Shareholders: Use your power to reform ITT Educational Services (ESI)

ITT Educational Services will host a shareholder meeting on July 27 in Arlington, Virginia.  ForProfitU believes that shareholders should use this meeting as an opportunity to do the important and necessary work of reforming ITT’s business practices.

ITT Educational Services is currently under investigation by the SEC which has charged the CEO and CFO of fraud related to the company’s private student loan program.  The Consumer Financial Protection Bureau also sued ITT over the same program in 2014.  Concurrently, Attorneys General from Arkansas, Arizona, Colorado, Connecticut, Hawaii, Idaho, Iowa, Kentucky, Maryland, Minnesota, Missouri, Nebraska, North Carolina, Oregon, Pennsylvania, Tennessee,  Washington, and the District of Columbia are involved in a multi-state investigation of ITT.

Here are some questions that we believe ITT Educational Services shareholders should ask management:

  • Since the inception of the PEAKS student loan program in 2010, ITT Educational Services has paid the top three executive over $40M. Why do these executives deserve multi-million dollar salaries when their actions have directly led to charges of fraud by federal regulators and caused ITT’s stock price to drop 95% over the last five years?
  • In 2013, ITT Educational Services collected over $20K per student in tuition but only $4K of that amount was spent on instruction. Where does ITT spend the rest of the tuition money?
  • While ITT Educational Services reports spending on instruction through the Integrated Postsecondary Education Data System, there is no easy way for shareholders to know how much ITT spends on marketing. Why doesn’t ITT, as a matter of course, report recruiting and marketing expenses in its annual report to shareholders?

Many of the shareholders and major creditors (JP Morgan and Cerberus) of ITT Educational Services have relationships with former public officials.  Scrutiny from former Treasury Secretaries Tim Geithner and John Snow, as well as former Vice President Dan Quayle would go a long way in reforming this behemoth in the for-profit higher education sector.

ITT Educational Services’ Major Shareholders:

  • Putnam Investments: 14.5%
  • Warburg Pincus: 12.4%
  • Select Equity Group/George S. Loening: 9.6%
  • Capital World Investors: 7.9%
  • Nantahala Capital Management: 7.6%
  • Clifton Park Capital Management: 6.8%
  • Providence Equity: 6.3%
  • Barnstar: 5.4%
  • BlackRock: 5.3%

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>