Publications

Colleges and Universities Pay $10.25 Million for Job Placement Misrepresentations

September 9, 2013
Harter Secrest & Emery LLP

In the latest round of scrutiny of higher education job placement data, the New York Attorney General has settled allegations that a national for-profit company misrepresented the job placement rates of graduates from its colleges and universities. The Attorney General alleged that those schools improperly boosted placement rates by counting single-day employment, as well as employment wholly unrelated to students’ training and education. The settlement imposes $10.25 million in restitution and penalties, dictates a specified methodology for future calculations of job placement rates, and requires the retention of an independent auditor to verify those calculations. The settlement illustrates the government’s continuing focus on the accuracy of job placement rates.

Background

In 2011, the New York Attorney General’s Bureau of Consumer Frauds & Protection began an inquiry into Career Education Corporation (CEC), a for-profit company. CEC operates seven brick-and-mortar campuses in New York, under the names Stanford-Brown Institute and Briarcliffe College, as well as two online educational institutions, American InterContinental University and Colorado Technical University. CEC cooperated with the State’s two-year investigation, self-disclosing that it had misrepresented job placement data and taking corrective action, including terminating fifteen employees and accepting the resignation of its CEO.

According to the Attorney General’s allegations, CEC used two principal methods to inflate its job placement data provided to current and prospective students, its accreditors, and the State of New York. First, CEC counted graduates working at single-day health fairs as employed. Second, it classified students as being placed in an industry related to the training they received when they were in fact working in an unrelated job.

The Attorney General also found that CEC provided incentives to employees tied to placement statistics. The State determined that the alleged manipulation resulted in significant discrepancies between actual and reported placement rates. For instance, at CEC’s Stanford-Brown Institute and Briarcliffe College campuses in New York, actual placement rates ranged from 24.1% to 64.1%, whereas CEC had reported rates ranging from 54.9% to 80.2%.

The New York Attorney General further criticized CEC for not disclosing to students that its schools lacked accreditation for certain programs, which caused students to be ineligible to sit for necessary qualifying exams immediately upon graduation. Likewise, CEC allegedly failed to make adequate disclosures to students that many credits would not be transferrable to other colleges and universities.

The Settlement Agreement

The New York Attorney General settled with CEC in the form it typically settles investigations, an Assurance of Discontinuance. The agreement obligates CEC to pay $10.25 million, consisting of $9.25 million in restitution to former students and a $1 million civil penalty.

The settlement also imposes continuing government oversight of CEC schools. Among other things, the settlement dictates the methodology CEC must use for calculating placement rates, the means by which CEC should disclose placement rates, and job placement thresholds required for CEC to continue offering programs. In addition, the settlement requires CEC to provide fulltime job placement representatives to assist students at each of its New York campuses. Moreover, CEC must retain an independent auditor to verify its job placement data and must certify annual compliance with the Attorney General.

Implications

This settlement reveals yet another layer of significant exposure for educational institutions that are suspected of misreporting career placement data. Other state and federal regulators continue to scrutinize the job placement data published by colleges and universities. Examples include the 2007 settlement between the California Attorney General’s office and Corinthian Colleges for $6.5 million, as well as open investigations into CEC by the attorneys general of Florida, Illinois, and Massachusetts. At the federal level, the Department of Justice recently announced that it settled False Claims Act allegations related to the job placement data provided by ATI Enterprises, Inc. for $3.7 million. Beyond government enforcement, colleges and universities have been subject to congressional investigations and private litigation about job placement misrepresentations, and such misrepresentations could also trigger action by institutional or program accreditors.

Conclusion

Institutions of higher learning must ensure that the job placement data they provide to students, accreditors, and government agencies is accurate, and that monitoring systems are in place to ensure accuracy. HSE attorneys can assist you in ensuring your data is accurate, investigating allegations of inaccurate data, and addressing any concerns regarding government investigations in this area. If you would like our assistance, or if you have any questions about this LEGALcurrents®, please contact any member of our Higher Education or Government and Internal Investigations practice groups at (585) 232-6500