ITT Educational Services Inc. (ESI - Free Report) has been facing various litigation processes lately. Most recently Holzer & Holzer, LLC, a Georgia-based law firm, began investing whether the company has complied with the necessary state and federal laws. There have been speculations that ITT Educational Services has engaged in improper and unlawful credit practices during the time period between Jul 2011 and Dec 2011.
A number of other law firms including Pomerantz LLP, Johnson & Weaver, LLP, Rosen Law Firm, P.A., Levi & Korsinsky, and Law Offices of Howard G. Smith have begun investigating potential claims against ITT Educational. The firms will inspect whether the company has violated any of the federal securities laws or has provided inaccurate statements regarding its true financial position.
ITT Educational Services has recently been in news for the wrong reasons. Last week, the education company called off its sale and lease back deal with College Portfolio Buyer LLC (CPB) which would have boosted its cash position by $119.1 million. The termination of the deal is a significant blow to investor confidence.
ITT Educational also has not been able to file its earnings results since the fourth quarter of 2013 owing to uncertainty related to the accounting treatment of the PEAK Private Student Loan Program in the company’s financial statements. As a result, the company may be required to provide a letter of credit to the Department of Education (DOE), as the education company is facing the threat of being declared “not financially responsible” by the DOE.
In addition, ITT Educational withdrew its previously provided guidance for 2014 on May 22 as the company could face restrictions in terms of student financial aid funding.
On Aug 4, 2014, ITT Educational announced that its CEO Kevin M. Modany has notified the board of directors about his plan to resign, effective from Feb 4, 2015. He has already stepped down as the director and chairman. Modany has been the CEO of the company since Apr 2007. The company has named John Dean as executive chairman.
All these controversies have severely affected the company’s share price this year. Shares of this Zacks Rank #3 (Hold) company have lost over 70% since Jan 2014.
However, some other education companies are doing well. Better-ranked companies in the space include Strayer Education Inc. (STRA - Free Report) , Grand Canyon Education Inc. (LOPE - Free Report) and Capella Education Company , all carrying a Zacks Rank #2 (Buy).