According to a press release dated November 10, 2005, on September 14th 2005 the United States District Court for the Southern District of Indiana dismissed without prejudice all of the claims against all of the defendants in the consolidated securities class action lawsuit filed against the Company and ten of its current and former directors and executive officers. The plaintiffs did not file an amended complaint within the period permitted by the court and the court dismissed the complaint with prejudice on October 24th 2005.
The original complaint alleges that the Company's Class Period representations regarding its quarterly performance, made in press releases and SEC filings, were each materially false and misleading because they failed to disclose that : (1) ITT
Educational had systematically falsified records, such as those relating to
enrollment, graduation and job placement rates, in order to artificially
inflate its reported operational and financial performance; (2) a material
portion of the Company's reported revenues were derived through fraudulent
business practices, such as federal grants and financial aid payments that were
secured through falsified records; (3) the Company's reported results did not
accurately portray the Company's operations because a material portion of those
results were attributable to prohibited practices; and (4) that the Company's
results were not prepared and reported in accordance with generally accepted
accounting principles and did not fairly present its actual financial results
The complaint further alleges that on February 25, 2004, before the opening of ordinary trading, the Company issued a press release announcing that it had been served with a search warrant and related grand jury subpoenas at its corporate headquarters and several of its schools. In reaction to this announcement, the price of ITT Educational common stock plummeted, falling from $57.40 per share on February 24, 2004 to close at $38.50 on February 25, 2004 -- a one-day drop of 33% on unusually heavy trading volume.