Career Education Corp., which runs for-profit schools including Lehigh Valley College, said Monday an investigative committee it formed to study alleged securities law violations found wrongful conduct by some employees but cleared senior management.
Career Education said the investigation followed class-action lawsuits by investors who say the company misrepresented and failed to disclose facts, causing them to buy its stock at artificially high prices.
The investigative committee didn't ''find support for the claims that Career Education or its senior management engaged in the securities laws violations'' cited by plaintiffs, Career Education said in a statement. ''The committee did find wrongful conduct by individual employees,'' the statement says.
Career Education of Hoffman Estates, Ill., was founded in 1994 and issued stock and became a public company in 1998. It has grown through dozens of acquisitions, buying trade-related schools such as the Cooking & Hospitality Institute of Chicago. It runs more than 80 campuses with about 97,000 students in the United States, Canada and overseas.
The company is the subject of a dozen lawsuits and investigations by the Justice Department, the Securities and Exchange Commission, the Education Department and the Postal Service.
Among the claims in a class-action shareholder fraud suit: Career Education exaggerated enrollment and graduation rates; its school in Montclair, N.J., graduated students who did not complete required course work, and another school boosted enrollment by recruiting ''felons, homeless persons and drug addicts.''
Lehigh Valley College, formerly called Allentown Business School, has about 1,350 students at its two-year-old building in Center Valley. The college offers associate degrees and certificates in accounting, business administration and criminal justice, among other areas. It charges $30,400 to $37,500 for an associate degree.
Founded in 1869, Lehigh Valley College has operated under at least five owners and at several locations in the area. Under Career Education, which bought the school in 1995, Lehigh Valley College added programs, doubled enrollment and raised tuition.
A Morning Call investigation published last month found that aggressive and sometimes misleading sales tactics are at the center of Lehigh Valley College's recruiting; that the school often turns a blind eye to failure and cheating to maintain enrollment, and that graduates are less likely to be able to pay back their loans than students of other area colleges.
Gary Bisbee, a Lehman Brothers analyst, said in a note to investors that the conclusions from Career Education's committee are ''as expected'' and that ''worst-case scenarios remain unlikely.'' He expressed concern that Career Education gave no details of the alleged employee improprieties.
Career Education shares rose $1.91 Monday, or 6.2 percent, to close at $32.70 in Nasdaq Stock Market composite trading. Before Monday, shares had fallen 23 percent this year.
Steve Bostic, Career Education's largest individual stockholder, said the lack of details is ''incomprehensible'' and plans to challenge directors at next week's shareholders' meeting.
Bostic, who owns 1 percent of the company's shares, asked the board ''to share the report with stockholders promptly, so that we can learn the extent of the wrongdoing, whether management created a culture in which such wrongdoing could occur, the additional recommendations of the committee and the scope of its continued work.''
Company spokeswoman Karen King had no immediate comment on the employees' conduct.
Richard Close, a Jeffries & Co. analyst in Nashville, Tenn., said he wasn't surprised by the lack of details in the company statement, given that legal proceedings remain active.
Career Education's investigative committee hired the law firm of McDermott, Will & Emery LLP, which retained the forensic accounting firm Navigant Consulting for its work.
Career Education said in its statement that it has taken steps to improve internal controls for finance and compliance, and that its investigative committee recommended additional measures.
Paul Basken of Bloomberg News and Morning Call reporter Kurt Blumenau contributed to this story.
Schools company finds misconduct
But probe by Lehigh Valley College's parent clears senior management.
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