news to an industry already under intense scrutiny for promises it makes to students.
The Schaumburg-based for-profit college said late Wednesday that some of its campuses improperly reported statistics about how successful students are at finding jobs after graduation — a metric central to the controversy surrounding the for-profit college industry and a crucial number that students focus on when deciding where to attend school.
"Schools that misreport employment information about their programs potentially exploit vulnerable individuals with false hopes for job-placement after completing the program," said Tom Pauken, chairman of the Texas Workforce Commission, which last week revoked the license of a for-profit education company to operate in the state.
Career Education, which employs about 4,100 workers in the Chicago region, said it identified the "improper practices" at some of its campuses that offer health-related education. Officials would not provide specifics, except to say the problem was "related to the determination of placement rates."
The for-profit school is the latest to be found disclosing bad job-placement stats. Texas regulators revoked the license last week for a trade-school chain called ATI Enterprises, which allegedly ginned up its job-placement numbers.
Also in Texas, employment records of 288 former students of Everest College, part of Corinthian Colleges Inc., were reportedly falsified over four years by the school, according to an investigation by WFAA-TV in Dallas.
In California in 2007, Corinthian paid about $6.5 million to the attorney general’s office to settle a lawsuit that alleged the school inflated its job-placement statistics. (A Corinthian spokesman said employees were fired in the Dallas case and that job placement ended up not being an issue in the final California settlement.)
At Career Education, the company has launched an independent investigation into not just its health-education schools where problems were discovered, but at all its campuses, said Gary E. McCullough, the company’s president and chief executive.
"I can assure you, the independent investigation will be thorough," he said in a conference call Thursday with analysts, adding that the company will take swift "remedial measures."
He described the impropriety as occurring at the campus level among a few bad actors.
"We’ve got people who didn’t do the right thing, very simply. We will go back and deal with those people if the investigation indicates that they’ve done something bad or they’ve broken our rules," he said. "When you have procedures in place, unfortunately they can be thwarted by people who aim to do that and who work together to do that. … People worked to simply skirt the rules."
But other cases of misreported job-placement numbers show the problem hasn’t always been a few rogue employees, said Pauline Abernathy, vice president for the nonprofit Institute for College Access & Success, a group frequently critical of for-profit colleges.
"The companies typically do blame it on a few employees until evidence emerges that it is systemic," she said. "This is not an isolated incident in this industry." However, Abernathy said she did not know the circumstances at Career Education.
Poor job placement is among the issues that have brought scrutiny to Career Education and the for-profit college industry. Others are high-pressure sales tactics, low graduation rates, excessive profit margins and saddling students with crushing debt — often from loans backed by U.S. taxpayers that students default on. Most for-profit colleges have seen enrollments decline recently as they change enrollment practices to comply with tougher new regulations linking access to federal aid with students’ ability to repay debt.
For-profit colleges have strong motivation to show high job-placement rates.
One reason is to attract new students and persuade them to take on student-loan debt. Colleges can tell students they’ll be able to pay back loans with the great jobs they’ll have after graduation. Another motivation is to retain their state licenses or accreditations by various national agencies, which often require schools to have a minimum job-placement rate to retain a stamp of approval. For-profit schools need accreditations to be eligible for federal funding, Abernathy said.
Career Education said it discovered the improper practices with placement rates while preparing its response to a subpoena issued in May by the New York attorney general, who is investigating several players in the for-profit education industry, including Career Education. The company will release results from its independent investigation to the New York attorney general and college accrediting groups, McCullough said.
"The actions of a few people have tarnished what I believe has been really good work over the course of the last several years by the overwhelming majority of employees that we have in this company," he said.
The Illinois attorney general’s office is also investigating a few specific for-profit colleges and has a joined a multistate investigation into for-profit schools in general, a spokeswoman said.
However, the office had nothing to release that was specific to Career Education, she said.
Career Education runs the American InterContinental University, Le Cordon Bleu North America and Sanford-Brown colleges, among others. It has about 101,700 students enrolled at its colleges.
The company’s stock dropped about 15 percent Thursday.