Consumer Federation of California

A for-profit education company with five campuses in California disclosed last week that an investigation by outside counsel found the company was inflating job placement calculations at several of its campuses ‘ just one day after the company announced the CEO’s resignation.

The investigation at Illinois-based Career Education Corp. was a response to a subpoena from the New York attorney general. It centered on whether the schools were accurately counting the percentage of recent graduates who get jobs in the field ‘ a major selling point for many colleges.

The inquiry determined that 36 of the company’s 49 accredited health education and art and design schools had placed fewer than 65 percent of 2010-11 graduates in jobs in their field or related fields. That falls below the minimum rates required by the schools’ accreditation agency, the Accrediting Council for Independent Colleges and Schools.

Two colleges in California could be affected: the International Academy of Design & Technology in Sacramento and the Brooks Institute, which has campuses in Santa Barbara and Ventura. Under the formula required by the accreditation agency, the company reported 2009-10 job placement rates of 65 percent at IADT-Sacramento, 73 percent at the Brooks Institute in Ventura and 78 percent at the Brooks Institute in Santa Barbara.

Under the company’s internal formula, it reported much higher job placement rates: 92 percent at the Brooks Institute and 83 percent at the International Academy of Design & Technology.

It’s not clear which colleges placed fewer than 65 percent of their graduates in jobs because Career Education officials refused to reveal those details Friday. Company officials said they aim to report the correct 2010-11 job placement rates on college websites by Nov. 14 but will not disseminate the information before then.

And in the coming weeks, the lawyers will complete their investigation on the rest of Career Education’s campuses, including the California Culinary Academy in San Francisco and Le Cordon Bleu College of Culinary Arts campuses in Los Angeles and Sacramento.

Career Education serves more than 116,000 students across the world through more than 90 campuses, as well as online programs.

It’s not the first time the company’s job placement rates have been questioned. Career Education tentatively agreed [PDF] last year to pay $40 million to settle a class-action lawsuit contending that the California Culinary Academy in San Francisco had duped students with its claim that 97 percent of graduates got jobs in the field.

Career Education Corp. first reported in August that the company had discovered inaccuracies in its job placement rate calculations at some health education colleges while gathering information to respond to the subpoena.

Then-CEO Gary E. McCullough said Career Education had hired a law firm to investigate placement practices at the rest of the company’s colleges.

On Nov. 1, the company announced that McCullough had resigned. The next day, during an earnings call, company officials revealed that improper placement practices were not limited to the health education segment.

"We have uncovered what were going to be recorded as placements were not genuine placements, according to our standards," said new CEO Steven Lesnik.

Career Education leaders said the company had taken several steps to prevent the problem from happening again ‘ such as getting rid of employees who were involved in the misconduct, adopting new career services policies and training people on the new guidelines.

‘We’re obviously very disappointed by these findings, but we took swift and effective action in identifying the conduct and rooting out the problem,’ Lesnik said. ‘And we’ve been fully transparent with the New York attorney general and other regulators about what we found at these schools.’

But Michael Graham, Career Education’s executive vice president and chief financial officer, said the investigation had focused only on current job placement rates and not on how long the improper calculation practices have been in place.

Stephen Burd, editor of the New America Foundation’s Higher Ed Watch, said job placement rates are key recruiting tools for colleges, and the company should do more for students.

‘When you talk to students who went to these schools, they always talk about promises about jobs as the number-one factor that made them decide to go somewhere,’ Burd said. ‘They should come clean with the students. They should be giving these students a choice as to whether they want to stay.’

Graham said in the earnings call that the company would communicate the results of the investigation to students by changing any job placement websites to reflect the accurate numbers. But the required disclosure websites for the International Academy of Design & Technology and the Brooks Institute in California both have old rates, from 2009-10.

Career Education spokesman Mark Spencer said in an e-mail that the investigation of the 2010-11 placement rates scrutinized the accuracy of the rates before they were reported to the company’s accreditors and regulators and before they were made publicly available to current or prospective students.

Albert C. Gray, executive director of the Accrediting Council for Independent Colleges and Schools, said the agency had received the updated job placement rates from Career Education and would determine in the next few months whether to take action.