Shares of for-profit education companies tumbled Tuesday after a government report prepared ahead of a Senate hearing scheduled for Wednesday detailed deceptive -- and in some cases -- possibly illegal actions, by recruiters at 15 for-profit schools.
The Government Accountability Office's report, which was obtained by The Associated Press, said enrollment counselors allegedly encouraged investigators posing as potential students to falsify financial aid applications, and misled them about the cost of programs and potential salaries after graduation.
No publicly traded companies were involved in the alleged fraudulent activity, but some may have used deceptive marketing and recruiting practices. The GAO said it plans to refer cases of deceptive marketing to federal investigators.
"As information emerges about which public companies were cited, we expect heads to roll," said Signal Hill education analyst Trace Urdan.
BMO Capital Markets analyst Jeffrey Silber and Baird analyst Amy Junker said it was likely that the unnamed schools whose counselors misled prospective students included two campuses owned by Apollo Group , two owned by Corinthian Colleges. and one owned by Washington Post Co. , a newspaper publisher that also owns the Kaplan school chain.
"We reviewed the testimony and it doesn't have enough information for us to determine whether any of the campuses are ours. We are investigating and if we find any reason to take action we will," said Corinthian spokesman Kent Jenkins.
Following the broadcast Apollo Group sent us this statement.
“The recent GAO study sampled recruiting practices at a number of for-profit colleges. While we have not been informed whether or not Apollo Group schools were involved in this study, we take very seriously the issues raised in the recent GAO study. We have clear policies in place to protect students. If we are made aware of violations of our code of conduct we will promptly and thoroughly investigate the matter and, if found true, will take disciplinary action up to, and including, termination of the employee involved."
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> GAO Finds For-Profit Schools Encouraged Fraud
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