Several class action suits against for-profit “educational institutions” have recently hit courts across the U.S. One suit, against Westwood College, alleges fraud across the board. The plaintiffs say Colorado-based Westwood’s pursuit of students was essentially predatory in nature. According to court documents, Westwood followed “a simple formula.” It sought to “recruit those with the greatest financial need and enroll them in high-cost institutions to maximize the amount of federal funding” Westwood received.
Before the Senate Committee on Health, Education Labor & Pensions (“HELP Committee”) began to examine the for-profit education industry in June, court papers say Westwood “flourished in the unscrupulous culture of the for-profit college industry, making it clear why the words ‘for profit’ come before ‘college.’” Via its various institutions Westwood allegedly preyed “on the hopes and dreams of vulnerable students who are desperately seeking better lives.” Westwood, the documents allege, spent more on recruiting than anything else, including education.
A suit filed in the Northern District of West Virginia against American Public Education, Inc. (APEI) alleges violations of the Securities Exchange Act. Papers filed on August 12 claim that the online college, which courts students in the military and in public service, misrepresented its growth and profitability. According to the plaintiffs, APEI CEO Wally Boston Jr., CFO Harry Wilkins and provost Frank McCluskey were fully aware that the company was giving shareholders bogus numbers and profited from the scam as well, dumping overpriced shares and profiting to the tune of nearly $4 million.
While the Westwood College suit seeks compensation for damages from deceptive trade, the APEI class action asks for compensation for securities violations. Now that there’s blood in the water, similar institutions may all be fair game–on August 13 stockholders in Lincoln Educational Services, Inc. took their cause to court in Newark, N.J. Like APEI, Lincoln is accused of violating federal securities laws.