This excerpt taken from the CECO DEFA14A filed May 15, 2006.
McSparran v. Larson, et al, a shareholder derivative action against the company and certain of its officers and directors. The courts order terminates this derivative litigation, first filed against the company in January 2004.
According to the courts 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 companys 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 companys 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 Educations Brooks Institute of Photography a Notice of Conditional Approval to Operate, and that the Notice is invalid.
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