The head of ITT Technical Institutes on Thursday said a federal investigation that led to raids at 10 of the for-profit chain's schools in eight states would not be over quickly.
A day after news of the probe sent ITT's shares tumbling, Rene Champagne refused to answer questions about the investigation's focus or offer a specific estimate on how long the probe would take.
The stock slide eased Thursday, even as the company faced a lawsuit alleging the company misrepresented its financial health and falsified records on enrollment and graduation rates.
Classes resumed Thursday at the 10 ITT campuses where investigators served warrants and searched records after grand jury subpoenas were issued.
Champagne said during a telephone conference call that the chain, which has 77 campuses in 30 states overall, would continue normal operations while authorities investigate.
But after offering few new details in a brief statement to industry analysts and reporters, Champagne declined to take questions and ended the call.
The move, coming a day after federal authorities and the company offered no specifics on what was being investigated, drew criticism from an analyst who said the company needed to be more open to calm investors, employees and students.
Trace Urdan, of ThinkEquity Partners, a research and investment banking firm in San Francisco, said, "The lawyers clearly are running the place right now."
"I think it's terrible advice, because the stakes involved in this are so high. You're talking about the morale of the organization, 401(k) investments, all of the staff and students at the school," Urdan said.
After falling 33 percent on Wednesday, shares of ITT Educational Services lost another $1.24, or 3.2 percent, to close at $37.26 on Thursday on the New York Stock Exchange.
On Wednesday, investigators searched ITT's headquarters in the Indianapolis suburb of Carmel, and 10 campuses in Indiana, Texas, Virginia, Florida, Louisiana, Nevada, California and Oregon.
Authorities have not said why they conducted the searches or indicated whether criminal or civil matters are at issue. Phone calls to the U.S. Attorney's Office in Houston, which is heading the probe, were not returned Thursday.
"This investigation may not be concluded quickly, considering the amount of information we submitted yesterday," Champagne said in Thursday's call.
"To date, the investigators have disclosed very few details of their investigation to us, and therefore, I am unable to take questions this afternoon," he said.
Investigators obtained records about personnel issues such as firings, staff complaints and internal investigations, he said.
Authorities also seized documents about student graduation, attendance, recruiting and grades -- information used to back up reports ITT submits to regulators to qualify for federal education aid programs.
About 68 percent of the company's 2003 revenue of nearly $523 million came from federal programs. And most ITT students also are eligible for aid to help cover tuition.
Jeff Weber, head of the Indiana Commission on Proprietary Education, which regulates the state's for-profit schools, said his office was subpoenaed for its records on ITT in October by Justice Department investigators.
Meanwhile, a law firm said Thursday it had filed a lawsuit against ITT seeking to represent buyers of ITT stock from April 17, 2003, through Tuesday.
During that period, ITT misrepresented its financial health and failed to disclose that it "had systematically falsified records, such as those relating to enrollment, graduation and job placement rates, in order to artificially inflate its reported operational and financial performance," the New York City firm Milberg Weiss Bershad Hynes & Lerach said in a news release.
ITT spokeswoman Nancy Brown declined to comment on the lawsuit, which was announced after Champagne's call.
ITT provides post-secondary, year-round courses to about 37,000 students, with emphasis on technical fields. The company, which employs about 3,000, began operations in 1969.
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