Form 8-K DEVRY EDUCATION GROUP For: Dec 15

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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FORM 8-K

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CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report

(Date of earliest event reported)

December 15, 2016

 

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DEVRY EDUCATION GROUP INC.

 (Exact name of registrant as specified in its charter)

 

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(630) 515-7700

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

 

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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 

 

 

 

 

 

On December 15, 2016, DeVry Education Group Inc. (“DeVry Group”) announced that DeVry Group, DeVry University, Inc. (“DeVry University”), and DeVry/New York Inc. (collectively, the “DeVry Parties”) and the Federal Trade Commission (“FTC”) agreed to a Stipulation as to Entry of an Order for Permanent Injunction and Monetary Judgment (the “Agreement”) resolving litigation brought by the FTC regarding DeVry University’s use of employment statistics in former advertising.  The Agreement will become effective upon its entry as an Order in the United States District Court of the Central District of California.

Under the terms of the Agreement, the DeVry Parties agreed to pay $49.4 million to be distributed at the sole discretion of the FTC; to forgive $30.4 million of institutional loans issued before September 30, 2015; and to forgive outstanding DeVry University accounts receivable balances by $20.2 million for former students.  DeVry Group expects to record a related pre-tax settlement charge in the range of $52 million to $55 million in the second quarter of fiscal year 2017 arising from the monetary terms of the settlement.  In addition, the DeVry Parties agreed that DeVry Group institutions marketing to U.S. consumers will maintain specific substantiation to support any future advertising regarding graduate outcomes and educational benefits, and will implement training and other agreed-upon compliance measures.

DeVry Group chose to settle the FTC litigation after filing an answer denying all allegations of wrongdoing.  Student services and access to federal student loans are not impacted by the Agreement, and at no time has the academic quality of a DeVry University education been questioned.  DeVry Group is pleased this matter is reaching resolution, particularly as its institutions implement recently announced student commitments and as it continues to focus on investments that directly support its students’ success.

The foregoing description of certain terms contained in the Agreement does not purport to be complete and is qualified in its entirety by reference to the copy of the Agreement filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.

 

Item 7.01       Regulation FD Disclosure

 

On December 15, 2016, DeVry Group issued a statement regarding the signing of the Agreement, a copy of which is attached hereto as Exhibit 99.1.

Forward-Looking Statements

Certain statements contained in this Form 8-K and related press release, including those that affect the expectations or plans of DeVry University  or DeVry Group, may constitute forward-looking statements subject to the Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as DeVry University, DeVry Group or their management “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “foresees,” “intends,” “plans” or other words or phrases of similar import. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause DeVry Group’s actual results to differ materially from those projected or implied by these forward-looking statements. Potential risks, uncertainties and other factors that could cause results to differ are described more fully in Item 1A, "Risk Factors," in DeVry Group’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2016. These forward-looking statements are based on information as of December 15, 2016, and DeVry Group assumes no obligation to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

 

Item 9.01       Financial Statements and Exhibits

 

 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

CHRISTINA V. TUSAN

 Cal Bar. No. 192203; [email protected]

JOHN D. JACOBS

 Cal. Bar No. 134154; [email protected]

THOMAS J. SYTA

 Cal. Bar No. 116286; [email protected]

BARBARA CHUN

 Cal. Bar No. 186907; [email protected]

MARICELA SEGURA

 Cal. Bar No. 225999; [email protected]

FEDERAL TRADE COMMISSION

10877 Wilshire Blvd., Suite 700

Los Angeles, CA 90024

Tel: (310) 824-4343; Fax: (310) 824-4380

SARAH E. SCHROEDER

 Cal Bar No. 221528; [email protected]

KAREN GOFF

 G-waived; [email protected]

FEDERAL TRADE COMMISSION

901 Market St., Suite 570

San Francisco, CA 94103

Attorneys for Plaintiff

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

 

 

 

On January 27, 2016, Plaintiff, the Federal Trade Commission (“Commission” or “FTC”), filed its Complaint For Permanent Injunction and Other Equitable Relief (Dkt # 1) (“Complaint”) pursuant to Section 13(b) of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 53(b).  On May 16, 2016, DeVry Education Group Inc., DeVry University, Inc., and DeVry/New York Inc. (“Defendants”) filed Defendants’ Answer to Plaintiff Federal Trade Commission’s Complaint (Dkt #42) (“Answer”), in which Defendants denied the charges in the Complaint.

 

The Commission and Defendants stipulate to the entry of a Stipulated Order for Permanent Injunction and Monetary Judgment (“Order”), lodged concurrently with this Stipulation, to resolve all matters in dispute in this action between them, with the following terms and provisions:

 

FINDINGS

 

 

 

 

 

 

 

DEFINITIONS

 

For the purpose of this Order, the following definitions apply:

 

 

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ORDER

I.   PROHIBITION AGAINST DECEPTIVE CLAIMS

 

IT IS ORDERED that DeVry, DeVry’s officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, in connection with promoting or offering for sale any educational product or service, are permanently restrained and enjoined from:

A.        Misrepresenting, expressly or by implication, the success that students or graduates have realized or are likely to realize in starting or obtaining careers, jobs or employment.  This prohibition includes, but is not limited to, misrepresenting:

1.

the extent to which––whether expressed by a number, a percentage or otherwise––graduates or any subset of graduates have obtained jobs or careers:

a.

in their field of study;

b.

in any specified field or type of employment;

c.

with any given category or type of employer;

d.

with any particular employer; or

e.

within a given time frame;

2.

the extent to which any employment statistic, or any other statement that refers to the employment success or status of students or graduates, reflects the success of students or graduates who were actively seeking employment;

3.

the extent to which any employment statistic, or any other statement that refers to the employment success or status of students or graduates, either includes or does not include any subset of students or graduates; or

 

 

4.

that any individual obtained a job or career, in his or her field of study or otherwise, as a result of attending DeVry.

 

 

 

1.

that any employment statistic reflects the success of graduates in obtaining employment near or after graduation when the statistic includes employment that graduates obtained (a) before purchasing the product or service, or (b) at any time more than six months prior to graduating; provided, however, that, nothing in this Subsection D.1 shall be construed to prohibit DeVry from making a representation to a state or federal authority or programmatic or institutional accreditor on a reporting form required by such entity, provided further that DeVry clearly and conspicuously disclose on such form, either as the primary number or in a footnote in 14-point font, the percentage of students who obtained their jobs upon or after graduating; or

2.

that any employment statistic reflects the employment status or employment success of graduates who were actively seeking employment if graduates were classified as not actively seeking employment based on (a) having waived career-services assistance, in whole or in part, or (b) the extent to which the graduates used career services.

 

 

 

 

II.   PRESERVATION OF RECORDS RELATING TO SUBSTANTIATION

 

IT IS FURTHER ORDERED that:

 

1.

All student files relating to the students or graduates;

2.

All emails, letters, and other communications constituting or relating to complaints received from any student or graduate, either directly or through any third party, regarding: the person’s experience in attempting to obtain a career, job, or employment; the compensation or compensation range of jobs; the assistance the person received or failed to receive from DeVry in attempting to find employment; or any advertising or marketing that referred to obtaining employment or to compensation received by past graduates.

3.

All forms completed by or received from any student, graduate or third party relating to any student’s or graduate’s employment status, job search, or use of, or desire to use, any career-related services offered by DeVry;

 

 

4.

All documents and information relating to any student’s or graduate’s employment status or income at any point before or after graduation;

5.

All documents relating to any audit, review, survey or analysis underlying or supporting any rate or statistic used in any representation covered by Section I.E of this Order, including the employment status or compensation of students or graduates; and

6.

All documents, including, but not limited to, manuals, training materials, guidelines and instructions relating to the methodology that DeVry utilizes to determine any calculation, rate or statistic used in any representation covered by Section I.E of this Order, including, but not limited to, how to classify the employment status of any student or graduate, and any factor utilized in determining the number of students or graduates placed in the numerator or the denominator of any such calculation, rate or statistic.

 

 

III.   TRAINING PROGRAM

 

IT IS FURTHER ORDERED that for 20 years after entry of this Order, DeVry must:

 

 

 

 

 

 

 

IV.   PROHIBITION AGAINST NON-DISPARAGEMENT CLAUSES

 

IT IS FURTHER ORDERED that DeVry, DeVry’s officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are hereby permanently restrained and enjoined from:

 

 

 

V.   COOPERATION WITH CUSTOMERS

 

IT IS FURTHER ORDERED that, except as otherwise provided by law, DeVry shall cooperate in a timely manner with all reasonable requests for information or documents relating to DeVry University enrollment or billing that DeVry receives from any current or former student.  Such cooperation shall include, but is not limited to, providing copies of the student’s transcripts, registration documents, diplomas, other information confirming the student’s school, program(s) of study, or dates of enrollment, and itemized billing statements to the current or former student or to that person’s authorized representative.  Such documents and information shall be provided within 15 business days of receipt of a request made by the student or former student that was submitted by mail, email, or fax.  DeVry shall provide, on all DeVry University enrollment agreements, registration documents, and billing statements, a statement of how to make such a request, and shall provide a mailing address, email address and fax number that shall be used for making such requests.  DeVry also will make reasonable efforts to identify requests for diplomas or transcripts that any current or former DeVry University students made between September 30, 2015 and the date of entry of the Order and will issue the requested diploma or transcript to the individual’s last known contact information within 60 days after the date of entry of the Order.  No current or former DeVry University student shall be denied access to his or her diploma or transcript due to any hold that DeVry University has previously placed on the release of such document.  Nothing in this provision shall be construed to require DeVry to act in a manner that is in conflict with their obligations under the Family Educational Rights and Privacy Act of 1974 (20 U.S.C. § 1232g; 34 C.F.R. Part 99).

 

 

VI.   MONETARY JUDGMENT

 

IT IS FURTHER ORDERED that:

1.

A payment of Forty-Nine Million Four Hundred Thousand Dollars ($49,400,000) to the Commission.

a.

Defendants are ordered to pay to the Commission $49,400,000, which as Defendants stipulate, their undersigned counsel, as of December 9, 2016, holds in escrow for no purpose other than payment to the Commission.

b.

Such payment must be made within 7 days of entry of this Order by electronic fund transfer in accordance with instructions previously provided by a representative of the Commission.

2.

A total of Thirty Million Three Hundred Fifty-One Thousand and Nineteen Dollars ($30,351,019) in forgiveness of unpaid private student loans that DeVry issued directly to current or past students of DeVry University.

a.

Pursuant to this provision, within 7 days after entry of this Order, Defendants shall forgive and cancel the entire unpaid balance of all private student loans issued to DeVry University students between September 1, 2008 and September 30, 2015, as described on the document that Defendants submitted to counsel for the FTC on November 30, 2016, describing the intended forgiveness of unpaid private student loans (“Loan Forgiveness Sheet”), for a total amount of no less than $30,351,019.

 

 

b.

Because the Loan Forgiveness Sheet that Defendants provided to FTC counsel on  November 30, 2016, was redacted by agreement to avoid disclosure of Personally Identifiable Information in violation of the Family Educational Rights and Privacy Act of 1974 (20 U.S.C. § 1232g; 34 C.F.R. Part 99), Defendants shall, within 30 days after the date of entry of this Order, email to the undersigned counsel for the FTC the unredacted version of the Loan Forgiveness Sheet; provided, however, that Defendants shall not include Personally Identifiable Information of any person who has, after receiving the notice required by Subsection B.1 of this Section (below), obtained a protective order from this Court prohibiting such disclosure; provided further, that, with respect to any person who has sought a protective order but has not obtained a ruling, Defendants shall not disclose such person’s Personally Identifiable Information unless and until the Court denies the person’s request.

c.

The forgiveness and cancellation required by this Subsection includes all unpaid interest and fees that accrued up to November 30, 2016, as well as any outstanding principal balance.  No interest or fees that accrue after November 30, 2016, may be added to these accounts.

d.

Defendants shall, within 10 days after entry of this Order, provide a signed declaration to the FTC attesting that they have effectuated the loan forgiveness required by Subsection A.2 of this Section.  The declaration shall be sent in accordance with the instructions in Section IX.E of this Order, and also sent by email to the undersigned FTC counsel.

 

 

e.

Within 7 days after entry of this Order, the people listed on the Loan Forgiveness Sheet will owe nothing on their accounts, and their accounts will be closed out.

f.

Defendants shall, within 30 days of receipt, refund any payments received on any loan balance after November 30, 2016, that has been forgiven pursuant to Subsection A.2 of this Section.

3.

A total of Twenty Million Two Hundred Forthy-Eight Thousand Nine Hundred Eighty-OneDollars ($20,248,981) in forgiveness of debts from accounts receivable, relating to debts of individuals who have been DeVry University students.

a.

Pursuant to this provision, within 7 days after entry of this Order, Defendants shall forgive and cancel debts in the amounts described on the document that Defendants submitted to counsel for the FTC on November 30, 2016, describing the intended forgiveness of accounts receivable (“Debt Forgiveness Sheet”), for a total amount of $20,248,981.

b.

Because the Debt Forgiveness Sheet that Defendants provided to FTC counsel on November 30, 2016, was redacted by agreement to avoid disclosure of Personally Identifiable Information in violation of the Family Educational Rights and Privacy Act of 1974 (20 U.S.C. § 1232g; 34 C.F.R. Part 99), Defendants shall, within 30 days after the date of entry of this Order, email to the undersigned counsel for the FTC the unredacted version of the Debt Forgiveness Sheet; provided, however, that Defendants shall not include Personally Identifiable Information of any person who has, after receiving the notice required by Subsection B.1 of this Section, obtained a protective order from this Court prohibiting such disclosure; provided further, that, with respect to any person who has sought a protective order but has not obtained a ruling, Defendants shall not disclose such person’s Personally Identifiable Information unless and until the Court denies the person’s request.

 

 

c.

The forgiveness and cancellation required by this Subsection includes all unpaid interest and fees that accrued up to November 30, 2016, as well as any outstanding principal balance.  No interest or fees that accrue after November 30, 2016, may be added to these accounts.  With respect to all accounts receivable that are forgiven in full, those accounts shall be closed out and the balance of those accounts shall be zero.

d.

Defendants shall, within 10 days after entry of this Order, provide a signed declaration to the FTC attesting that they have effectuated the debt forgiveness required by this Subsection A.3.  The declaration shall be sent in accordance with the instructions in Section IX.E of this Order, and also sent by email to the undersigned FTC counsel.

e.

Defendants shall, within 30 days of receipt, refund any payments received after November 30, 2016, on any debt that has been forgiven pursuant to this Subsection A.3.

 

 

 

1.

Provided, however, that:

a.

this requirement shall not be construed to require Defendants to violate the Family Educational Rights and Privacy Act of 1974 (20 U.S.C. § 1232g; 34 C.F.R. Part 99);

b.

accordingly, Defendants are ordered, by the end of the third day after entry of this Order, to publish public notice that Defendants intend to provide the Federal Trade Commission with the information described in this Subsection, and advising such persons of their rights in the event they object to the proposed disclosure to the FTC;

c.

Defendants are not required to provide information to the FTC as required in this Subsection regarding any recipient of the notice if the person has, within 21 days after the publication of such public notice described in Section VI.B.1.b, obtained a protective order from this Court prohibiting the release of such information.  With respect to any person who has sought a protective order but has not obtained a ruling, Defendants shall not disclose such person’s Personally Identifiable Information unless and until the Court denies the person’s request.

 

 

2.

Defendants shall provide the information required by this Subsection B to the undersigned counsel for the FTC by no later than the 30th day after the date of entry of this Order.

 

 

1.

The letter and the email to be sent to individuals listed on the Debt Forgiveness Sheet and the Loan Forgiveness Sheet shall clearly state in large font that, as part of a settlement of a lawsuit that the Federal Trade Commission filed against DeVry University, DeVry University has canceled and forgiven the consumer’s debt.  The letter and email shall also state the nature of the debt (e.g., DeVry student loan) and the total amount of debt that was forgiven, whether such forgiveness was full or partial forgiveness, and the applicable account number.

2.

In addition, the letter and email shall clearly advise the recipient that  (a) DeVry University has notified relevant credit reporting agencies and collection agencies that the debt(s) as described in the letter or the email has been forgiven, and (b) that, to the extent a transcript or diploma has been withheld on grounds of nonpayment of a debt, those documents will be made available and released.  The letter and the email shall also shall provide recipients with a DeVry University telephone number that recipients and any co-signers may call, starting the 45th day after the date of entry of this Order, to speak with a live person in the event of any further collection activity or in the event that the forgiveness and cancellation is not reflected on the relevant person’s credit reports.

 

 

3.

The letter and email shall not include any marketing messages or any statements other than the advisory statements described in this Section.  Defendants shall not include anything in or with the letter or email that is inconsistent with the purpose of advising the recipient of the forgiveness and cancellation of his or her debt.

4.

The outside of the envelope and the subject line of the email shall include the statement: “Notice of Settlement of FTC v. DeVry.”

5.

At least 7 days prior to sending the required letter and email, Defendants shall provide a copy, including the envelope, of the proposed letter and email to FTC counsel for good-faith approval, to be based on whether the letter and email comply with the terms of this Order, with approval not to be unreasonably withheld.  In the event of a dispute, the FTC shall bear the burden of persuading the Court that the proposed letter and email should be modified before being sent.

 

 

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1.

Defendants shall ensure that people calling this telephone number are able within a reasonable amount of time to speak to a live person and shall take good-faith efforts to minimize any wait time.

2.

Defendants shall maintain a log of all calls received on this telephone number, including the name and number of the person calling and the nature of the call, and shall provide the log to the FTC upon request.

3.

Defendants shall further take steps to respond to complaints to ensure that, as required by this Order, all collection efforts have ceased and that the credit reporting agencies have been properly notified of the forgiven obligations, and shall create and maintain a log of all such steps that Defendants have taken, to be produced to the FTC upon request.

 

 

 

 

 

 

 

 

VII.   CUSTOMER INFORMATION

 

IT IS FURTHER ORDERED that DeVry, the officers, agents, employees, and attorneys of each of the DeVry entities, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, are permanently restrained and enjoined from directly or indirectly failing to provide sufficient customer information to enable the Commission to efficiently administer consumer redress.  DeVry represents that they have provided any requested redress information to the Commission.  If a representative of the Commission requests in writing any information related to redress, DeVry must provide it, in the form prescribed by the Commission, within 30 days as permitted under and in compliance with the Family Educational Rights and Privacy Act of 1974 (20 U.S.C. § 1232g; 34 C.F.R. Part 99).

 

VIII.   ORDER ACKNOWLEDGMENTS

 

IT IS FURTHER ORDERED that DeVry obtain acknowledgments of receipt of this Order:

 

 

 

 

IX.   COMPLIANCE REPORTING

 

IT IS FURTHER ORDERED that Defendants and DeVry make timely submissions to the Commission:

1.

identify the primary physical, postal, and email address and telephone number, as designated points of contact, which representatives of the Commission may use to communicate with that Defendant;

2.

identify all of that Defendant’s businesses by all of its names, telephone numbers, and physical, postal, email, and Internet addresses;

3.

describe the activities of each business, including the goods and services offered, and the means of advertising, marketing, and sales, and the involvement of any other Defendant;

4.

describe in detail whether and how that Defendant is in compliance with each Section of this Order including, but not limited to, describing in detail the way that Defendant calculates, documents and substantiates any claim covered by this Order; and

 

 

5.

provide a copy of each Order Acknowledgment obtained pursuant to this Order, unless previously submitted to the Commission.

 

1.

any designated point of contact;

2.

any process or procedure for calculating, documenting or substantiating any claim covered by this Order; or

3.

the structure of any DeVry entity or any entity that DeVry has any ownership interest in or controls directly or indirectly that may affect compliance obligations arising under this Order, including: creation, merger, sale, or dissolution of the entity or any subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order.

 

 

 

 

 

X.   RECORDKEEPING

 

IT IS FURTHER ORDERED that Defendants must create certain records for 15 years after entry of the Order, and retain each such record for 5 years.  Specifically, Defendants must create and retain the following records:

 

 

C.        Records of all consumer complaints (and any response) that relate to any of the following:

1.

any of the Defendants’ advertisements;

2.

the person’s experience in attempting to obtain a career, job, or employment, whether in the person’s field of study or otherwise;

3.

the compensation or compensation range of jobs;

4.

Defendants’ job placement rates or employment statistics;

5.

the assistance the person received or failed to receive from Defendants in attempting to find employment;

6.

unsolicited or undesired telephone calls or emails, including alleged Do Not Call violations;

7.

telemarketing practices or representations; or

8.

any issue related to the GI Bill or a student’s status as a veteran;

 

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XI.   COMPLIANCE MONITORING

 

IT IS FURTHER ORDERED that, for purposes of monitoring DeVry’s compliance with this Order and any failure to transfer any assets as required by

this Order:

 

 

 

XII.   EFFECTIVE DATE

 

IT IS FURTHER ORDERED that this Order shall become effective upon entry, except that, with respect to all subsidiaries of DeVry Education Group Inc. other than DeVry University, Section II.B of this Order shall become effective 120 days after entry of this Order.

 

 

XIII.   RETENTION OF JURISDICTION

 

IT IS FURTHER ORDERED that this Court retains jurisdiction of this matter for purposes of construction, modification, and enforcement of this Order.

SO STIPULATED:

 

FOR PLAINTIFF FEDERAL TRADE COMMISSION

 

 

Dated: _______________	______________________
	Christina V. Tusan
	John D. Jacobs
	Attorneys for Plaintiff
	FEDERAL TRADE COMMISSION

 

 

FOR DEFENDANTS

 

Dated: _______________	______________________
	Alan Salpeter
	Bryan Westhoff
	Philip Giordano
	Attorney for Defendants
	DEVRY EDUCATION GROUP INC.,
	DEVRY UNIVERSITY, INC. and
	DEVRY/NEW YORK INC.

 

 

 

 

Dated: _______________	______________________
	Greg Davis
	Secretary
	DeVry University, Inc.
	3005 Highland Parkway
	Downers Grove, IL 60515
	As an officer of DeVry University, Inc.

 

 

Dated: _______________	______________________
	Greg Davis
	Secretary
	DeVry/New York Inc.
	180 Madison Ave., Suite 900
	New York, NY 10016
	As an officer of DeVry/New York Inc.

 

 

DeVry Education Group Statement on Federal Trade Commission Settlement