INDIANAPOLIS--(EON: Enhanced Online News)--Deborah J. Caruso, the chapter 7 Trustee appointed by the United States Bankruptcy Court to oversee the liquidation of the estate of the failed ITT Educational Services, Inc. and ITT Technical Institute today responded to the purported class action complaint filed by the Legal Services Center of Harvard Law School on behalf of all former ITT students:
“Since the filing of these chapter 7 cases in September, we have been working with state regulators, the SEC, the Consumer Financial Protection Bureau, and the Department of Education to better understand and address the causes of ITT’s collapse and develop a path forward. The Trustee is not ITT. My duty as a fiduciary is to investigate claims, monetize assets, and make distributions to creditors. In this case, the creditors not only include former students, but also a number of other undisputed claimholders, such as landlords and vendors. Resolving these claims is an enormous task for a company in a traditional restructuring, such as a retailer, but it is made even more complicated where there are several thousand potential student claimants – each with a unique, heartfelt story to tell – and no one left at ITT to verify their assertions, or assist in the response to the allegations.
The complaints filed by the states, the SEC, and the CFPB are a roadmap, but the Trustee has to travel down the road independently to make sure that the claims are valid. Otherwise, the risk is that unsubstantiated claims will dilute recoveries for other creditors – including other students – and that would defeat the purpose of the chapter 7 filing. The recent complaint filed by the Harvard clinic has to be reviewed in the same light.”
Focused on Students
“As we have reported to the Bankruptcy Court, in virtually every appearance we have had, the Trustee is focused on maximizing recoveries for former students. If there is a recovery to be had for former students, the Trustee wants them to get it, but the Trustee also needs to be sure that the student claims do not wipe out recoveries for other creditors.
To that end, with the assistance of my counsel from Rubin & Levin and Proskauer Rose we have made great progress. Our first task was to avoid ‘piecemeal litigation’. Significantly, we have reached agreements with all of the regulators regarding the various state and federal actions asserting consumer fraud to temporarily stay the actions while the Trustee conducts her initial investigation. Those agreements will allow us to work productively to advance the interests of the creditors without depleting the estate’s resources. In many respects, we share a common interest. We hope to work constructively with the Harvard clinic, as we are doing with other regulators, and see no reason why we can’t work with them as well. The complaint filed by the Harvard clinic mirrors many of the same assertions raised by the regulators. We have already made contact with the Harvard clinic, and look forward to speaking with them about ways we can work together to bring these cases to a successful resolution for everyone.”