(CN) - An investor of Career Education Corp. (CEC) is suing the for-profit college for overstating the post-graduate rate of employment, putting the school at risk of losing federal tuition funding.
     Investor Kharran Bangari claims the company falsely represented that 65 per cent or greater of post-graduate students achieved jobs in their field of study. An August 2011 investigation, however, discovered that 36 out of 49 CEC institutions placed less than 65 per cent of students in their chosen field. CEO Steven Lesnik, Chairperson Leslie Thornton, and several others are named as defendants.
     According to the complaint, The Accrediting Counsel for Independent Colleges and Schools directed CEC to "show cause at ACIC's December 2011 meeting as to why the institutions' current grants of accreditation should not be withdrawn by way of suspension due to the company's having misrepresented the percentage of graduates having found job placement in their field of study." The counsel is particularly focused on the 49 health education and art design institutions run by CEC, all of which could lose accreditation.
     "However, even if the 49 schools ultimately do not face probation, suspension or loss of accreditation, the company has been irreparably damage," the investor claims. The suit further claims that CEC admitted to losing millions due to the investigations and accusations.
     During a November 2 conference call with investors, CEC directors reported an 18 percent decrease in revenue for third quarter 2011. CEC stock dived from $15.95 to close at $7.37 per share on November 3, the complaint states. The school is also being investigated by the Attorney General of New York and Florida.
     The investor, represented by Lasky & Rifkind, Ltd., seeks damages for breach of fiduciary duty and abuse of control.