As outrage against for-profit educational institutions in the U.S. for knowingly precipitating a debt crisis continues to grow, officers in one of the leading industry players DeVry Inc. face a lawsuit filed by a shareholder.
A report by Bloomberg identifies Timothy Hald as the shareholder in Devry Inc. who has sued 14 of the for-profit education company's officers and directors in court for their failure to properly oversee the DeVry schools' student recruitment and financial aid policy. This, the suit claims, has left students debt-ridden and without employment, thus causing serious dent to the company's prospects and future profitability. DeVry shares fell 15 percent in New York Stock Exchange trading last year.
Hald now seeks a court order that compels directors to reform DeVry's governance and pay restitution to the company, according to the report.
Based in Chicago, DeVry Inc. operates, other than its namesake university, the Keller Graduate School of Management, Carrington College and Chamberlain College of Nursing and has more than 73,000 students on their rolls.
These, together with peers in the for-profit education industry such as the University of Phoenix, Washington Post's Kaplan, the Corinthian Colleges and others stand accused of fuelling a mammoth debt crisis in the nation, as a September report from the Education Department revealed that such colleges account for almost one in two federal-loan defaults.
Furthermore, many of them are known to have intentionally signed up students who were unqualified on federally-guaranteed loans and recruited aggressively in expensive vocational-training courses for industries that were already saturated. Kaplan, for example, faces several federal whistle-blower lawsuits in this regard.
The findings have not only injured the reputation of these institutes but also affected their market performance. A year-end report in Bloomberg revealed that an index of 13 publicly traded for-profit education stocks fell 26 percent over 2010, while the Standard & Poor's 500 index increased about 13 percent during the period.