How Whistleblowing Closed ITT Tech’s Doors

By : Tony Snider

ITT Technical Institution was a for-profit technical institute with 130 campuses nationwide.  This institution has recently closed all of its campuses as of September 6, 2016, and ITT Tech as a whole filed for bankruptcy on September 16, 2016.  The closing of this institution was long overdue, as ITT Tech had racked up many legal issues under their belt.  ITT Tech had been known for charging incredible prices for more than 20 years as it took millions in federal grant money, buried low-income and first-generations students in insurmountable debt, and evaded regulators since the early 1990’s, all while its CEO and other executives personally profited hundreds of thousands of dollars from the fraudulent service.  This institution would have continued to stay in business if it was not for former employee and whistleblower Dan Graves, who brought a lawsuit alleging that the company had systematically violated the law governing compensation of sales representatives over 17 years earlier (A Whistle Was Blown On ITT).

Whistleblowing is commonly defined as “revealing questionable organizational practices to an outside audience that can bring justice or increase awareness in an affected public” (Avtgis, 2012).  Whistleblowing is a common ethical dilemma because of the amounts of repercussions the whistleblower and institution could face, but also because of the obvious need for change that would not happen if it were not for a whistleblower.  Most commonly, whistleblowers will go to the media, law enforcement, or regulating agencies with the problems they see in their organization or institution to make the problem public and to try and resolve the issue.  Whistleblowing is typically only used when the offense by the organization or institution is great, the risk of retaliation on the whistleblower is low, and that the whistleblower themselves has a high perception that the whistleblowing will bring change. There are also two types of whistleblowers, internal and external whistleblowers.  Internal whistleblowers report misconduct to another person within the organization.  External whistleblowers report misconduct to a person outside the organization, such as law enforcement or media (What is a Whistleblower).   Whistleblowers can also be sorted by the type of whistleblowing.  Federal whistleblowers are government employees who reveal misconduct committed by their employers or can also be private-sector employees who inform about the misconduct of their employers that is committed in relation to the federal government.  For these people working for the federal government, the Whistleblower Protection Act, or WPA, was created to protect disclosures of misconduct (Information on Whistleblower Protection Act and Whistleblower Protection Enhancement Act).  Corporate whistleblowers are employees of corporations or other private businesses that disclose statutory or regulatory violations by the employers.  Corporate whistleblowers are more commonly heard of in your everyday news, as they are those workers in corporate America fighting for fairness and equality in the workplace.  In the case of Dan Graves, the whistleblower from ITT Tech, he would have been a corporate whistleblower, as he was an employee at the institution at the time he brought the lawsuit against ITT Tech.  Whistleblowing will forever be the most difficult ethical decision to make.  As a whistleblower one may risk pariah within the organization, being blackballed from the industry as a whole, or one could face legal punishment if they admit to being aware of the action taking place within the organization previously.  When it comes to whistleblowing one first must understand the importance of being a whistleblower if action is genuinely needed, or whether finding an internal and discrete way of fixing the problem would be more beneficial.  Studies have shown that whistleblowing will most often occur when employees feel that the communication climate of the organization is highly supportive and low in defensiveness, whereas other research has shown that the severity of the offense and relational closeness to the perpetrator are the best indicators.  Although few things statistics and trends have been proven in regards to whistleblowing, it is true that the closer we are to a coworker who does the wrongdoing, the less likely we will be to blow the whistle on them.

Previously stated, ITT Tech was a well-known technological institution before closing its doors in September of 2016.  ITT Tech was owned and operated by ITT Educational Services Inc., a publicly traded company headquartered in Carmel, Indiana.  The main problem with ITT Tech was the incredibly high tuition rates they charged.  ITT Tech had the highest tuition rates in the industry and had the industry’s highest rate of loans go into default in student’s first two years of attending the school.  The institution stayed in business far longer than every should have, but finally closed its doors following a federal crackdown led by the Department of Education, which revealed that the school was earning the vast majority of its revenue from taxpayer dollars.  It was estimated following the investigation that over 70 percent of the school’s money gained in 2015 was from federal financial aid funds.  ITT Tech was also under fire for allegedly purposefully recruiting students who were not qualified to attend the school – including one puzzling incident where a student was accepted that could not write a coherent sentence was enrolled – so that the school could lockdown more federal financial aid money. This led to the Department of Education blocking ITT Tech’s access to any more federal aid.  Following the Department of Education blocking the school’s access to federal aid, the school was essentially forced to stop enrolling students from that point on.  ITT Tech attempted to quietly shut down the operation of some campuses across the nation ahead of Labor Day weekend, but was forced to announce the decision publicly to shut down all operations of all campuses nationwide the following Tuesday.  Less than a week after announcing the ceasing of operations at their campuses, ITT Tech filed for bankruptcy.

itt-tech

Photo Credit – forbes.com

Dan Graves, the former employee at ITT Tech and eventual whistleblower that ended the school’s fraudulency, still wondered what had taken the government so long.  It had been over 17 years since Graves and another former ITT Tech employee had brought up the suit alleging that the company had been violating numerous compensation laws dealing with sales representatives.  Initially, Graves’ case was taken with great interest by 6 federal prosecutors and regulators.  Graves explained that they expressed great interest initially, as the government was estimated to be able to recover over 400 million dollars in damages from the case. Somehow, by 2004, the lawsuit was all but dead and Grave’s was unable to continue to provide the government with more influential evidence, so his efforts were seemingly for nothing (Nunez, 2016)

Graves was devastated and confused following the closing of the case.  He explained how he thought he brought up a very good case and how ITT Tech was abusing the system and ripping off the government for billions of dollars.  Bringing to light how ITT Tech was pocketing millions of federal financial aid dollars and how they were enrolling students that were obviously not qualified for the institution to do so only brought out more of the bad from the school.  Because of Graves’ whistleblowing on his own employer, the suit also claims that ITT Tech unlawfully employed recruiters that were paid sales commission to provide false information to potential and current students regarding their financial obligations, how transferable ITT Tech credits would be to other schools or programs, and about future employment opportunities as well.  In one student’s case, they were told that upon graduation from ITT Tech  in forensic science that they could be employed to scientist jobs similar to those in CSI shows or other criminal justice shows, but ITT Tech did not give any of the basic training necessary to work as a forensic scientist, so this student was unable to find a job at all with the worthless degree he had obtained (Whistleblower Lawsuit Accuses ITT Tech Of Defrauding Government).

The closing of ITT Tech is obviously beneficial to the society we live in.  The investigation against ITT Tech and its findings expose some of the large problems with for-profit institutions like ITT Tech.  This investigation exposed the true, alarmingly low graduation rates and job placement rates of ITT Tech (Comulada, 2016).  Another reason this was beneficial was because it showed how much money ITT Tech was bringing in yearly of federal aid.  Now, because of ITT Tech being exposed publicly, other for-profit schools will be less likely to be able to get away with pocketing our taxpayer dollars and will be scrutinized much more closely.

Taking ITT Tech’s investigation into hand, work policies and ethical standards were definitely the problems put on the forefront.  For decades ITT Tech had been employing recruiters, that were payed based on commission, to bring in as many students as they could that they knew were obviously not qualified and would hopefully fail out or drop out.  This process was what ITT was able to make so much money off of the government off of, bringing in so much money in federal aid and grants. Ethically that obviously wrong for many reasons; ITT Tech was giving false hope to those who were destined to fail and were already in financial trouble and was employing specific people just to recruit these specific people.

At ITT Tech it was obvious that they were doing all that they could to stay in business and continue their ways following Dan Graves’ whistleblowing almost 20 years ago.  In all of my time growing up, seeing all of the ITT Tech commercials and even knowing handful of people that attended the institution itself, I was still personally unaware of the unethical and illegal operations going on at ITT Tech.

This scenario will hopefully bring to light any similar cases with higher education institutions or even any other similarly ran companies.  ITT obviously was not an honorably ran school, so few similar institutions can learn much of anything from them, other than what not to do.  ITT Tech was run by money-hungry cowards that took advantage of the American system.  Thankfully, because Dan Graves whistleblew on his employer, no more American citizens will be duped by recruiters looking for the poor, ill qualified students that they know how little chance of success just so that they can continue to rake in federal aid money.

References

M. (2016, October 21). A Whistle Was Blown on ITT; 17 Years Later, It Collapsed. Retrieved October 27, 2016, from http://www.nytimes.com/2016/10/23/business/a-whistle-was-blown-on-itt-17-years-later-it-collapsed.html?rref=collection/timestopic/Whistle-Blowers&action=click&contentCollection=timestopics®ion=stream&module=stream_unit&version=latest&contentPlacement=1&pgtype=collection&_r=0

@. (2016). Whistleblower Lawsuit Accuses ITT Tech Of Defrauding Government, Using Deceptive Recruitment Practices. Retrieved October 27, 2016, from https://consumerist.com/2016/01/21/whistleblower-lawsuit-accuses-itt-tech-of-defrauding-government-using-deceptive-recruitment-practices/

Nunez, M. (2016). How ITT Tech Screwed Students and Made Millions. Retrieved October 27, 2016, from http://gizmodo.com/how-itt-tech-screwed-students-and-made-millions-1786654315

Comulada, J. (2016). Why ITT Tech closing down is a good thing for all of us. Retrieved October 27, 2016, from http://www.upworthy.com/why-itt-tech-closing-down-is-a-good-thing-for-all-of-us

(n.d.). Retrieved October 27, 2016, from http://study.com/academy/lesson/what-is-the-whistleblower-act-definition-rights-protection.html

Information on Whistleblower Protection Act and Whistleblower Protection Enhancement Act. (n.d.). Retrieved October 27, 2016, from https://www.sec.gov/eeoinfo/whistleblowers.htm

ITT Technical Institute. (n.d.). Retrieved October 27, 2016, from http://itt-tech.info/

Avtgis, T. A., & Rancer, A. S. (2012). Organizational communication: Strategies for success. Dubuque, IA: Kendall Hunt Pub.

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