INDIANAPOLIS (AP) — The former CEO of the parent company of for-profit ITT Technical Institute has agreed to pay $200,000 to settle a lawsuit accusing the company’s management of hiding from investors the now-defunct firm’s rapidly eroding financial condition.
Kevin Modany also accepted a five-year ban from serving as an executive of a public company to settle the Securities and Exchange Commission lawsuit against ITT Educational Services Inc. Former ITT Chief Financial Officer Daniel Fitzpatrick agreed to pay $100,000 and accept the same ban under a separate settlement, the Indianapolis Business Journal reported .
Neither man admitted wrongdoing in their settlements, which came just before a trial scheduled to begin Monday. Attorneys for both executives said the pair is pleased to move on from the case.
The SEC filed the lawsuit in 2015, accusing the two executives of concealing the “extraordinary failure” of two student loan programs ITT set up in 2009 after the financial crisis shut down the market for traditional private education loans.
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The lawsuit alleged the pair had “routinely misled” the company’s auditor on numerous fronts as loan defaults swelled at the education company, an omission that “helped to further the defendants’ fraudulent scheme.”
Attorneys for Modany and Fitzpatrick called the allegations “overreaching” and often “based on pure speculation.”
The company dismissed its thousands of employees and shut down its 130 ITT Technical Institutes in September 2016 due to federal sanctions that included a prohibition against providing financial aid to new students. The government attributed the sanctions to concerns over whether ITT’s expensive diplomas were leaving students awash in debt while failing to properly prepare them for employment.
Modany still faces legal challenges. ITT’s bankruptcy trustee filed a $250 million lawsuit last month against the former CEO and eight former directors, alleging that breaches of fiduciary duty and lapses in oversight led to ITT’s downfall.
Information from: Indianapolis Business Journal, http://www.ibj.com