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SEC files fraud charges against for-profit educator

/ CBS/AP

ITT Educational Services (ESI) is facing charges that it duped investors by concealing huge losses on loans made to students attending the company's for-profit colleges.

A complaint filed Tuesday by the Securities and Exchange Commission alleges ITT engaged in scheme designed to cover up mounting problems in two different loan programs that helped finance the tuition of its students.

ITT guaranteed the loans, threatening to hobble the Carmel, Indiana, company as students missed payments.

The SEC case in Indiana federal court portrays ITT CEO Kevin Modany and Daniel Fitzpatrick, the company's chief financial officer, as the masterminds of the fraud. Both men previously announced they are leaving the company.

ITT said in a statement that it "vehemently" disagrees with the SEC's allegations, and vowed to fight the charges.

The company's stock plunged more than 40 percent to an all-time low of $2.07 in afternoon trading. Shares peaked at $133.75 in 2009.

The for-profit operator of the ITT Technical Institutes chain and Daniel Webster College was sued by the Consumer Financial Protection Bureau last year for alleged predatory lending.

First published on May 12, 2015 / 3:31 PM EDT

© 2015 CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.

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