DeVry: DoJ Investigation May Complicate Matters

DeVry (DV) announced yesterday that it was cooperating fully with the Department of Justice inquiry regarding “recruiter compensation”.

I’ve been waiting on the sidelines for DeVry’s stock to get into a more favorable valuation range, but this piece of news adds a slight tinge to things.

The recruiters’ main job is to go out and recruit students by going to high schools, and other PR related events with the hopes of securing new enrollments. Part of the requirements of participating in government lending programs (Title IV loans) require strict adherence to specific rules of engagement. One of these rules requires that recruiters do not get compensated in any way shape or form from private lenders.

DeVry got into a little trouble with this a few years back where they received $88K in fees from Citibank (C). The company reiterated in their 2007 10k report that the company did not receive any referral or marketing fees from any other lenders.

Yesterday’s news makes no mention of any violations, or whether this has anything to do with their preferred lenders. However, the allegations revolve around DeVry possibly submitting false claims to the Department of Education around recruiter compensation.

This maybe nothing material, but I’m still going to keep an eye out for it. If there is anything material, you can be sure it will complicate audit/compliance matters with the new law President Bush just signed whereby the government is going to step in to buy student debt.

Disclosure: none

Comments

[Devry Watch:]

Hi David and All:

First of all the student loan kickback skim wasn't a few years ago it was last year April 2007. Second of all Devry issued the press release in regards to what this investigation is about. Because Apollo Inc was sued for failing ot notify investors of a recruiting inquirer Devry mau have felt this is a known commodity that investors could grasp and not feel moved by the investigation. In fact we who watch this industry/sector know that Apollo lost money not for the act but for lying and misleading. So Devry press release capitalizes on that. The issues are not with Devry on those counts. Me thinks that the US Department of Justice failure to comment shows an unknownd commodity of false claims act far beyond recruiter pay. I started a web site that discussed some of the issues and is growing daily with hints and trigger what those false claims may be. www.devrywatch.com

2008 May 20 11:28 AM

[David Tsao:]

The student lending kickbacks came to light for several schools last year in the time frame you mention, but DeVry's exposure was in relation to Citibank back in 2004 and 2005.

www.chicagobusiness.co...;id=24686&seenIt=1

I'm still keeping my eye out for this story and the implementation details for the government to buy student debt.

2008 Jun 02 02:35 PM

[Jojobuju:]

What do you mean? Do you know what recruiter compensation is? Its an investigation on how the recruiters are paid. For instance if you sign up 10 people every session you will get a raise each quarter. If you dont hit 10 applicants each session you will get money taken away from your paycheck for the next quarter. If you dont hit your goal they take off 8.9 percent of what you make. Each level they can take off more or add more. You could get a raise if you hit your goal but if you dont hit your goal they will remove your raise. They call it compensation not a bonus.

2008 Sep 26 01:52 AM