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ITT Educational altered test scores, ex-employee's suit says

April 21, 2010

ITT Educational Services Inc., a Carmel-based for-profit education company, changed applicants’ test scores to allow them to enroll and get U.S. financial aid, an ex-employee says in a lawsuit.

Jason Halasa, who identified himself as the former director of ITT Educational’s campus in Lathrop, Calif., said in court documents that he was fired after he told company officials about altered grades. Halasa filed a complaint last week against ITT Educational, saying he was fired for speaking out. He is seeking reinstatement, back wages, legal costs and unspecified damages.

Students without high school diplomas must pass entrance examinations, called ability-to-benefit tests, to be eligible for U.S. financial aid for higher education, the Government Accountability Office said in a report in August. Some education companies changed applicants’ test grades and provided them with answers to ensure qualification for aid, the agency, which is the investigative arm of Congress, said without naming the enterprises.

“Halasa was attempting to halt conduct that was defrauding the federal government,” according to his complaint, filed in federal court in Indianapolis on April 15.

Lauren Littlefield, a spokeswoman for ITT Educational, didn’t immediately return a call seeking comment Wednesday.

ITT Educational stock was up $2.85, or 2.5 percent, to $118.16 per share in mid-afternoon trading Wednesday. The shares have gained 7.9 percent in the past 12 months.

After Halasa joined ITT Educational in February 2009, he saw employees in Lathrop giving passing scores to students who had failed entrance exams, according to the complaint. Employees raised students’ grades and altered attendance records so they would continue to receive U.S. financial aid, according to the complaint.

The company’s staff also compiled inaccurate job-placement figures for its graduates to make the company’s programs appear more valuable, according to the suit. After Halasa reported his findings to corporate officials, he was fired in September, according to the complaint.

Halasa is represented by Timothy Matusheski, who is a lawyer in Hattiesburg, Miss., and the firm Plews Shadley Racher & Braun of Indianapolis.

About 70 percent of ITT Educational’s $1.32 billion in revenue in 2009 came from the government’s Title IV financial-aid program, according to a company filing.

ITT Educational may lose its eligibility to participate in the program if the company changed grades and concealed violations, according to the complaint.

In 2002, the California Attorney General investigated ITT Educational’s calculation of students’ grade-point averages. The company agreed to pay $725,000 to settle the probe.

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