University operator Bridgepoint Education Inc (BPI.N) said the Department of Justice was investigating the compensation of its admissions personnel, three months after its flagship college was denied accreditation for not complying with certain standards.
The affiliation of Bridgepoint's Ashford University with the Higher Learning Commission has been under scrutiny since the Western Association of Schools and Colleges said in July that the college spends more money on recruiting students than on teaching them.
Bridgepoint's shares, which have lost more than half their value this year to Monday's close, fell as much as 13 percent to $9.47 after the bell. They closed at $10.97 on the New York Stock Exchange on Monday.
The for-profit education company said in a regulatory filing with the U.S. Securities and Exchange Commission on Monday that it was evaluating the letter it received on October 10, but declined to comment further on the matter. (r.reuters.com/raz33t)
"In its letter, the Justice Department indicated that it is considering a formal process to obtain evidence as part of its investigation," the company said.
The investigation should include specific admissions personnel whose compensation was reviewed as part of the Department of Education's most recent audit report, said Jeffrey Silber, an analyst with BMO Capital Markets.
A number of companies such as Education Management Corp EDMC.O and Apollo Group Inc (APOL.O) have come under pressure from alleged violations of a federal law that prohibits colleges from compensating employees based on the number of students they enroll.
Universal Technical Institute Inc (UTI.N) said in July it was being investigated by the Department of Justice after a former employee alleged the company had violated compensation laws.
Bridgepoint cut 450 jobs and reassigned 400 employees dealing solely with admissions at Ashford last month.
(Reporting by Sagarika Jaisinghani in Bangalore; Editing by Roshni Menon)