Cecily Zamora
ITT Tech has been accused of breaking several laws, including the Higher Education Act of 1965, which prohibits incentivising recruiters based on the number of students they enrol. In 2015, a federal whistleblower lawsuit was filed against the company, alleging that it used coercive tactics to enrol students who were unlikely to pass classes, unlawfully paid sales commissions to recruiters, and lied to students about their financial obligations and transferability of credits. The same year, the Securities and Exchange Commission announced fraud charges against ITT Educational Services Inc., its chief executive officer, and its chief financial officer. ITT Tech has also been investigated by the Office of the Attorney General for the State of California and sued by the Massachusetts Attorney General for misleading and harassing students.
| Characteristics | Values |
|---|---|
| Used coercive tactics to enroll students who were unlikely to pass classes | Yes |
| Unlawfully paid sales commissions to recruiters | Yes |
| Lied to students about their financial obligations and transferability of ITT credits to other schools and career prospects | Yes |
| Temporarily ordered to stop enrolling new or returning students who fund their educations with GI Bill benefits | Yes |
| Fraud charges against ITT Educational Services Inc., its chief executive officer Kevin Modany, and its chief financial officer Daniel Fitzpatrick | Yes |
| Investigation negatively affected the company's stock and triggered several class-action lawsuits by investors | Yes |
| Investigation by the Office of the Attorney General for the State of California (CAG) | Yes |
| Settled eight legal proceedings involving 40 former students arising out of their recruitment and education practices | Yes |
| Whistleblower lawsuit alleging compensation for some ITT staff violated the Higher Education Act of 1965 by incentivizing recruiters based on the number of students they enrolled | Yes |
| Sued by Massachusetts Attorney General Maura Healey for allegedly "misleading and harassing students" | Yes |
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What You'll Learn
Coercive tactics to enrol students
ITT Tech was accused of using coercive tactics to enrol students who were unlikely to pass classes at the school. In 2015, a federal whistleblower lawsuit was filed by former ITT employee Rodney Lipscomb, who alleged that the company used these tactics, unlawfully paid sales commissions to recruiters, and lied to students about their financial obligations and the transferability of ITT credits to other schools and their career prospects.
In 1998, ITT Tech settled eight legal proceedings involving 40 former students arising out of their recruitment and education practices. The settlements cost $12.9 million, including legal fees. One of the cases, filed by Daniel Graves, alleged that compensation for some ITT staff violated the Higher Education Act of 1965 by incentivizing recruiters based on the number of students they enrolled.
In 2004, several ITT Tech campuses were raided by federal enforcement agencies, and their predatory practices were confirmed. Despite this, the school remained open for years, settling many lawsuits and earning billions of dollars through federal financial aid in the form of grants and loans.
In 2016, Massachusetts Attorney General Maura Healey sued ITT Educational Services for allegedly "misleading and harassing students." The same year, the Department of Education announced that students could not use federal financial aid for the school, leading to its closure and bankruptcy filing.
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Unlawful payment of sales commissions to recruiters
In 2015, a federal whistleblower lawsuit was filed against ITT Tech by former employee Rodney Lipscomb. Lipscomb alleged that the company had used coercive tactics to enrol students who were unlikely to pass classes at the school, unlawfully paid sales commissions to recruiters, and lied to students about their financial obligations and the transferability of ITT credits to other schools and career prospects.
In 1998, ITT Tech settled eight legal proceedings involving 40 former students arising out of their recruitment and education practices at ITT Tech campuses. The settlements cost $12.9 million, including legal fees. One of the cases was a whistleblower lawsuit filed by Daniel Graves, who alleged that compensation for some ITT staff violated the Higher Education Act of 1965 by incentivizing recruiters based on the number of students they enrolled with the school. The case alleged a culture of corruption at ITT, and was litigated for about 17 years until ITT prevailed when the US Supreme Court refused to hear an appeal of earlier rulings that the case was dismissed for failure to state a claim.
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Lying to students about their financial obligations
In 2015, a federal whistleblower lawsuit was filed against ITT Tech by former employee Rodney Lipscomb. The lawsuit alleged that the company used coercive tactics to enrol students who were unlikely to pass classes, unlawfully paid sales commissions to recruiters, and lied to students about their financial obligations and the transferability of ITT credits to other schools and their career prospects.
The same year, the California Department of Veterans Affairs (CalVet) temporarily ordered ITT Tech to stop enrolling new or returning students who were funding their educations with GI Bill benefits. The Securities and Exchange Commission also announced fraud charges against ITT Educational Services Inc., its chief executive officer Kevin Modany, and its chief financial officer Daniel Fitzpatrick.
ITT Tech had a history of legal troubles, dating back to at least 1998 when the company settled eight legal proceedings involving 40 former students arising out of their recruitment and education practices. The settlements cost $12.9 million, including legal fees. In 2004, several ITT Tech campuses were raided by federal enforcement agencies, and predatory practices were found to be true. Despite this, the school remained afloat for years by settling many lawsuits and earning billions of dollars through federal financial aid in the form of grants and loans.
However, ITT Tech's run came to an end in 2016 when the Department of Education announced that students could not use federal financial aid for the school. With the loss of billions of dollars in federal aid and students having to find other schools, ITT Tech shut down shortly after the federal aid ban and filed for bankruptcy.
In 2016, Massachusetts Attorney General Maura Healey sued ITT Educational Services for allegedly "misleading and harassing students."
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False Claims Act violations
ITT Tech was accused of violating the False Claims Act in 2015 when a federal whistleblower lawsuit was filed by former employee Rodney Lipscomb. The lawsuit alleged that the company used coercive tactics to enrol students who were unlikely to pass classes, unlawfully paid sales commissions to recruiters, and lied to students about their financial obligations and the transferability of ITT credits to other schools and career prospects. The same year, the California Department of Veterans Affairs (CalVet) temporarily ordered ITT Tech to stop enrolling new or returning students who funded their educations with GI Bill benefits.
The Office of the Attorney General for the State of California (CAG) also investigated ITT Technical Institutes in California in response to qui tam actions filed against the company under state, federal, or both False Claims Acts. Qui tam actions allow private individuals who assist in a prosecution to receive part or all of the damages or financial penalties recovered by the government.
In addition to the 2015 allegations, ITT Tech had a history of legal troubles dating back to at least 1998. In that year, the company agreed to settle eight legal proceedings involving 40 former students, with settlements costing $12.9 million, including legal fees. One of the cases, filed by Daniel Graves, alleged that compensation for some ITT staff violated the Higher Education Act of 1965 by incentivizing recruiters based on the number of students they enrolled. This case, which alleged a culture of corruption at ITT, was litigated for about 17 years until it was ultimately dismissed by the US Supreme Court.
Despite settling many lawsuits and earning billions of dollars through federal financial aid, ITT Tech's run came to an end in 2016 when the Department of Education announced that students could no longer use federal financial aid for the school. With the loss of billions of dollars in federal aid and students having to find other schools, ITT Tech shut down shortly after the federal aid ban and filed for bankruptcy.
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Misleading and harassing students
In 2016, Massachusetts Attorney General Maura Healey sued ITT Educational Services for allegedly "misleading and harassing students". This was not the first time the company had been accused of such practices. In 2004, several ITT Tech campuses were raided by federal enforcement agencies, who found evidence of predatory practices. In 2015, a federal whistleblower lawsuit was filed by former ITT employee Rodney Lipscomb, who alleged that the company used coercive tactics to enrol students who were unlikely to pass classes. He also claimed that the company paid unlawful sales commissions to recruiters and lied to students about their financial obligations, the transferability of ITT credits to other schools, and their career prospects.
In 1998, ITT Tech settled eight legal proceedings involving 40 former students, which cost the company $12.9 million, including legal fees. One of these proceedings was a whistleblower lawsuit filed by Daniel Graves, who alleged that compensation for some ITT staff violated the Higher Education Act of 1965 by incentivising recruiters based on the number of students they enrolled.
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Frequently asked questions
ITT Tech was accused of breaking the Higher Education Act of 1965 by incentivising recruiters based on the number of students they enrolled.
In 2016, the Department of Education announced that students could not use federal financial aid for the school. As a result, ITT Tech shut down shortly after the federal aid ban and filed for bankruptcy.
Several ITT Tech campuses were raided by federal enforcement agencies, who found that the school's predatory practices were true.
