One of the nation’s most senior regulators charged with protecting consumers publicly downplayed the alleged harm committed by a giant for-profit college chain her agency sued last week for defrauding students.
The Jan. 27 estimate by Edith Ramirez, chairwoman of the Federal Trade Commission, has fueled speculation that DeVry Education Group, the for-profit college operator, faces much lower potential costs than the FTC’s lawsuit suggests.
The FTC accused DeVry of deceiving tens of thousands of prospective students through national advertisements with false claims about their future career prospects if they enrolled at the company’s main school, DeVry University. The company misled students about its graduates’ success at landing jobs in their fields as well as their earnings, according to the FTC.
DeVry inflated its success at getting graduates jobs in their fields by including mail carriers and restaurant servers in its advertised job placement rates, the FTC said in its lawsuit.
In its complaint, the federal regulator said that DeVry annually enrolled 29,000 to 49,000 new students from 2008 to 2014 while it was peddling its false claims. The figures suggest that as many as 300,000 students were harmed during the period.
Ernie Gibble, a DeVry spokesman, said no students were harmed and that the FTC lawsuit is without merit. He added that there’s no national standard for calculating a school’s employment statistics.
Hundreds of thousands of Americans cumulatively took on about $5.3 billion in federal student loans to attend DeVry University beginning in the 2008-09 academic year through June 30 of last year, federal data show.
Federal law allows defrauded student loan borrowers to petition the U.S. Department of Education to cancel their debt if their school cheated them into enrolling and taking on student loans. The Education Department can then pass on that cost to the school.
The lawsuit, filed Jan. 27, led investors to drop DeVry shares, sending its stock plummeting more than 15 percent that day.
But Ramirez told reporters on Jan. 27 that DeVry’s alleged falsehoods harmed a much smaller pool of prospective students.
“Approximately thirty- to fifty-thousand students may have been impacted during the period during which the representations were made,” Ramirez said, minimizing the potential population of alleged victims by roughly a factor of six.
Jay Mayfield, an FTC spokesman, said Ramirez cited figures from the agency’s complaint but didn’t note that they were annual figures.
Several news outlets, such as the Wall Street Journal, Chicago Tribune and Associated Press, cited Ramirez’s figure. So did financial analysts who follow publicly traded DeVry on behalf of investors, such as Michael Tarkan, an analyst at Washington-based Compass Point Research & Trading.
That in turn has affected how some investors view the company’s potential exposure to the FTC’s demands for unspecified damages to make defrauded students whole.
Trace Urdan, an analyst at Credit Suisse, told clients this week that DeVry's stock was worth $29 per share, a 46 percent premium to its $19.84 price as of the end of Wednesday trading.
But the FTC has refused to correct Ramirez’s error.
Mayfield didn’t answer questions from The Huffington Post about Ramirez’s apparent misstatement.