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For-profit college chain ITT lands in the crosshairs of Mass. attorney general

Massachusetts Attorney General Maura Healey speaks with reporters after testifying before the Massachusetts Gaming Commission, Jan. 22, in Boston. (Steven Senne/AP)

Massachusetts Attorney General Maura Healey has filed a lawsuit against ITT Educational Services, one of the largest operators of for-profit technical schools, for engaging in abusive sales tactics and misleading students about the quality of its programs.

“These students were exploited and pressured to enroll with the promise of great careers and high salaries, but were instead left unable to repay their loans and support their families,” Healey said Monday in a statement announcing the lawsuit.

Is this the beginning of the end for ITT?

To get prospective students in the doors at two campuses in Massachusetts, ITT employees allegedly told them that anywhere from 80 to 100 percent of graduates found jobs in or related to their field of study, according to the complaint. The actual job placement rates were 50 percent or less at each location, and included graduates with internships or short-term employment. What’s more, ITT counted jobs selling computers at big box stores and providing customer service for an airline as working in the field of computer technology.

According to the complaint, former ITT recruiters say they were expected to call up to 100 prospective students per day and were publicly shamed or fired if they failed to meet their quotas. Recruiters allegedly persuaded students to visit a campus as soon as possible, where they were pressured to apply, take an admissions exam and complete a financial aid appointment the same day. State prosecutors say this behavior occurred from 2010 through at least May 2013.

ITT issued a statement Monday, saying the company is “disappointed” in Healey’s actions, which follows her office’s “wide-ranging fishing expedition that lasted for more than three years.” The company claims that it provided evidence that its conduct was lawful and has cooperated with Healey, who nevertheless chose litigation over working to address any concerns over ITT’s practices.

Officials at the company are accusing Healey of withholding “all but the vaguest description of its claims and denied ITT/ESI any meaningful opportunity to provide further information that could have addressed those issues.” They insist that some of the claims rest on a “biased and selective portrayal” of the facts, including omissions of how prosecutors calculated placement rates. ITT is accusing the complaint of quoting testimony out of context and disregarding key facts about the company’s track record of finding jobs for students.

“The Attorney General’s action is all the more disappointing because it extends Massachusetts’ woeful record of hostility toward career colleges that train non-traditional and under-served students,” ITT said in the statement. “At a time when Massachusetts is experiencing a severe shortage of technically-trained professionals, this action will have a negative effect on the education and employment climate in Massachusetts.”

This is the latest in a series of blows for ITT. In October, the Department of Education placed additional restrictions on the company’s use of federal grants and loans, after ITT failed to account for millions of dollars in aid that was disbursed to students in the past five years. The company originally landed on the department’s watch list, known as “heightened cash monitoring,” a year ago for missing the deadline for filing financial statements.

SEC charges executives at for-profit college ITT with fraud

A month before the department took action against ITT, the company revealed that the Department of Justice is investigating whether it lied to the Department of Education about executive compensation. That probe has since been closed. ITT is also fighting two separate lawsuits from the Consumer Financial Protection Bureau and the Securities and Exchange Commission.

At the heart of both of those lawsuits are two in-house student loan programs that are also raised in Healey’s complaint against ITT. Massachusetts’s top prosecutor is accusing ITT of steering students into those private loans, which had origination fees as high as 10 percent of the loan and interest rates that could climb as high as 25 percent, according to the complaint. Prosecutors say the loans were so onerous that ITT estimated in 2013 that nearly 60 percent of them would wind up in default.

Healey wants ITT to pay restitution to current and former students enrolled in its computer network systems program, including refunding all tuition the company received as a result of it alleged deceptive practices.

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