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Top For-Profit CEO Resigns After Investigation Reveals Job Placement Deception

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Career Education Corporation operates dozens of colleges nationwide.

CREDIT: Campus Progress Illustration

Shares in one of the nation’s largest for-profit colleges plummeted nearly 40 percent on Wednesday as the school’s CEO resigned shortly after an internal investigation uncovered deceptive practices regarding job-placement rates at several of its campuses.

Gary McCullough offered his resignation as CEO of Career Education Corporation on Tuesday, the same day the company revealed in a Securities and Exchange Commission filing [PDF] that some of the company’s Health Education and Art & Design schools reported jobs for graduates that “lacked sufficient supporting documentation or otherwise did not meet applicable placement guidelines.”

(Screw U: For-Profit College Accountability)

The company first announced the issues in August, when officials hired an outside law firm to conduct the investigation released this week. At that time, then-CEO McCullough placed most of the blame on a handful of employees, calling the initial findings “very, very disappointing.”

“The actions of a few people have let down others who work hard and responsibly every day on behalf of our students,” he said in August.

Now, the issue appears to be widespread, with dozens of Career Education Corporation schools’ job placement rates adjusted to reflect errors. It’s unclear if the investigation is the impetus for McCullough’s resignation; acting CEO Steven Lesnik offered only the following rationale in a statement:

“Given the complexities of the regulatory environment and other issues that have arisen over the last year, CEC is moving towards a new phase and the Board views it as the appropriate time to start the process of putting in place fresh leadership at the CEO level. At the same time, the Board and the Company's experienced management core will move forward to address the issues before Career Education.

News of the malpractices and resignation prompted the company’s stock to fall substantially; enrollment is already on the decline and revenues have fallen by about 18 percent from last year, according to a report from Market Watch.

“We expect that the news of McCullough’s departure is spreading alarm throughout the for-profit higher education sector,” writes Steven Burd of Higher Ed Watch. “After all, Career Education Corporation is hardly the only career college company that has cooked the books on the job placement rates they disclose to prospective students and regulators.”

The company has struggled with a number of regulatory issues, like many other for-profit colleges, which face increased scrutiny from lawmakers after extensive research showed a number of shortcomings at the institutions. Earlier this year, Career Education Corporation settled with former students from San Francisco’s California Culinary Academy who claimed that the school’s high job-placement rate misled them, as many of the “reported jobs” were students working as waiters or as baristas at Starbucks.

(Read More: Too Many Cooks in the Kitchen—Spoiled the Broth)

For-profit colleges are struggling to ensure their job-placement rates meet standards set out in a Gainful Employment Rule by the U.S. Department of Education, which for-profit schools lobbied against.

Career Education Corporation enrolls more than 100,000 students at various colleges across the country, including American InterContinental University, Colorado Technical University, Le Cordon Bleu North America, and others. The company has brought in nearly $1.5 billion in revenue already this year.

Brian Stewart is the Communications Director at Generation Progress. You can follow him on Twitter @brianstewart.

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