Harris Miller as a defendant in class action law suit

By: Left Wing
Published On: 6/11/2006 6:48:53 PM

[UPDATED BY JOSH:  Apparently the lawsuit discussed in this diary was dismissed.  This should be stated at the beginning as an issue of fairness. 

Here is the dismissal order (PDF).


Did you know that Miller is a defendant in a lawsuit against the executives and directors of ITT Technical Institute?  Apparently the officials cooked the books to increase the stock price of the firm.  When ITT learned that this deception would soon be made public, people (including our boy Miller) sold their stocks before the inevitable drop in their stock.  Miller's received $934,000 for his stock.  The suit was filed by the City of Austin Police Retirement System as Civil Action No.: 1:04-cv-00380-DFH-TAB in the U.S. District Court, Southern District of Indiana, Indianapolis Division.  Check out http://techpol.blogspot.com/2006_01_01_techpol_arc hive.html which has a link to the suit itself.

Some excerpts from the suit include the following.

========================================

... ITT publicly touted its business and financial performance, the performance of its stock price, and its ability to enroll and keep students in its institutes to entice investors to purchase its stock... These representations, however, were materially false and misleading and they failed to disclose to the investing public that ITT had been regularly falsifying records used as indicators of its operational success ... The strong growth reported by the Company throughout the Class Period was grounded upon these fraudulent and inherently unsustainable practices, rendering ITT's reported financial historical performance and projections of future growth materially false and misleading.

.. .

Defendants used a host of tricks to falsify student information, including inflating enrollment figures, counting students as enrolled who never attended ITT, double counting enrollees, changing and falsifying grades, and misrepresenting attendance and placement rates.

...

Defendant Harris N. Miller ... served as a Director of ITT since July 1999 and has been a member of the Audit Committee since 2001.+âGÇÜ During the Class Period, Miller sold 18.000 shares of ITT common stock for proceeds of $934,400. Defendant Miller signed the Company's Forms 10-K for fiscal years 2002 and 2003. [In addition to Harris being a Director, he was also a member of the Audit Committee which had special responsibility for oversight of the integrity of ITTs financial statements and other financial information.]

 


Comments



Insider Trading / Confict of Interest (loboforestal - 6/11/2006 7:49:00 PM)
Read and weep :
http://www.google.com/search?hl=en&lr=&q=itt+%22harris+miller%22+insider&btnG=Search

One of my favorites:
http://www.thestreet.com/comment/herbonthestreet/929890.html

According to a report by Nadel, who declined to comment on the record, the recruiters also steer potential students to the Web site of the Information Technology Association of America, the tech school industry's trade group, which talks about industry salaries. (The trade group's president, Harris Miller, as it turns out, is also on ITT's board. I couldn't get a hold of Miller, who didn't return two calls over the past two weeks, so we'll refrain from asking what the prez of a trade group is doing as a director of one of its member companies.)

Virginia has a conflict of interest with Harris Miller



Almost the exact amount he has given to his campaign... (Loudoun County Dem - 6/11/2006 8:02:06 PM)
interesting...


Harris Miller and all ITT Directors Were Vindicated (anon06 - 6/11/2006 8:08:31 PM)
Lowell posted a similar thread back in April:

http://www.raisingkaine.com/showDiary.do?diaryId=2126

This post is no longer available, I hope, because of what I relayed in a reply.  Specifically, regarding the ITT issue, Lowell linked the Complaint but he did not link Judge Hamilton’s Order to Dismiss.

Just like Lowell’s April Diary, you are referring to the Complaint but you are not providing Judge Hamilton’s Order to Dismiss.

In April, I responded with the following.  The same applies with this Diary, and it is wrong for you (or anyone else) to throw out allegations on this matter without all of the facts:

Regarding the ITT issue, you linked the Complaint but you did not link Judge Hamilton’s Order to Dismiss.  You’ll find that Harris Miller was not only vindicated, but the alleged charges were disturbingly false—twisted to support assumptions rather than facts alone.  The Order was not too kind to the Claimants.  It’s a pretty damning read. 

http://www.insd.uscourts.gov/opinions/AN3800O2.PDF

From page 39-40:  Plaintiff also relies on the fact that the individual defendants benefited financially from higher stock prices.  As many courts have observed, nearly all for-profit corporations compensate executives for successful financial performance as measured in the stock market, so this fact does not support a strong inference of scienter.  Judge Moran has explained: “If scienter could be pled solely on the basis of plaintiff’s allegations that defendants were motivated to defraud the public in order to inflate the stock price, ‘virtually every company in the United States that experiences a downturn in stock price would be forced to defend securities fraud actions.’”  …In this case, the records of the defendants stock sales do not show any unusual pattern that would lend any support to an inference of scienter. 

Oh, and by the way.  ITT’s stock (Ticker ESI) surpassed the $57.40 per share mark prior to Harris Miller’s resignation from the board in January (to run for Senate).  In other words, the stock returned to, then surpassed the February 2004 pre-corporate crisis stock price of $57.40 (it dropped to $38.50 in one day). It seems that Mr. Miller was a very good board member to that company, its stock holders, and its employees. 



Please Read the Entire Order to Dismiss (anon06 - 6/11/2006 8:17:10 PM)
You'll find that the lawsuit, and SEC intervention, were unfounded and disturbingly erroneous. 


Case is gone but fishy smell remains. (loboforestal - 6/11/2006 9:18:14 PM)
Well, insider trading is *VERY* hard to prove. Bush Administration is not gung ho on suits against their business buddies like Miller: notice the quick settlement on Microsoft when Bush got in.  What's known is that Miller did sell a bunch of stock before disclosure. It does remain *legally unproven* that it was insider trading

Bloombeg report:

Additional sellers were Clark Elwood, senior vice president and general counsel, who sold 161,666 shares for $4.1 million; Thomas Lauer, former senior vice president who sold 120,000 shares for $4.9 million; Gene Baugh, former chief financial officer, who sold 67,500 shares for $1.7 million; Martin Grossman, senior vice president, who sold 10,000 shares for $484,000; and Harris Miller, an outside director and president of the Information Technology Association of America, who sold 18,000 shares for $932,000.

Elwood and Grossman declined comment through company spokeswoman Brown. Lauer said in an interview that he was aware of the California investigation when he sold and declined further comment. Baugh wasn't available for comment, and Miller declined comment.

Insider Purchases

The only purchases since ITT Educational learned of the attorney general's investigation were made by two outside directors that joined the company's board in October 2003. Joanna Lau, chief executive of Lau Technologies in Littleton, Massachusetts, bought 200 shares on Feb. 13, 2004. John Cozzi, 42, managing director of Arena Capital Partners LLC of New York, bought 2,000 shares on Jan. 30. Neither returned telephone calls seeking comment.

So the Austin Police couldn't prove their case against Mr. Miller. Water under the bridge at this point.

Still, Mr. Miller could answer some questions (now that a suit no longer hangs over him?):

1) Did Mr. Miller know about the search and think it would materially affect stock price? Why did he sell? [ the stock answer is "college for my kids" ]

2) What is Mr. Miller doing on the board while serving as ITAA head?

Perhaps he could return the reporters calls.



I agree with anon06 (Kathy Gerber - 6/11/2006 9:08:05 PM)
I was very alarmed when I first saw this a while back, someone on another blog was kind enough to look into it then and pretty much said what anon06 says.

I don't think it is appropriate to bring this up. 



Yeah, it's a little late (loboforestal - 6/11/2006 9:21:14 PM)
Hitting him on this without time to respond would be acting like ... well ... you know ... the other guy.


Yes. (JennyE - 6/11/2006 9:24:22 PM)
Just unrecommend the diary.


Some issues are still open. (loboforestal - 6/11/2006 9:41:48 PM)
The legal case is closed. 

Two issues remain:

1) The stock sale?  Why?

2) Serving on the ITT board of directors while representing competitors on ITAA.

If he addresses them satisfactorily, then the issue may close for good.

He'll answer #1 with "cuz I felt like it".  Which is okay as long it doesn't turn out to be false.
He'll answer #2 with "It's not a big deal".  Which is again okay as long Mr. Miller himself says it and no one can demonstrate that he was serving two masters with different agendas.

He's lucky he's probably going lose on Tuesday because Allen would ask these questions.



We had known of this for some time (relawson - 6/11/2006 10:15:06 PM)
But given the order from the judge to dismiss not sure there is anything here.  Unless there is more information this is probably a dead end.

Of course politically you can make hay out of whatever you please.  Miller made hay out of the cartoon rubish - but perhaps it is best not to sink to his level.  Also, his horrific actions just may backfire.



ITT Settles California Fraud Probe (danarothrock - 6/12/2006 1:44:56 AM)
http://www.consumeraffairs.com/news04/2005/itt_institute.html

ITT Settles California Fraud Probe
October 22, 2005
ITT Educational Services Inc., which operates ITT Technical Institutes across the country, agreed to pay $725,000 to settle an investigation by the California attorney general’s office.



Hmm... (Kathy Gerber - 6/12/2006 6:38:27 AM)
The article has a typo; the Chronicle article is Oct 28, not Oct 18.

Miller talking about pouring money into education for adults, and the for-profit schools are consistent with his platform.  They are largely funded with tax dollars.

It looks like there was a number of complaints and lawsuits in many states because of problems with several of these schools. Not ITT, but one of the other schools was in some trouble for aggressive recruiting outside of welfare and unemployment offices.



There Out to Be a Moratorium (KathyinBlacksburg - 6/12/2006 10:31:20 AM)
There ought to be a moratorium on putting something like this up this late.  We don't want to stoop to Harris's level with his reckles charges this past week.  We may feel like it staying cool, but we shouldn't get carried away with this.  Most of us here at RK have not been happy with Miller's choices in the past.  Most of us have critiqued them (and most by staying with the issues and the record).  And we don't take them lightly.  But, this, today?

I agree with Kathy Gerber.  Let's not revisit this now.  (And I'm not a troll, but a diarist on this blog and enthusiastic Webb supporter.) Vote Webb, leave the sludge in the Miller camp.



Moratorium (KathyinBlacksburg - 6/12/2006 11:08:18 AM)
Oops, I mean "ought."


anon06 is a Miller supporter (loboforestal - 6/12/2006 11:26:39 AM)
anon06 is a Miller supporter:
http://www.raisingkaine.com/showComment.do?commentId=17587

Very quick to counter.  Part of the Miller rapid response team?

They seem pretty sensitive to the questions raised.



But not a troll (Eric - 6/12/2006 11:40:02 AM)
as far as I can tell.  And there is a BIG difference between the two. 

I have no problem with Miller supporters providing quick and reasonable defense for anything he is accused of.  Perfectly fair.

On the other hand, the trolls are quick to jump in but provide no real value to the discussion.