CECO » Topics » HOFFMAN ESTATES, IL, MAY 17, 2006

This excerpt taken from the CECO 8-K filed Dec 20, 2006.
HOFFMAN ESTATES, IL (December 19, 2006) — Career Education Corporation (NASDAQ: CECO) today announced the retirement of John Larson as chairman of the board and as a director.  Robert E. Dowdell, who currently serves as CEC’s interim chief executive officer, has assumed the role of interim chairman of the board. In recognition of his significant contributions as a founder and a director of the company, the board of directors has named Larson to the honorary position of chairman emeritus.

Larson served as president and CEO and a member of the board of directors since the company’s founding in 1994, and as chairman of the board since January, 2000. Larson’s guidance drove the acquisition of gold standard brands such as Brooks Institute of Photography and Le Cordon Bleu Schools North America and the expansion of on-site and online educational offerings throughout the U.S. and Canada, France, and the United Kingdom.

“I take great pride in what this company and its employees and educators have accomplished since the company’s founding—becoming a $2 billion dollar company that now educates almost 100,000 students a year.  I feel privileged to have been a part of the development of Career Education Corporation,” said Larson.  “Since the search for a new CEO is progressing, I believe now is the right time for me to retire to spend more time with my family and to accommodate new leadership at CEC.  I leave with high regard for our CEC team and what we have accomplished together, particularly for our students and graduates.”

“Jack Larson has dedicated an incredible amount of his talent and his life to this company,” said Dowdell, who has been a director of CEC since its inception.  “Following a year of concrete progress, Jack leaves this company in a strong position with a bright future. He will always be revered and respected and long remembered for his innovation and entrepreneurship.”




This excerpt taken from the CECO 8-K filed Sep 27, 2006.
HOFFMAN ESTATES, IL, September 25, 2006 — Career Education Corporation (NASDAQ: CECO) today announced that John M. Larson has stepped down as the company’s president and chief executive officer while continuing to serve as chairman of the board.  Larson will focus on guiding and supporting the development of new initiatives for the corporation, but will no longer be responsible for the day-to-day operations of the company.

Robert E. Dowdell, Career Education’s lead director, has been named interim CEO and will have responsibility and authority for day-to-day operations with a full-time presence at the company’s corporate headquarters.  The board of directors is in the final stages of engaging a nationally recognized executive search firm to lead the search for a permanent CEO.  “Jack Larson’s talent, passion, commitment, and leadership have brought this company to the forefront of for-profit post-secondary education,” said Dowdell.  “The board and Jack have determined that the decision to split the position of chairman and CEO is the best one for the company.  This will enable Jack, as Career Education’s founder, to focus on the company’s global strategy, its various growth initiatives, and to further define a viable and compelling vision for the company




 

in the evolving world of education.  I have agreed to serve as interim CEO during the period it takes for the board to complete its search for a permanent CEO.  The fundamentals of the business remain solid.  We are confident that a strengthened, broader executive leadership team will successfully move the company forward in addressing opportunities and challenges, and in pursuing strategies to deliver high quality education and value for all our stakeholders.”

“I am proud of what Career Education Corporation and its employees and educators have accomplished over the past 12 years,” said Larson.  “We are moving now into a new and even more positive stage for our company, and I look forward to working closely with Bob and his permanent successor to continue leading the company forward.  I remain extremely optimistic about growth prospects for the global for-profit postsecondary education sector, and believe Career Education will continue to be a market leader in providing high quality education programs to students.”

In 1994, Larson founded Career Education Corporation, currently the second largest for-profit education company in the United States.  He has served as chairman since January 2000 and as president and CEO and a member of the board of directors since 1994.  Under his leadership, the company’s annual revenues surpassed $2 billion in less than 12 years, and achieved a compound annual growth rate of 44 percent in the last five years.  Career Education Corporation was ranked fourth on FORTUNE magazine’s 2003 list of the 100 Fastest-Growing Companies, and first in the for-profit sector. CEC also ranked in the Top 20 of the 2003 “Hot Growth Companies” as measured by BusinessWeek magazine.  Larson’s guidance drove the acquisition of gold standard brands such as Brooks Institute of Photography and Le Cordon Bleu Schools North America and the expansion of on-site and online educational offerings throughout the U.S., France, the United Kingdom, Dubai and Canada.  In 2000, Larson was named Ernst & Young’s “Entrepreneur of the Year” for the Illinois and northwestern Indiana region in the service category.  Larson has recently been named as one of the first inductees to the Hall of Fame at the Haas School of Business at the University of California, Berkeley.

Robert E. Dowdell has been a director of Career Education since its inception in January 1994. From 1984 to 1988, Dowdell served as president of National Education Centers, Inc., a subsidiary of NEC. From 1989 to early 2006, Dowdell served as chief executive officer and as a

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director of Marshall & Swift, L.P.  Dowdell is also the general partner of RGD Partners, L.P., an investment business.

This excerpt taken from the CECO 8-K filed May 24, 2006.
HOFFMAN ESTATES, IL, MAY 18, 2006 – At its 2006 Annual Meeting of Stockholders held today, Career Education Corp. (NASDAQ:CECO) announced that, based on its receipt of preliminary results in its contested election, stockholders have elected all three of its nominees -- Patrick W. Gross, Steven H. Lesnik and Keith K. Ogata -- to the company’s Board of Directors. Final results will be announced in the coming weeks of the vote tabulation by IVS Associates, Inc., the independent inspector of election.

 

The company also reported that its proposals to institute a phased declassification of the Board and to allow stockholders holding two-thirds of its shares to call a special meeting received the required margin for passage.

 

“We are grateful that the stockholders have supported the company’s recommended nominees and we are pleased at the acknowledgement by investors of our corporate governance enhancements,” said John M. Larson, Chairman, President and Chief Executive Officer of Career Education. “The depth of experience and industry knowledge of our board is important to Career Education’s ongoing success as we move the company forward. Now we can turn our undivided attention to the resolution of remaining legal and regulatory issues, and focus on the business of delivering high-quality student education and enhanced value for stockholders.”

 

In addition, at the Annual Board of Directors Meeting yesterday, the Board voted to create a new compliance committee that will cover the areas of ethics, federal and state regulatory matters

 



 

related to education, and accreditation issues, consistent with criteria approved by the Board. The committee will be chaired by Leslie Thornton, former long-time Chief of Staff to United States Education Secretary Dick Riley. Ms. Thornton, who joined the Career Education Board in December 2005, is a partner at the Washington D.C. based law firm Dickstein Shapiro, where she focuses on educational regulatory compliance and internal corporate investigations. She is joined on the committee by fellow directors Dennis Chookaszian, Steven Lesnik and Keith Ogata.

 

Preliminary results of the election were tabulated by Georgeson Shareholder Communications, Inc., Career Education’s proxy solicitation firm.

 

This excerpt taken from the CECO DEFA14A filed May 17, 2006.
HOFFMAN ESTATES, IL, MAY 17, 2006 – Career Education Corporation (NASDAQ: CECO) today announced that it has sent a cease and desist letter to Steven Bostic, its dissident shareholder, for Bostic’s repeated use of misleading information in his proxy solicitations.

 

In addition, Career Education has filed a complaint letter with the Securities and Exchange Commission charging Bostic with filing materially false and misleading proxy solicitation materials on May 10, 12 and 16, 2006, and seeking the correction or retraction of these inaccurate materials. “The materials are further evidence of Bostic’s dissemination of false and misleading information about the company, its Board of Directors and senior management in order to improperly influence the media and CEC stockholders to advance his proxy campaign,” said Janice Block, Chief Legal Officer for Career Education Corporation.

 

CEC’s Board of Directors sent this letter to Bostic and his attorney yesterday:

 

May 16, 2006

 

Dear Mr. Bostic:

 

We write to you to insist that you immediately cease and desist from disseminating false and misleading information to the stockholders of Career Education Corporation (“CEC”), and that you immediately correct proxy solicitation materials which contain this false and misleading information.

 

In particular, we draw your attention to your oft-repeated statements about CEC’s “recent” student drops and your use of a “CEC internal drop report” to support your outrageously false statements that “96,388 students dropped out of CEC programs in a recent reporting period.”  What you failed to disclose in your statement, however, is that the document you are disseminating was from Q1 2004 and was subject to a

 

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This excerpt taken from the CECO 8-K filed May 17, 2006.
HOFFMAN ESTATES, IL, MAY 16, 2006 – Career Education Corporation (NASDAQ: CECO) announced today a final decision by the California Department of Consumer Affairs (the Department) vacating in its entirety the Notice of Conditional Approval to Operate issued last summer by the California Bureau for Private Postsecondary Vocational Education (the Bureau) to Brooks Institute of Photography. The Department directed the Bureau to review Brooks Institute’s license renewal application, to conduct a qualitative review and assessment of the school pursuant to the appropriate sections of the California Education Code, and extended Brooks Institute’s current approval to operate.

 

“We are pleased that our position has been vindicated in this matter,” said Janice L. Block, Chief Legal Officer for Career Education Corporation. “We look forward to moving past this and continuing to enhance the outstanding education offered by Brooks Institute. This decision further underscores the progress Career Education is achieving in resolving past regulatory and litigation issues.”

 

In March of this year, an administrative law judge ruled that the Bureau improperly issued to Brooks Institute the Notice of Conditional Approval to Operate, and that the Notice was invalid. The judge found that the Bureau failed to follow the California Education Code and its own regulations. However, that decision was subject to a final determination by the Department of Consumer Affairs.

 



 

In a 26-page decision by the Chief Deputy Director of the Department of Consumer Affairs, the Department reached the same conclusion as the administrative law judge, and vacated the Notice of Conditional Approval. The Department found that the Bureau did not comply with the mandatory provisions of the Education Code, and that it wrongly denied Brooks Institute an opportunity to contest the Bureau’s action prior to the time it was imposed. “This violates the most basic principles of Due Process as found in the Federal and State Constitutions, as well as the Administrative Procedures Act and the Bureau’s own enabling legislation and regulations,” the Department said. The Department further found that the Bureau’s failure to provide Brooks Institute with notice and an opportunity to be heard “deprived Brooks of the opportunity to have a qualitative review and assessment conducted by a visiting committee.”

 

The Brooks Institute of Photography has just celebrated its 60th year educating students in the visual media. With a campus in Santa Barbara, California and a campus in Ventura with two sound stages for filmmaking, the school has over 2200 students pursuing Masters, Bachelors, Associates and diploma programs in fields such as photography, film and video production, visual communications and visual journalism. Graduates have gone on to work for distinguished organizations, such as National Geographic, Smithsonian, the Los Angeles Times and other national media outlets, Hallmark Publishing, Cousteau Society, HBO, Kodak and literally scores of other leaders in visual media fields.

 

This excerpt taken from the CECO 8-K filed May 17, 2006.
HOFFMAN ESTATES, IL, MAY 16, 2006 – Career Education Corporation (NASDAQ: CECO) today announced that its largest institutional stockholder, Ariel Capital Management, LLC, has informed the company that it has voted its 12.9 million shares, representing approximately 13% of Career Education’s outstanding shares, in favor of the company’s proxy and its director nominees.

 

“Having heard the positions of both the company and its dissident, Steven Bostic, we came to the conclusion that the current Career Education board and management team are the best equipped to take the company forward. We have cast our votes in support of the company’s director nominees,” said John W. Rogers, Jr., Ariel’s Founder, Chairman, Chief Executive and Chief Investment Officer.

 

Career Education’s board also responded today to a letter circulated by Bostic, allegedly written to him by a disgruntled former Career Education employee, who was terminated for cause in 2004.

 

“Dear Mr. Bostic:

 

As you know, but fail to mention, Jon Coover, the purported author of the letter distributed by you to certain of Career Education’s stockholders, was a disgruntled former CEC employee who was terminated for cause by the company in 2004. Mr. Coover’s perspective on events that occurred subsequent to

 



 

CEC’s acquisition of AIU is clearly at odds with what actually transpired.

 

Last week we sent you a letter asking that you reply to nine key questions that we believe are relevant and important to our stockholders. Instead of telling the shareholders the truth about what you really intend to do to and at Career Education Corporation, you have chosen to disseminate a letter filled with inaccuracies. It’s a shame, because Career Education stockholders deserve better than that.

 

We and the CEC stockholders are still awaiting your response, Mr. Bostic.

 

Sincerely yours,

 

The Board of Directors of Career Education Corporation”

 

This excerpt taken from the CECO DEFA14A filed May 16, 2006.
HOFFMAN ESTATES, IL, MAY 16, 2006 – Career Education Corporation (NASDAQ: CECO) announced today a final decision by the California Department of Consumer Affairs (the Department) vacating in its entirety the Notice of Conditional Approval to Operate issued last summer by the California Bureau for Private Postsecondary Vocational Education (the Bureau) to Brooks Institute of Photography. The Department directed the Bureau to review Brooks Institute’s license renewal application, to conduct a qualitative review and assessment of the school pursuant to the appropriate sections of the California Education Code, and extended Brooks Institute’s current approval to operate.

 

“We are pleased that our position has been vindicated in this matter,” said Janice L. Block, Chief Legal Officer for Career Education Corporation. “We look forward to moving past this and continuing to enhance the outstanding education offered by Brooks Institute. This decision further underscores the progress Career Education is achieving in resolving past regulatory and litigation issues.”

 

In March of this year, an administrative law judge ruled that the Bureau improperly issued to Brooks Institute the Notice of Conditional Approval to Operate, and that the Notice was invalid. The judge found that the Bureau failed to follow the California Education Code and its own regulations. However, that decision was subject to a final determination by the Department of Consumer Affairs.

 

In a 26-page decision by the Chief Deputy Director of the Department of Consumer Affairs, the Department reached the same conclusion as the administrative law judge, and vacated the Notice of Conditional Approval. The Department found that the Bureau did not comply with the mandatory provisions of the Education Code, and that it wrongly denied Brooks Institute an

 

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opportunity to contest the Bureau’s action prior to the time it was imposed. “This violates the most basic principles of Due Process as found in the Federal and State Constitutions, as well as the Administrative Procedures Act and the Bureau’s own enabling legislation and regulations,” the Department said. The Department further found that the Bureau’s failure to provide Brooks Institute with notice and an opportunity to be heard “deprived Brooks of the opportunity to have a qualitative review and assessment conducted by a visiting committee.”

 

The Brooks Institute of Photography has just celebrated its 60th year educating students in the visual media. With a campus in Santa Barbara, California and a campus in Ventura with two sound stages for filmmaking, the school has over 2200 students pursuing Masters, Bachelors, Associates and diploma programs in fields such as photography, film and video production, visual communications and visual journalism. Graduates have gone on to work for distinguished organizations, such as National Geographic, Smithsonian, the Los Angeles Times and other national media outlets, Hallmark Publishing, Cousteau Society, HBO, Kodak and literally scores of other leaders in visual media fields.

 

This excerpt taken from the CECO DEFA14A filed May 15, 2006.
HOFFMAN ESTATES, IL, MAY 12, 2006 — Career Education Corporation (NASDAQ: CECO) announced today that the United States District Court for the Northern District of Illinois has dismissed McSparran v. Larson, et al, a shareholder derivative action against the company and certain of its officers and directors.  The court’s order terminates this derivative litigation, first filed against the company in January 2004.

According to the court’s opinion, the only specific allegations are “two instances of ex-employees making salacious claims that were repeated in a class action complaint and investigated by the SEC.”   The court held that “not every lawsuit means a board was negligent in its oversight and not every government investigation means a company’s board must relinquish control over litigation on behalf of the corporation.”

This latest legal victory follows significant legal and regulatory progress for the company in the past few months. The United States District Court for the Northern District of Illinois recently granted for a second time the company’s motion to dismiss a class action against the company and certain of its current officers, holding that the plaintiffs once again failed to plead a violation of securities laws. The court gave the plaintiffs one last opportunity to file a third amended complaint, which was filed on May 1, 2006. As it has in the past, Career Education will continue to vigorously defend this lawsuit.

In early March 2006, a trial judge ruled that the California Bureau for Private Postsecondary and Vocational Education (the Bureau) improperly issued Career Education’s Brooks Institute of Photography a Notice of Conditional Approval to Operate, and that the Notice is invalid.

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Most significantly, the staff of the Midwest Regional Office of the Securities and Exchange Commission recently notified Career Education that it intends to recommend to the SEC that it terminate its investigation of the company and that no enforcement action be taken. Recommendations by the SEC staff do not constitute final action by the SEC, as the SEC thereafter makes its own determination as to whether to follow the recommendations of the SEC staff.

“The termination of the McSparran suit is additional evidence of the considerable progress we have made in addressing legal and regulatory issues,” said Janice L. Block, Chief Legal Officer of Career Education. “We are committed to setting the record straight and putting these issues behind us, consistent with our commitment to and priority of growing the company’s value for our students and our stockholders.”

This excerpt taken from the CECO DEFA14A filed May 15, 2006.
HOFFMAN ESTATES, IL, MAY 12, 2006 – Career Education Corporation’s board of directors today sent a letter to the company’s dissident shareholder, Steven Bostic, challenging him to answer in the public domain questions related to his character, his competence, and his intentions regarding the company.  The content of that letter follows below.

 

 

May 12, 2006

 

AN OPEN LETTER TO STEVEN BOSTIC

 

In your proxy campaign to get yourself and your personal colleagues elected to the board of directors of Career Education, you have attacked the current management’s competence; made negative assertions about the Company’s business operations and corporate governance; and questioned what the Company is doing on behalf of its stockholders.  In doing so, we believe that you knew that this would create a negative environment surrounding the Company which would adversely influence the perceptions of the investment marketplace, regulators, and media. 

This excerpt taken from the CECO DEFA14A filed May 12, 2006.
HOFFMAN ESTATES, IL, MAY 12, 2006 – Career Education Corporation’s board of directors today sent a letter to the company’s dissident shareholder, Steven Bostic, challenging him to answer in the public domain questions related to his character, his competence, and his intentions regarding the company. The content of that letter follows below.

 

This excerpt taken from the CECO 8-K filed May 3, 2006.
HOFFMAN ESTATES, IL, May 2, 2006 — Career Education Corporation (NASDAQ: CECO) reported today that the Third Amended Complaint has been filed in the securities class action litigation against the company. In March 2006, the United States District Court for the Northern District of Illinois granted for the second time the company’s motion to dismiss the action, holding that the plaintiffs had once again failed to plead a federal securities law violation against the company. In its decision dismissing the Second Amended Complaint, the Court granted the plaintiffs until April 17, 2006 to file a third amended complaint. Shortly before that deadline, the plaintiffs sought an extension of time, and the Court granted the plaintiffs one last opportunity to file a third amended complaint by no later than May 1, 2006.

“After the Court has already twice ruled that plaintiffs’ attorneys have not pled a single securities law violation, it is disappointing that they would try again, coming back for a third time,” said




Associate General Counsel Scott Levine, a former long-standing federal prosecutor. “We intend to vigorously defend our position, as we have in the past.”

This excerpt taken from the CECO DEFA14A filed Apr 19, 2006.
HOFFMAN ESTATES, IL, APRIL 18, 2006 – Career Education Corporation (NASDAQ: CECO) today reported that it sent a letter to stockholders outlining its business plan and reiterating the company’s strong track record and progress. The letter also questions the motives of dissident Steven Bostic, who is running a proxy fight featuring an alternative slate of three directors, including himself, for election to the company’s board.

 

The letter, sent by Chairman and CEO Jack Larson, highlights the relevant business and educational experience of Career Education’s Board candidates, Patrick Gross, Steven Lesnik and Keith Ogata, while challenging Bostic’s credentials for a position on the CEC board. A complete text of the letter follows and can be found on the company’s website, www.careered.com.

 

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April 18, 2006

 

Dear Fellow Stockholder:

 

Career Education Corporation has momentum, drive, and the right plan for the future. This momentum is reflected in our strong financial performance, our solid progress in addressing our operational and regulatory issues, and our success in enhancing corporate governance. We are determined to continue building on these successes and delivering value to you through high-quality, well-targeted growth and a focus on return on investment. This year’s annual meeting of stockholders is an important one for your company. By signing and returning the WHITE proxy card, you will ensure that your management and Board of Directors can sustain the current momentum that is creating value for stockholders.

 

Our business plan is aimed at accomplishing three key goals: to continue to grow the company profitably, to become the industry’s best in class for service and compliance, and to leverage our strong competitive advantages to benefit all of our key constituents – including students, employees and, of course, stockholders.
 

Underscoring the success of our plan is our continued strong financial performance in 2005. We generated record revenues, cash flow and earnings. We continue to have a very strong balance sheet with over $400 million in cash and marketable investments and total debt of less than $17 million as of December 31, 2005. We also have taken aggressive action to enhance shareholder value by repurchasing over $200 million of stock in the past year, with approximately $300 million authorized for repurchase in the near future.

 

We also are making significant progress on the regulatory front and in addressing other issues, and we are continuing to strengthen our compliance processes with the addition of talented people, new processes, and relevant technology. We have a plan and are committed to effective execution of that plan.

 

      Earlier this month, the staff of the Midwest Regional Office of the Securities and Exchange Commission advised us that they intend to recommend to the SEC that it terminate its investigation of the company and that no enforcement action be taken.

 

      The United States District Court for the Northern District of Illinois recently granted for a second time Career Education’s motion to dismiss a class action lawsuit against the company and certain of its current officers, holding that the plaintiffs once again failed to plead a violation of securities law.

 

      A trial judge recently ruled against the California Bureau for Private Postsecondary Vocational Education, stating that the Bureau had improperly issued Career Education’s Brooks Institute of Photography a Notice of Conditional Approval to operate.

 

We do not believe it is in your best interest for our momentum to be interrupted—or worse, potentially permanently impaired—by distractions from Steve Bostic, a dissident who owns approximately one percent of CEC’s stock and is choosing to become a perennial agitator against

 

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your company, management and Board in order to forward his own self-serving agenda. Mr. Bostic has stated publicly that he intends to file proxy materials asking you to elect his hand-picked nominees to the Career Education Board of Directors. It is important for you to know that Mr. Bostic has a record of significant mismanagement. Career Education stockholders have every right to question his record and the negative implications that electing him and his cohorts would have on your company.

 

In fact, when we look at Mr. Bostic’s qualifications as a director, not only do we see little that would add value to our highly qualified Board, but also we have reason to be concerned about his true intentions for the company. Mr. Bostic was CEO of EduTrek, the corporation that previously owned American InterContinental University (AIU). EduTrek was a for-profit education company crippled by heavy losses and regulatory problems when we purchased AIU in 2000. From September 1997, when EduTrek began trading as a public company, until the end of September 2000, when we announced that we were acquiring AIU, EduTrek’s stock price declined 90.4%, or 54% a year on an annualized basis. This wholesale destruction of stockholder value was all under Mr. Bostic’s leadership. Nonetheless, Mr. Bostic received millions of Career Education shares in the transaction, which today, given price appreciation and stock splits, would be valued at more than $57 million. Now, despite his poor leadership track record, he is attempting to convince Career Education’s stockholders to elect him and two of his hand-picked nominees as directors.

 

We do not believe Mr. Bostic’s alternative slate deserves your vote. Following last year’s annual meeting, we repeatedly asked Mr. Bostic to recommend qualified board members for consideration by the independent firm conducting the company’s board search. He refused to do so, and, instead, for the second year in a row, unilaterally launched a costly and disruptive fight against your company. In addition, we recently asked to meet with Mr. Bostic’s nominees to discuss their agenda or any plans they might have for the company. A meeting for this purpose was set for the morning of April 11, 2006. The evening before that meeting was scheduled to occur, Mr. Bostic and his nominees abruptly cancelled the meeting, for no stated reasons. Two of our directors had canceled previous plans and flown across the country to attend the meeting to accommodate Mr. Bostic’s schedule.

 

Our own nominees have strong track records running businesses, deep experience in the education field – or both. Patrick W. Gross brings significant experience in managing companies. He served as founding Chairman and CEO of American Management Systems and the Lovell Group, and has been a director at eight publicly traded companies. Steven H. Lesnik served as Chairman of the Illinois Board of Higher Education, which has authority over higher education in the State of Illinois. Keith K. Ogata has nearly three decades of experience in the for-profit education sector, and a decade of commitment to Career Education, for which he serves as Chairman of the Audit Committee. As chair of the Audit Committee, Mr. Ogata has been instrumental in the recent operational and financial successes of your company.

 

This excerpt taken from the CECO DEFA14A filed Apr 11, 2006.
HOFFMAN ESTATES, IL, APRIL 10, 2006 – Career Education Corporation (NASDAQ: CECO) distributed a letter to stockholders today highlighting the company’s achievements in 2005 and asking for their support in the weeks leading up to and beyond the May 18 annual meeting of stockholders.

 

In his letter to stockholders, Chairman and CEO Jack Larson outlines Career Education’s strong financial performance and the solid progress the company has made on a number of fronts, including enhancing corporate governance policies and practices, adding three independent members to the Board of Directors, achieving favorable rulings on two pending legal matters, and making positive progress on regulatory issues. A complete text of the letter follows and can also be found on the company’s website, www.careered.com.

 

April 10, 2006

 

Dear Fellow Stockholder:

 

The priority of your Board and management continues to be generating enhanced value for Career Education Corporation, our stockholders, our students, and all the communities our company serves. Consistent with this priority, Career Education has developed a sound business strategy designed to help us grow and become best-in-class for service and compliance in our industry, move forward with strong competitive advantages in our markets, and benefit our students, employees and, in turn, stockholders.

 

Our plan for the future includes high-quality, well-targeted growth and a focus on return on investment. We have worked hard to position ourselves for future success through innovation in our business models; through the flexibility and student-focus of our online, on-ground, and planned hybrid offerings; and through new programs and new locations. Our strategy for the future also includes the continued strengthening of our compliance-related processes and infrastructure and our demonstrated commitment to sound corporate governance and to quality in education.

 

Over the past year, we have taken important steps to maintain and strengthen our company’s growth trajectory and enhance corporate governance, while continuing to generate stockholder value. Since we became a public company in 1998, this focus on achievement has enabled us to reward stockholders who believe that the for-profit education industry is an excellent, long-term investment opportunity. We are committed to generating value for our stockholders and hope that you will continue to support us in 2006 and in the years ahead.

 

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We are performance driven and fiscally fit. In 2005 we achieved record highs in revenues, cash flow and earnings, even as we strengthened our balance sheet and repurchased $200 million in common stock. Revenue was up 18 percent versus 2004, income from operations increased 27 percent, and our operating profit margin increased 120 basis points. Evidence shows that our strategy is working and continues to be sound.

 

We are pleased to report good progress on the legal and regulatory fronts. Most significantly, the staff of the Midwest Regional Office of the Securities and Exchange Commission notified us that it intends to recommend to the SEC that it terminate its investigation of the company and that no enforcement action be taken against the company. Recommendations by the SEC staff do not constitute final action by the SEC, as the SEC thereafter makes its own determination as to whether to follow the recommendations of the SEC staff.

 

We also continue to move closer toward successful resolution of securities class action litigation. Recently, the United States District Court for the Northern District of Illinois granted for a second time the company’s motion to dismiss a class action against the company and certain of its current officers, holding that the plaintiffs once again failed to plead a violation of securities laws. The plaintiff has one more opportunity to file a third amended complaint by April 17, 2006.

 

In addition, a trial judge recently ruled that the California Bureau for Private Postsecondary Vocational Education had improperly issued the company’s Brooks Institute of Photography a Notice of Conditional Approval to Operate, and that the Notice is invalid.

 

Progress is also being made on addressing certain issues that have arisen in the area of accreditation. In December of 2005, American InterContinental University (AIU) was notified that its accrediting body, the Commission on Colleges of the Southern Association of Colleges and Schools (COC), had placed AIU on probation. The University is committed to addressing the COC’s recommendations, and initiatives to enhance AIU’s core competencies are already underway in a number of areas, including its faculty and education programs, its academic leadership, its student complaint process, admissions and marketing initiatives, and its standards of integrity as an accredited institution. A third-party assessment of AIU’s marketing and admissions process has just been completed, and AIU will start to roll out recommended changes. After additional third-party assessments and monitoring over the next six months, the COC will once again review AIU.

 

We recognize that measures of our success include how well we serve our students, our financial performance, our relationships with our industry and financial regulators and the ethical and compliance standards to which we hold ourselves. We continue to work hard to address challenges and to strengthen our performance in each of these areas.

 

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An area of intense focus for us has been corporate governance. As a result, we have adopted the following progressive corporate governance initiatives over the past year:

 

                  increased your Board’s size from seven to nine members, including seven independent directors under SEC and NASDAQ rules

                  terminated our shareholder rights plan

                  implemented minimum stock ownership guidelines for senior management and Board members

                  implemented mandatory continuing education for all Board members

                  developed a policy requiring approval for Board members to serve on other outside Boards

                  adopted majority voting for the election of directors into our by-laws

 

In addition, we will be proposing to you the following at our annual stockholders’ meeting:

 

                  a phased declassification of the Board

                  the ability for stockholders to call special meetings with a two-thirds affirmative vote

 

We want to thank all of you for relaying to us the various changes you wanted in our governance policies and practices. In its most recent Corporate Governance Quotient rankings, Institutional Shareholder Services (ISS), a leading stockholder advisory firm, ranked Career Education Corporation as being in the top 20 percent of our peer group in terms of governance practices.

 

We have also added three highly qualified and experienced independent directors to your Board’s composition in the past few months. Our current Board members have strong track records in running businesses, deep experience in the education field—or both. They also have knowledge of our company and our industry, the respect of the educational and/or business community, and a strong commitment to the future of our company.

 

Our capable leadership team has a plan to ensure the future success of our company. It includes a strong focus on return on investment, targeted market expansion, and a student-focused, compliance-oriented company culture. We will be mailing our proxy statement to you shortly, and we look forward to counting on your support in the weeks leading up to our May 18 annual meeting of stockholders, and in the months and years to come.

 

Sincerely,

 

/s/ John M. Larson

 

John M. Larson

Chairman, President and Chief Executive Officer

 

This excerpt taken from the CECO 8-K filed Feb 7, 2006.
HOFFMAN ESTATES, IL, February 2, 2006 – Career Education Corporation (NASDAQ:CECO) today announced its Board of Directors has approved additional enhancements in corporate governance to serve the long-term interest of all stakeholders.

 

The new measures are in addition to a series of corporate governance enhancements already adopted and announced during the past year by the company, including terminating the Shareholder Rights Plan in August 2005 and recently appointing two new independent directors to its Board, Leslie Thornton and Patrick Gross.  Currently, seven out of nine Career Education directors are independent under SEC and NASDAQ rules.  The company also previously implemented minimum stock ownership guidelines for senior management and the Board of Directors, a policy requiring approval for Board members to serve on other outside Boards, and mandatory continuing education for all Board members.

 

Among the measures adopted by the Board and announced today is its proposal to the stockholders for a phased-in declassification of the Board of Directors.  The proposal provides

 



 

that, beginning with the 2006 proxy season, Career Education Corporation’s Board slate, if elected, will serve for a one-year term and stand for election annually.  Directors from the prior two years’ classes will serve out their remaining terms, but will then be required to run for re-election annually.

 

The Board also announced a proposal to enable stockholders to call a special meeting with a two-thirds affirmative vote.  Both proposals to stockholders will be voted on at the company’s annual meeting in May.

 

Effective today, the Board amended its by-laws to adopt a majority vote standard policy for directors, requiring each director to receive a majority of the votes cast to be elected in uncontested elections. If an incumbent director is not elected by a majority of the votes cast, the director shall offer his or her resignation to the Board.  The Nominating and Governance Committee would then make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken.  The Board will publicly disclose its decision and the rationale behind it within 90 days of the certification of the election results.

 

Robert E. Dowdell, lead director of Career Education’s Board, said, “Today’s announcement is the result of our analysis of recommendations made by corporate governance thought leaders and the recent actions of other public firms, as well as our own commitment to best practices in corporate governance.”

 

“Career Education continues to be well positioned to deliver high quality education for students, while pursuing profitable growth and offering significant stakeholder value,” added John Larson, Chairman and CEO.  “Our Board and management are committed to operating at the highest levels of effectiveness and integrity and to becoming leaders in sound corporate governance.”

 



 

This excerpt taken from the CECO DEFA14A filed Feb 7, 2006.
HOFFMAN ESTATES, IL, February 2, 2006 – Career Education Corporation (NASDAQ:CECO) today announced its Board of Directors has approved additional enhancements in corporate governance to serve the long-term interest of all stakeholders.

 

The new measures are in addition to a series of corporate governance enhancements already adopted and announced during the past year by the company, including terminating the Shareholder Rights Plan in August 2005 and recently appointing two new independent directors to its Board, Leslie Thornton and Patrick Gross.  Currently, seven out of nine Career Education directors are independent under SEC and NASDAQ rules.  The company also previously implemented minimum stock ownership guidelines for senior management and the Board of Directors, a policy requiring approval for Board members to serve on other outside Boards, and mandatory continuing education for all Board members.

 

Among the measures adopted by the Board and announced today is its proposal to the stockholders for a phased-in declassification of the Board of Directors.  The proposal provides

 



 

that, beginning with the 2006 proxy season, Career Education Corporation’s Board slate, if elected, will serve for a one-year term and stand for election annually.  Directors from the prior two years’ classes will serve out their remaining terms, but will then be required to run for re-election annually.

 

The Board also announced a proposal to enable stockholders to call a special meeting with a two-thirds affirmative vote.  Both proposals to stockholders will be voted on at the company’s annual meeting in May.

 

Effective today, the Board amended its by-laws to adopt a majority vote standard policy for directors, requiring each director to receive a majority of the votes cast to be elected in uncontested elections. If an incumbent director is not elected by a majority of the votes cast, the director shall offer his or her resignation to the Board.  The Nominating and Governance Committee would then make a recommendation to the Board on whether to accept or reject the resignation, or whether other action should be taken.  The Board will publicly disclose its decision and the rationale behind it within 90 days of the certification of the election results.

 

Robert E. Dowdell, lead director of Career Education’s Board, said, “Today’s announcement is the result of our analysis of recommendations made by corporate governance thought leaders and the recent actions of other public firms, as well as our own commitment to best practices in corporate governance.”

 

“Career Education continues to be well positioned to deliver high quality education for students, while pursuing profitable growth and offering significant stakeholder value,” added John Larson, Chairman and CEO.  “Our Board and management are committed to operating at the highest levels of effectiveness and integrity and to becoming leaders in sound corporate governance.”

 



 

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