NEW YORK, April 17, 2013 (GLOBE NEWSWIRE) -- Labaton Sucharow LLP filed a class action lawsuit on April 17, 2013 in the U.S. District Court for the Southern District of New York. The lawsuit was filed on behalf of persons or entities who purchased or otherwise acquired the publicly-traded common stock of ITT Educational Services, Inc. ("ITT" or the "Company") (NYSE:ESI) between April 24, 2008 and February 25, 2013, inclusive (the "Class Period").
The action charges ITT and certain of its officers with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder. The complaint alleges that, throughout the Class Period, ITT made false and misleading statements, and concealed material information relating to the value of the Company's liabilities and sufficiency of its reserves.
ITT is a for-profit provider of post-secondary degree programs in the United States. The complaint alleges that, during the Class Period, ITT concealed from shareholders that: (1) the Company had exposed itself to tremendous liability under three risk-sharing agreements ("RSAs"); (2) the Company falsely downplayed the risks associated with the RSAs and assured investors that it had properly set aside reserves to meet its liabilities; (3) the Company was improperly accounting for the RSAs, and its accounting practices were repeatedly questioned by the Securities and Exchange Commission ("SEC") and are now the subject of a formal SEC investigation; and (4) by failing to book adequate reserves for its liabilities under the RSAs, the Company misrepresented its earnings throughout the Class Period.
The truth about ITT was revealed through a series of disclosures. First, on July 26, 2012, the Company released its results for the second quarter of 2012 that revealed the allowances for doubtful accounts and bad debt expenses that ITT had taken in connection with loans the Company had extended to students directly. These accounting entries implicitly revealed to investors that the loans previously issued through the RSAs had experienced similarly poor performance. In reaction to this news, ITT's stock price fell $7.65 per share, or 15.1 percent, to close at $42.78 per share on July 26, 2012.
Then, on January 4, 2013, ITT disclosed that it had settled an action brought by SLM Corporation ("Sallie Mae") arising out of the Company's guarantee obligations under the 2007 RSA for $46 million—nearly double the $26 million that Sallie Mae had originally sought. In connection with this settlement, ITT took a $13.2 million charge for the 2007 RSA and an additional $70 million charge to establish a reserve related to the 2009 and 2010 RSAs. On this news, ITT's stock price fell $3.72 per share, or 19.2 percent, to close at $15.57 per share during the next trading session on January 7, 2013.
Finally, after the market closed on February 22, 2013, ITT disclosed that it had received a subpoena from the SEC on February 8, 2013 that requested the production of documents relating to ITT's accounting for the 2009 and 2010 RSAs. In reaction, ITT's stock price fell $3.10 per share, or 16.6 percent, to close at $15.53 per share during the next trading session on February 25, 2013.
If you are a member of this Class you can view a copy of the complaint and join this class action online at http://www.labaton.com/en/cases/Newly-Filed-Cases.cfm.
If you purchased ITT common stock during the Class Period, you may be able to seek appointment as Lead Plaintiff. Lead Plaintiff motion papers must be filed with the U.S. District Court for the Southern District of New York no later than May 10, 2013. A lead plaintiff is a court-appointed representative for absent Class members. You do not need to seek appointment as lead plaintiff to share in any Class recovery in this action. If you are a Class member and there is a recovery for the Class, you can share in that recovery as an absent Class member. You may retain counsel of your choice to represent you in this action.
If you would like to consider serving as lead plaintiff or have any questions about the lawsuit, you may contact Rachel A. Avan, Esq. of Labaton Sucharow LLP, at (800) 321-0476 or (212) 907-0709, or via email at ravan@labaton.com.
Labaton Sucharow LLP, with offices in New York, New York and Wilmington, Delaware, is one of the country's premier law firms representing institutional investors in class action and complex securities litigation, as well as consumers and businesses in class actions seeking to recover damages for anticompetitive practices. The Firm has been a champion of investor and consumer rights for nearly 50 years, seeking recovery of current losses and necessary governance reforms to protect investors and consumers. Labaton Sucharow has been recognized for its excellence by the courts and its peers. More information about Labaton Sucharow is available at www.labaton.com.