In the Wake of Job Placement Rate Scandal, Career Ed Corp's CEO Steps Down

Career Education Corporation’s chief executive officer Gary McCullough resigned abruptly on Tuesday after an internal investigation found improprieties at a number of the company’s Health Education and Art & Design schools related to how they determine their job placement rates.

In announcing the resignation on Tuesday night, company chairman Steve Lesnik did not provide a specific explanation for McCullough’s departure. But he said that “given the complexities of the regulatory environment and other issues that have arisen over the last year, CEC is moving towards a new phase and the Board views it as the appropriate time to start the process of putting in place fresh leadership at the CEO level.”

In August, Career Education alerted investors and financial analysts that it had found that some of its health professional schools had engaged in “improper practices” in calculating their job placement numbers. Company officials did not disclose the nature of the problems, which they said they discovered while preparing a response to a subpoena from the New York attorney general. But the violations were serious enough to prompt the company to hire an outside law firm “to review the determination of student placements” at its more than 80 U.S. campuses.

On Monday, the company revealed in a Securities and Exchange Commission (SEC) filing that the law firm has “confirmed the existence of improper placement determination practices at certain of the Company’s Health Education Segment Schools.” In addition, the firm found that “certain placements” at both the Health Education and Art & Design schools “lacked sufficient supporting documentation or otherwise did not meet applicable placement guidelines established by the Company.”

In light of these findings, Career Education officials revised the 2010-11 job placement numbers for the 49 schools involved and discovered that only 13 of them have actual rates high enough to meet the Accrediting Council for Independent Colleges and School’s minimum standard of 65 percent. Schools that fail to meet this threshold face a number of possible penalties, including having their accreditation suspended. That could be a death sentence for these schools, as they would lose access to federal financial aid during this period of time.

At Higher Ed Watch, we expect that the news of McCullough’s departure is raising alarms throughout the for-profit higher education sector. After all, Career Education Corporation is hardly the only career college company that has cooked the books on the job placement rates they disclose to prospective students and regulators. As we’ve shown in prior posts, this is, in fact, a widespread problem throughout the industry.