Asset Management CultureOctober 11, 2019

DeVry Settles Securities Lawsuit with Utah State Pension

School allegedly lied about its work placement rates for graduates.

Reported by Michael Katz

DeVry Education Group and four of its executives have settled a class action lawsuit brought by lead plaintiff Utah Retirement Systems for $27.5 million.

The lawsuit alleged that DeVry Education Group Inc., CEO Daniel Hamburger, CFO Richard Gunst, Gunst’s successor Timothy Wiggins, and Chief Accounting Officer Patrick Unzicker made false statements to investors about the job placement and salary outcomes achieved by its students after graduation. The complaint says that over a five-year period ending in late January 2016, DeVry and its executives repeatedly claimed that 90% of their students obtained jobs in their field of study within six months of graduation, with starting salaries of around $40,000.

“These metrics were critical to DeVry’s investors who viewed superior outcomes as a sign of DeVry’s financial health and stability,” said the complaint. “But as four separate government agencies have concluded – and as numerous former employees of DeVry corroborate – these employment outcomes were false.”

The plaintiffs said DeVry “maintained a corporate policy of both artificially excluding (or “waiving”) students from the statistic who should have been counted, and artificially including students in the statistic who should not have been counted.”

Four government agencies investigated DeVry – the Federal Trade Commission, the Department of Education, the New York Attorney General’s Office, and the Massachusetts Attorney General’s Office. Each concluded that, based on DeVry’s own internal documents, that the company misled the public about its employment outcomes.

The Massachusetts Attorney General reported that certain DeVry programs had job placement rates as low as 52%. DeVry settled with each agency over its misrepresentations. The FTC settlement alone totaled $100 million.

The lawsuit also claimed that DeVry not only ignored a complaint from an employee who alerted an in-house attorney in its corporate compliance department that the university did not have the data to back up the 90% presentation, but that it fired the employee as a result his actions.

The plaintiffs cited the US Department of Education, which said that “this was not an isolated instance, but part of a pattern whereby DeVry either intentionally or through wanton negligence avoided clear statutory and regulatory requirements.”

A hearing will be held at US District Court for the Northern District of Illinois in December to approve the settlement.