A Florida campus of for-profit ITT Technical Institute often used deceptive practices to enroll and keep students and coerced students into racking up huge debt, according to a newly unsealed whistleblower lawsuit.
The lawsuit, filed in United States District Court, alleges ITT Tallahassee pressured students into taking out huge student loans by misrepresenting programs, lying about graduation and placement rates, all part of a larger scheme to defraud the federal government out of financial aid payments.
The lawsuit states the whistleblower, Rodney Lipscomb, a former dean of academic affairs at ITT's Tallahassee campus, was fired after raising concerns about the school's practices. The lawsuit was unsealed this week after the Department of Justice declined to join the complaint.
The former employee claims, among other things, that ITT purposefully recruited students who were not qualified to attend the school – including one specific incident where a student who could barely write a coherent sentence was enrolled – in order to secure more federal financial aid dollars. It cites another example of enrolling a blind student in a computer repair program.
ITT Tech recruiters also were allegedly encouraged by the director of recruitment, the college director and other officials to “probe” potential students about “what causes pain in their lives” and to “dig in” to that pain to get them to enroll. The lawsuit further claims ITT unlawfully pays sales commissions to recruiters and provides false information to students about their financial obligations, the transferability of ITT credits to other schools, and about their employment opportunities after graduation.
Lipscomb alleges that when he and another employee found out what recruiters had promised criminal justice students, including that they could get forensic jobs similar to those portrayed on the TV show, CSI: Miami, they went to classrooms to inform students about the false information. At that point, many students "became upset…and dropped out."The Tallahassee campus subsequently shut down the criminal justice program. The director of recruiting told his staff that prospective students interested in criminal justice "should be steered to the business management program and told that they will be able to open their own private investigation business, even though that is not what the Business Management program is designed to train students to do."
The lawsuit claims that ITT promised prospective students that if they enrolled they would receive “free laptops.” In reality, the laptops were far from free. Instead, they replaced the textbooks whose $800 cost had been built into student tuition.
Last year, the Securities and Exchange Commission filed fraud charges against current and former executives at ITT for their role in concealing problems with company-run student loan programs. According to the complaint, the loans performed so poorly by 2012 that the company’s guarantee obligations were triggered. But instead of disclosing the issue to investors, the SEC alleges that ITT and the executives engaged in a fraudulent scheme and made a number of false and misleading statements to hide the magnitude of ITT’s guaranteed obligations to the loan programs.
The U.S. Department of Education soon ramped up monitoring of Indiana-based ITT Educational Services, requiring the college chain to provide cash flow projections every two weeks, along with other information about financial transactions, planned school closures and expected new program offerings. The company also was ordered to provide the Education Department with a monthly roster of its 51,000 students, detailing their anticipated graduation date, enrollment status and individual contact information.
In February 2014, the Consumer Financial Protection Bureau filed a lawsuit against ITT, accusing the company of predatory student lending. In some cases, according to the CFPB, students didn’t even realize they had a private student loan until they started getting collection calls. For borrowers with credit scores under 600, the costs of the private student loans included 10 percent origination fees and interest rates as high as 16.25%, that lawsuit alleged. The CFPB further claimed ITT exploited its students and pushed them into high-cost private student loans that were likely to end in default.