Career Education Corporation - Securities Class Action

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Copyright (c) 2001
Stanford Law School

Career Education Corporation Summary: The original complaint charges CEC and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that career education publicly touted 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. These, and other statements particularized in the complaint, were materially false and misleading because 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. On December 3, 2003, the market learned that the former registrar of CEC’s Brooks Institute of Photography in Santa Barbara, California alleged, in a complaint filed with an accreditation agency, that the school falsified student records to ensure that the school passed inspections by accreditation auditors and to increase enrollment. In reaction to this announcement, CEC’s stock price plummeted, 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. Throughout the Class Period, Career Education insiders, including the individual defendants, sold a total of 1.7 million (split-adjusted) shares of Career Education common stock at artificially inflated prices, reaping gross proceeds in excess of $69 million.

Beginning on December 9, 2003, six class actions alleging violations of federal securities laws, Taubenfeld v. Career Ed. Corp., et al., 03-CV-08884; Stellato v. Career Ed. Corp., et al., 03-CV-08939; Katz v. Career Ed. Corp., et al., 03-CV-09157; Morris, et al v. Career Ed. Corp., et al., 04-CV-00305; Woo v. Career Ed. Corp., et al., 04-CV-00339; Schild v. Career Ed. Corp., et al., 04-CV-00906, were filed in the Court and were subsequently consolidated by Order dated March 19, 2004 under the caption above.

On March 19, 2004, by Order, the Court appointed Thomas Schroder as Lead Plaintiff and approved Lead Plaintiff’s choice of counsel, the firm now known as Labaton Sucharow LLP, as Lead Counsel. The Consolidated Amended Complaint was filed on June 17, 2004. The Court dismissed the June 17, 2004 complaint on February 11, 2005 with leave to replead.

The Second Consolidated Amended Complaint dated April 1, 2005 was dismissed by Order of the Court on March 28, 2006 with leave to replead. On May 1, 2006, Plaintiffs filed the Third Consolidated Amended Complaint (the “Complaint”) which generally alleged, among other things, that Defendants issued materially false and misleading statements regarding CEC’s bad debt, student enrollment and job placement statistics during the Class Period — April 22, 2002 through and including February 15, 2005 — in a scheme to artificially inflate the value of CEC securities.

The Complaint was dismissed with prejudice by Order of the Court on March 29, 2007. Plaintiffs filed and served a timely notice of appeal to the United States Court of Appeals for the Seventh Circuit on April 24, 2007. While the notice of appeal was pending, the Parties engaged in settlement discussions with the assistance of retired United States District Judge Nicholas H. Politan, acting as a mediator. On September 25, 2007, the Settling Parties, through their respective attorneys, and with the approval of their respective clients, agreed in principle to the Settlement of the Action.

On June 26, 2008, the Honorable Joan H. Lefkow preliminarily approved the settlement in the amount of $4,900,000 in cash. On September 18, 2008, the Settlement Fairness hearing was held and Judge Lefkow approved the settlement, the plan of allocation and attorney’s fees and expense. The complaint was dismissed with prejudice.

INDUSTRY CLASSIFICATION:
SIC Code: 8200
Sector: Services
Industry: Schools

COMPANY/ISSUER NAME:	Career Education Corporation
COMPANY/ISSUER TICKER:	CECO
COMPANY WEBSITE:	http://www.careered.com

FIRST IDENTIFIED COMPLAINT IN THE DATABASE

Daniel Taubenfeld, et al. v. Career Education Corporation, et al.

COURT: N.D. Illinois	DOCKET NUMBER: 03-CV-8884
JUDGE NAME: Hon. Joan Humphrey Lefkow
DATE FILED: 12/09/2003	SOURCE: Business Wires
CLASS PERIOD START: 04/22/2003	CLASS PERIOD END: 12/02/2003
TYPE OF COMPLAINT: Complaint (Unamended and Unconsolidated)
PLAINTIFF FIRMS NAMED IN COMPLAINT:
Bull & Lifshitz 18 East 41st St., New York, NY, 10017 (voice) 212.213.6222, (fax) 212.213.9405, Cauley Geller Bowman Coates & Rudman LLP (Little Rock, AR) P.O. Box 25438, Little Rock, AR, 72221-5438 (voice) 501.312.8500, (fax) 501.312.8505, Cauley Geller Bowman Coates & Rudman, LLP (New York) 200 Broadhollow, Suite 406, Melville, NY, 11747 (voice) 631.367.7100, (fax) 631.367.1173, Goodkind Labaton Rudoff & Sucharow LLP 100 Park Avenue, New York, NY, 10017 (voice) 212.907.0700, (fax) 212.818.0477, info@glrslaw.com Kenneth A. Elan (Chicago ) 30 North LaSalle Street, Suite 3200, Chicago , IL, 60602 (voice) 312782.4880, (fax) , mmiller@millerfauchner.com Law Offices of Charles J. Piven, P.A. World Trade Center-Baltimore,401 East Pratt Suite 2525, Baltimore, MD, 21202 (voice) 410.332.0030, (fax) , pivenlaw@erols.com Milberg Weiss Bershad Hynes & Lerach LLP (New York, NY) One Pennsylvania Plaza, New York, NY, 10119-1065 (voice) 212.594.5300, (fax) , Much Shelist Freed Denenberg Ament & Rubenstein, PC , Chicago, IL, (voice) 800-470-6824, (fax) 312-621-1750, Much, Shelist, Freed, Denenberg, Ament & Eiger, P.C. 200 N LaSalle St Ste 2100, Chicago, IL, 60601 (voice) 312.346.3100, (fax) , Schiffrin & Barroway LLP 3 Bala Plaza E, Bala Cynwyd, PA, 19004 (voice) 610.667.7706, (fax) 610.667.7056, info@sbclasslaw.com Wechsler Harwood LLP 488 Madison Avenue 8th Floor, New York, NY, 10022 (voice) 212.935.7400, (fax) , info@whhf.com _____________________________________________ TOTAL NUMBER OF PLAINTIFF FIRMS: 11

DOCUMENTS FOR THE FIRST IDENTIFIED COMPLAINT
Class Action Complaint For Violation Of Federal Securities Laws
Type: Complaint		Date on the document: 12/09/2003
Class Action Complaint For Violations Of Federal Securities Laws
Type: Complaint		Date on the document: 12/09/2003

REFERENCE COMPLAINT

Daniel Taubenfeld, et al. v. Career Education Corporation, et al.

COURT: N.D. Illinois	DOCKET NUMBER: 03-CV-8884
JUDGE NAME: Hon. Joan Humphrey Lefkow
DATE FILED: 05/01/2006	SOURCE: Business Wires
CLASS PERIOD START: 04/22/2002	CLASS PERIOD END: 02/15/2005
TYPE OF COMPLAINT: Third Amended and Consolidated
PLAINTIFF FIRMS NAMED IN COMPLAINT:
Goodkind Labaton Rudoff & Sucharow LLP 100 Park Avenue, New York, NY, 10017 (voice) 212.907.0700, (fax) 212.818.0477, info@glrslaw.com _____________________________________________ TOTAL NUMBER OF PLAINTIFF FIRMS: 1

DOCUMENTS FOR THE REFERENCE COMPLAINT
Amended Consolidated Complaint for Violation of the Federal Securities Laws
Type: Complaint		Date on the document: 06/17/2004
Notice Of Filing Corrected Pages 19 And 23 To The Amended Consolidated Complaint
Type: Notice		Date on the document: 06/22/2004
Memorandum Opinion And Order
Type: Order		Date on the document: 02/11/2005
Second Consolidated Amended Complaint for Violation of the Federal Securities Laws
Type: Complaint		Date on the document: 04/01/2005
Memorandum Opinion And Order
Type: Order		Date on the document: 03/28/2006
Third Amended Consolidated Complaint For Violation Of The Federal Securities Laws
Type: Complaint		Date on the document: 05/01/2006
Judgment in a Civil Case
Type: Other		Date on the document: 03/29/2007
Memorandum Opinion and Order
Type: Order		Date on the document: 03/29/2007
Notice Of Appeal
Type: Notice of Appeal		Date on the document: 04/24/2007
Stipulation And Agreement Of Settlement Of Class Action
Type: Settlement		Date on the document: 11/05/2007
Joint Motion For Order Preliminarily Approving Settlement, Setting Date For Final Approval Hearing, And Providing Notice To The Class And For Issuance Of An Order Of Certification Pursuant To Circuit Rule 57
Type: Motion		Date on the document: 03/19/2008
Order Of Certification Pursuant To Circuit Rule 57
Type: Order		Date on the document: 04/08/2008
Notice Of Pendency And Settlement Of Class Action
Type: Notice		Date on the document: 06/26/2008
Preliminary Approval Order
Type: Order		Date on the document: 6/26/2008
Order
Type: Order Approving AF&E		Date on the document: 09/18/2008
Order And Final Judgment
Type: Order		Date on the document: 09/18/2008
U.S. District Court Civil Docket
Type: Docket		Date on the document: 1/6/2009

OTHER DOCUMENTS
Class Action Complaint For Violation Of Federal Securities Laws
Case Name and/or Number: Stellato
Type: Complaint		Date on the document: 12/11/2003
Class Action Complaint
Case Name and/or Number: Woo
Type: Complaint		Date on the document: 01/16/2004
Order
Case Name and/or Number: Daniel Taubenfeld, et al. v. Career Education Corporation, et al.
Type: Order		Date on the document: 04/29/2008

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