In Another Injustice For ITT Students, Predatory ITT Executives Get July 4 Weekend Gift While Defrauded Students Left Holding The Bag | Press Release

July 9, 2018

Late on Friday, it was announced that the SEC had settled its case against former ITT executives Kevin Modany and Daniel Fitzpatrick for cheating the company’s shareholders and operating the company for their own personal financial benefit. The settlement, reached on Friday, July 6 just before the trial was set to start today, lets them walk away with a slap on the wrist. The imposed fines are a fraction of the billions of dollars in financial suffering caused to students and is yet another example of the government siding with the for-profit college industry instead of students.

Meanwhile, this week, The Project on Predatory Student Lending, which represents thousands of students in the ITT bankruptcy case,  is pressuring the Department of Education in court to reveal more documentation about how they are handling the debt of ITT students who were cheated and suffered from this massive fraud. To date, over 10,000 former ITT students have lodged claims for loan cancellation with the Department, yet the Department has only granted a handful of such applications, despite acknowledging that because of ITT’s “well-documented, pervasive, and highly publicized misconduct”… “the value of an ITT education…is likely either negligible or non-existent.” The Department has filed an objection to the Project’s document request on behalf of students.

The students’ settlement in the ITT bankruptcy was also expected to be approved in court this week, but has been delayed yet again until likely this fall. The settlement would recognize a $1.5 billion claim against ITT, including having more than $500 million in debts cancelled and $3 million returned to students who had paid the company directly since it filed for bankruptcy.  The cancelled debts only apply to those secured with ITT, and do not include all federal student loans taken out by ITT students. The decision on whether to cancel those loans remains with the Department of Education, which has refused to do so. Further, students would only receive their claim in the bankruptcy if there is money in the estate to pay unsecured claims.

The following is a statement from Toby Merrill, Director of the Project on Predatory Student Lending.

“This sweetheart deal for ITT executives is yet another injustice for ITT students. While executives were handed a gift by the SEC, defrauded students are left fighting an actively hostile government that refuses to acknowledge the harm these corrupt executives inflicted on them.

In fact, on Wednesday, we are being forced to go into court to obtain basic information from the Department of Education about how they are handling debt on the students they continue to collect on. It’s a sad day when our government is treating executives with kid gloves while defrauded students are being pushed back every step of the way.

If government watchdogs refuse to hold executives and institutions accountable, it’s all the more important for us to fight alongside state partners and ITT students to get the justice and relief they are legally owed.”

Case Background: Villalba et al. v. ITT

ITT deceived and misled students about financial aid and costs of attendance, job placement and salaries, the quality of equipment and experience of instructors, the desirability of ITT graduates by employers, ITT’s programmatic accreditation, the transferability of its credits, and career placement assistance. The students’ allegations also included ITT’s use of high-pressure sales tactics to get students to enroll and remain enrolled. In January 2017, former ITT students filed a class complaint and proof of claim in the bankruptcy, laying the groundwork for the settlement proposal heard in January and expected to be finalized on June 13. For more information about the settlement, click here.

Over the last decade of its existence, ITT took in over $7 billion in student aid, the majority of which came in the form of federal student loans. Former ITT students have submitted over 7000 borrower defense to repayment applications to the Department of Education. Despite the clear case that students have a defense to the repayment of their loans because of ITT’s fraud, only a handful of those applications have been granted, and no new applications have been granted since January 20, 2017.

The student class is represented by the Project on Predatory Student Lending of the Legal Services Center of Harvard Law School and Jenner & Block.

About the Project on Predatory Student Lending

Established in 2012, the Project on Predatory Student Lending represents former students of predatory for-profit colleges. Its mission is to litigate to make it legally and financially impossible for federally-funded predatory schools to cheat students.

The Project has brought a wide variety of cases on behalf of former students of for-profit colleges. It has sued the federal Department of Education for its failures to meet its legal obligation to police this industry and stop the perpetration and collection of fraudulent student loan debt.