NEW YORK, Jan. 20, 2004 (PRIMEZONE) -- Wechsler Harwood LLP today announced that a securities class action has been commenced on behalf of persons or entities who purchased or otherwise acquired the securities of Career Education Corp. ("CEC" or the "Company") (Nasdaq:CECO) between January 28, 2003 and December 2, 2003, inclusive, (the "Class Period").
The case, entitled Morris v. Career Education Corp., et al., 04-CV-0305, is pending in the United States District Court for the Northern District of Illinois against defendants CEC and certain of its officers. A copy of the complaint is available from the Court or can be viewed on Wechsler Harwood web site at: www.whesq.com.
The Complaint alleges that defendants made false and misleading statements concerning its business and financial performance, the performance of its stock price and its industry leading position as reasons for why investors should purchase its stock. Such representations were materially false and misleading because, unbeknownst to investors, they failed to disclose that CEC had been regularly falsifying student records in order to increase graduation rates and enrollment, conceal problems that could have threatened the accreditation of its schools, and generally, to allow it to increase its profitability. Among other things, CEC's schools graduated students who had not completed required courses and regularly credited and billed students for taking courses the students had never attended. Because many of CEC's students receive federal financial aid, the federal government footed tuition bills for courses not attended or passed by students. CEC improperly recognized and reported such payments as revenue.
On November 11, 2003, the Bergen Record, a local New Jersey newspaper, reported that a former director of CEC's Gibbs College in New Jersey had alleged that the school regularly graduated students who did not complete required courses or attend mandatory internships. These allegations were made in a wrongful termination action filed by the former director of Gibbs College in the Superior Court of New Jersey on November 5, 2003. Because the story appeared in a local New Jersey daily with very limited circulation, it was not digested by the market and did not immediately affect the Company's stock price.
On November 17, 2003, the Company issued a press release announcing the filing of the wrongful termination action. The Company's stock price plummeted on the news, falling from $52.70 per share on November 14, 2003 to $42.56 per share on November 17 (the next trading day), a one-day drop of 19.2%. However, CEC's stock price rebounded over the next few weeks as the market shrugged off the allegations in the lawsuit as isolated and unlikely to have a materially negative impact on the Company's overall operations.
However, on December 3, 2003, the market learned that a highly placed employee of a different CEC school in California had leveled similar accusations of wrongdoing. On December 3, 2003, Bloomberg News reported that the former registrar of CEC's Brooks Institute of Photography in Santa Barbara, California filed a complaint with ACICS alleging that the school falsified student records to ensure that the school passed inspections by accreditation auditors and to increase enrollment.
In reaction to this latest revelation, CEC's stock price plummeted again, falling from $54.76 per share on December 2, 2003 to $39.48 on December 3, 2003, a one-day drop of 28%, on trading volume of 18.2 million shares -- more than nine times the Company's three- month daily average.
If you purchased CEC securities during the Class Period, you may request that the Court appoint you as lead plaintiff by February 9, 2004. A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member's claim is typical of the claims of other class members, and that the class member will adequately represent the class. Under certain circumstances, one or more class members may together serve as "lead plaintiff." Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff.
Wechsler Harwood has taken a leading role in many important actions on behalf of defrauded shareholders. The Wechsler Harwood website (www.whesq.com) has more information about the firm and detailed information regarding this matter. If you wish to discuss this action with us, or have any questions concerning this notice or your rights and interests with regard to the case, please contact the following: