The action alleges that Career Education’s statements made during the applicable period were misleading because they misrepresented the following adverse facts, among others: (1) that the company's "record" financial growth was a product of inflated student enrollment, retention, and graduation rates procured through the falsification of records; (2) that student records were falsified in order to show a higher rate of enrollment, student retention, and graduation so the company would qualify for state and federal funding; (3) that Career Education, in order to procure its "record" financial results, forced its employees to falsify student records; and (4) that the company's earning and net income were inflated and in violation of Generally Accepted Accounting Principles ("GAAP") because its financial results were derived from illegal practices.

The truth behind Career Education’s "record" growth during the period began to emerge on November 11, 2003, when The Record, a Bergen County, New Jersey newspaper, reported that a former director of Gibbs College, a school owned by the defendants, had filed a lawsuit against the company. The former director accused the company of falsifying student records in order to show a high rate of student retention and graduation, and to qualify for state and federal funding. On news of this, Career Education’s stock fell more than 13% or $7.10 per share on November 17, 2003, to close at $45.81.

Similarly on December 3, 2003, The Santa Barbara News-Press reported that another former employee at a school owned by the defendants had filed another lawsuit wherein she claimed that "officials at the school acted illegally and improperly to inflate enrollment and boost the bottom line." The former employee also claimed that many staff members had been asked by management to commit forgery, fraud, perjury or whatever else was necessary to pass audit inspections. On news of this, shares of Career Education fell nearly 28% or $15.28 per share to close at $39.48 per share on December 3, 2003.

If you bought Career Education common stock between January 28, 2003, and December 2, 2003, and you wish to serve as lead plaintiff, you must request appointment by the Court no later than February 9, 2004.