Jan. 3 (Bloomberg) -- A DeVry Inc. shareholder sued 14 of the for-profit education company’s officers and directors alleging their failure to properly oversee the schools’ recruitment and financial aid policies injured the company.
Shareholder Timothy Hald, in a lawsuit filed today in Illinois state court in Chicago, claims bad recruiting practices at DeVry schools have left students debt ridden and without prospects for employment.
“The improper recruiting tactics allowed DeVry to grow rapidly, but now threaten the company’s future profitability and survival,” Hald said. He is seeking a court order for the directors to reform DeVry’s governance and pay restitution to the company.
For-profit education companies including DeVry, Washington Post Co.’s Kaplan Inc. and Apollo Group Inc.’s Phoenix University have been criticized for their rising student loan default rates by federal legislators the non-profit Education Trust research center.
The Washington-based Education Trust, in a November report, said only one in five for-profit college students earns a bachelor’s degree within six years and most graduate with “enormous debt.”
DeVry Inc., based in the Chicago suburb of Downers Grove, operates its namesake university and Carrington College, the Keller Graduate School of Management and Chamberlain College of Nursing.
The university has more than 73,500 students, an increase of almost 15 percent from 2009, according a Dec. 7 DeVry statement. Nursing school enrollment climbed 57.8 percent to 8,862 while Carrington enrollment fell 6.4 percent, according to the company.
DeVry relied upon federal student loan programs for 74 percent of its 2009 cash revenue, while its students’ loan repayment rate is only 37 percent, according to Hald’s complaint.
Chairman Harold T. Shapiro and Chief Executive Officer Daniel Hamburger are among the officers and directors named as defendants in the lawsuit. Joan Bates, a company spokeswoman, didn’t immediately respond to voice-mail and e-mail messages seeking comment after regular business hours.
DeVry shares rose 52 cents, or 1 percent, to $48.50 in New York Stock Exchange trading. The shares fell 15 percent last year.
The case is Hald v. Hamburger, 11CH00087, Cook County, Illinois, Circuit Court, Chancery Division (Chicago).
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