ITT Educational Services Inc.’s courtroom woes expanded on Tuesday, when a judge refused to dismiss most of a shareholder class action alleging that the for-profit education company duped investors about its troubles coping with rising student loan default rates. The ruling is a win for lead plaintiffs counsel at Cohen Milstein Sellers & Toll.
In an 18-page ruling, U.S. District Judge J. Paul Oetken in Manhattan mostly denied arguments by ITT’s lawyers at Gibson, Dunn & Crutcher that he should dismiss the securities fraud claims. The judge ruled that Cohen Milstein adequately alleged that ITT’s executives misstated the company’s liability under an agreement with SLM Corporation (commonly known as Sallie Mae) to jointly absorb losses from defaulted student loans. He also green-lighted claims that ITT concealed from investors that Sallie Mae was demanding repayment.
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