Editor's note: This article has been revised to clarify the corporate identities and ownership of the schools that were sued.
The company that formerly operated DeVry University and still operates several for-profit secondary educational institutions has agreed to pay $27.5 million — with plaintiff attorneys collecting $7.4 million — to settle a class action suit, in which an investment group alleged publicity surrounding DeVry’s falsification of graduate success rates caused the value of the school’s publicly traded stock to drop, soaking investors.
Utah Retirement Systems filed the suit in 2016, on behalf of itself and other investors, against DeVry Education Group in U.S. District Court for the Northern District of Illinois. Utah Retirement described itself as a "highly sophisticated institutional investor" that provides retirement benefits to Utah’s public school employees, managing about $33 billion in assets as of 2018.
DeVry Education Group is now operated by Adtalem Global Education, based in suburban Downers Grove. DeVry University and Keller Graduate School of Management were sold by Adtalem to Cogswell Education LLC in 2018.
The suit alleged that between 2011 and 2016, the schools formerly under the DeVry banner exaggerated the employment figures and incomes of graduates, so as to lure new students and give the wrong impression to the public the DeVry schools were in better financial shape than in reality. DeVry Education Group has denied wrongdoing. There have been at least three suits in Chicago federal court against the former DeVry schools, by former students claiming they were misled by the graduate statistics.
The investors suit alleged DeVry Education Group breached the U.S. Securities Exchange Act, causing the school's stock prices to decline at least $158 million and as much as $230 million, depending on gains accrued during the time in question.
A proposed settlement was submitted Aug. 30 to U.S. District Judge Mary Rowland. She granted preliminary approval two days later.
The agreement calls for DeVry Education Group's owner, Adtalem, to create a $27.5 million fund, from which to pay all those who acquired its publicly traded common stock or exchange-traded call options, between Aug. 26, 2011 and Jan. 27, 2016, as well as those who sold exchange-traded put options on such common stock in the same period. Utah Retirement said there are "likely thousands" of such investors. The $27.5 million figure represents between 12 to 17 percent of the alleged losses in stock value, according to Utah Retirement.
Utah Retirement noted the median settlement in securities class actions in 2018 in the U.S. was $11 million, and was $9 million between 1996 and 2017.
Plaintiffs and class members are represented by: Labaton Sucharow LLP, of New York City; Spector, Roseman & Kodroff, of Philadelphia; and Wexler Wallace LLP, of Chicago. These attorneys have asked to receive $7.4 million, with another $225,000 for expenses, from the settlement fund. Attorneys said the money they would receive is not "excessive."
Any money left over after plaintiff, class members and plaintiff's attorneys are paid, which is not practical to further distribute, will be donated to the nonprofit, nonpartisan Council of Institutional Investors, according to Utah Retirement.
DeVry Education Group has been defended by Steptoe & Johnson, of Chicago.