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The U.S. Securities and Exchange Commission on Tuesday brought fraud charges against for-profit college chain ITT Educational Services Inc. and its top executives, alleging they hid the “extraordinary failure” of two student-loan programs from investors, The National Law Journal reported yesterday. According to the SEC complaint filed in Indiana federal court, the company financially guaranteed the two private loan programs for ITT students. After an “extremely high” number of students defaulted, ITT found itself on the hook for more than $100 million in payments. Rather than admit this to shareholders and company auditors, ITT, according to the SEC, “engaged in a series of deceptive acts to hide the poor performance of the student loan programs and their financial impact on ITT.”

A lawyer for New York financier Lynn Tilton urged a U.S. judge on Monday to block the U.S. Securities and Exchange Commission from trying her before an administrative judge for defrauding investors, Reuters reported yesterday. Tilton, the head of private equity firm Patriarch Partners, appeared in court as one of her lawyers asked U.S. District Judge Ronnie Abrams in Manhattan to declare the SEC's in-house court system unconstitutional. Lawyers for the U.S. Justice Department defending the SEC countered that the system was proper, and that any challenge Tilton wanted to make would need to wait until after her trial, which is set for Oct. 13.

An analysis today by the Wall Street Journal of hundreds of decisions shows how much of a home-court advantage the SEC enjoys when it sends cases to its administrative law judges rather than federal courts. The SEC won against 90 percent of defendants before its own judges in contested cases from October 2010 through March of this year, according to the Journal analysis. That was markedly higher than the 69 percent success the agency obtained against defendants in federal court over the same period, based on SEC data. The SEC says its administrative law judges are impartial and the process is fair. It attributes the difference in outcomes partly to case mix. For instance, most of its complicated insider-trading cases have been heard in federal court, not by its in-house judges.

Securities regulators want publicly traded companies to make it easier for shareholders to determine whether top executives’ compensation is aligned with the firm’s financial performance, the Wall Street Journal reported today. The Securities and Exchange Commission today is set to propose long-awaited rules that would force thousands of companies to tell investors how the pay of top management tracked the firm’s financial results. The proposal, a requirement of the 2010 Dodd-Frank financial law, marks the latest attempt to strengthen investors’ ability to understand — and challenge — companies over their executive-pay practices. The SEC has previously greenlighted so-called “say-on-pay” votes that require companies to put executive-compensation packages up to a nonbinding shareholder vote at least once every three years.

Though federal regulators aimed their sights against former executives at the mortgage giant Freddie Mac in a court proceeding, a federal judge yesterday approved an unusual resolution to the case: The Securities and Exchange Commission and the former Freddie Mac executives agreed “that no party is the prevailing party,” the New York Times reported today. The deal requires modest payments to Freddie Mac investors rather than stiff financial penalties. And in another twist, it explained that “the parties agree, without conceding the strengths or weaknesses of their respective claims and defenses, that it is not in the interest of justice to continue to litigate this matter” — a phrase that has rarely, if ever, appeared in an SEC settlement. The settlement with the executives — Richard F. Syron, the former chief executive; Patricia L. Cook, who served as chief business officer; and Donald J. Bisenius, who was a senior executive in the mortgage guarantee business — is a bookend to one of the most prominent SEC actions stemming from the financial crisis. The case against the Freddie executives started to crumble after the SEC took more than 30 depositions from witnesses. Many of the witnesses did not support the theory of the case put forth by the SEC. And with lawyers on both sides expecting the case not to go to trial for at least another two years, they chose to open settlement talks about six weeks ago.

The Securities and Exchange Commission announced a settlement yesterday with KBR Inc. over allegations that it used employment agreements that could have muzzled whistleblowers, the Wall Street Journal reported today. The Houston-based global technology and engineering firm agreed to pay $130,000 to settle the agency’s allegations that the company required witnesses in certain internal investigations interviews to sign confidentiality statements that could have kept them from reporting possible securities-law violations to authorities. The settlement comes as the SEC is broadly probing whether companies are muzzling corporate whistleblowers. KBR didn’t admit or deny wrongdoing in the settlement and has since amended confidentiality agreements by adding language that makes it clear that employees are free to report to the SEC, the agency said.

Lynn Tilton, founder of Patriarch Partners LLC, embraced new and complex forms of debt to fund her companies, and it’s those financing methods that are now in the spotlight after the U.S. Securities and Exchange Commission accused her on Monday of crossing the line, Bloomberg News reported yesterday. The SEC said that Tilton overcharged investors almost $200 million on fees she collected on $2.5 billion of collateralized loan obligations, or CLOs, that she created to help fund her various businesses. Tilton’s representatives have called the allegations “ill-founded.” At the heart of the SEC’s case is how Tilton valued the loans to companies she or Patriarch controlled that were later bundled into CLOs and sliced up into securities of varying risks. The SEC says that some of the loans should have been written down -- and the fees charged investors to manage the CLOs lowered -- since many of the companies made no interest payments, or only partial payments.

The Securities and Exchange Commission faces new pressure from Congress to make it harder for lawbreaking companies to hold on to important privileges that help them raise money in the markets, the New York Times DealBook blog reported today. Rep. Maxine Waters (D-Calif.) is set to introduce legislation today that takes aim at how the SEC grants the privileges. The announcement will coincide with the appearance today of Mary Jo White, the SEC’s chairwoman, before the House Financial Services Committee, where Waters is the leading Democratic member. When a company is found to have broken securities laws, the SEC can disqualify it from issuing certain types of securities, which can affect how the firm raises money and impinge on client activities. The firms, however, typically request waivers from these disqualifications — and the agency has often granted them.