As a former employee who had blown the whistle on ITT, an operator of some 140 for-profit schools, Dan Graves was happy that the government had finally taken action to protect students from the company’s aggressive sales tactics, which lured them into debilitating debt and provided little in the way of an education, the New York Times reported on Saturday. Still, he wondered what had taken the government so long. After all, it has been 17 years since Graves and another former ITT employee brought a suit alleging that the company had systematically violated the law governing compensation of sales representatives. The two former employees shared extensive documentation with federal prosecutors and regulators. These officials expressed keen interest, Graves said, and estimated that the government could recover $400 million in damages from the case. But by 2004, the lawsuit was dead and Graves’s effort to provide the government with damning evidence had come to naught. Now that ITT is in bankruptcy, Graves’s whistle-blower experience is instructive: It spotlights a costly regulatory failure that allowed ITT to stay in business far longer than it otherwise might have, Graves said.
