An investor in Capella Education Company stock filed a lawsuit on behalf of those who purchased common stock of Capella Education (CPLA) between February 16, 2010 and August 13, 2010 against Capella Education Company over alleged violations of Federal Securities Laws. Meanwhile an investigation on behalf of current long term investors in Capella Education Company (NASDAQ: CPLA) shares over possible breaches of fiduciary duty by certain directors and officers at Capella Education Company was announced.

The investigation by a law firm on behalf of current long term investors in stock of Capella Education Company (NASDAQ: CPLA) concerns whether certain current and/or former officers and members of Capella Educations board of directors and executive officers can be held liable in connection with the alleged Securities Laws violations in the lawsuit by investors who purchased CPLA stock between February 16, 2010 and August 13, 2010. The lawsuit follows a report by the U.S. Government Accountability Office with the title Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and Questionable Marketing Practices. According to the complaint filed in the United States District Court for the District of Minnesota the plaintiff alleges on behalf of purchasers of the common stock of Capella Education Company (NASDAQ:CPLA) between February 16, 2010 and August 13, 2010, that Capella Education Company and certain of its officers and executives violated the Securities Exchange Act of 1934 by issuing between February 16, 2010 and August 13, 2010 materially false and misleading statements regarding its business and financial results.
Capella Educations revenue rose from $179.88million in 2006, to $226.24million in 2007, to $272.3million in 2008, and $334.64million in 2009. Its Net Income almost tripled over the same period from $13.41million in 2006 to $42.67million in 2009.

The U.S. Government Accountability Office (GAO) report Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and Questionable Marketing Practices details undercover investigations into 15 for-profit schools that uncovered misconduct by school staff. According to this GAO study, the college personnel at schools may have encouraged applicants to falsify their financial aid forms to qualify for federal aid and pressured applicants to sign a contract for enrollment prior to allowing them to speak to a financial advisor. The undercover tests at 15 for-profit colleges found that 4 colleges encouraged fraudulent practices and that all 15 made deceptive or otherwise questionable statements to GAOs undercover applicants. In particular, so the report, admissions or financial aid representatives at all 15 for-profit colleges provided our undercover applicants with deceptive or otherwise questionable statements, which included information about the colleges accreditation, graduation rates and its students prospective employment and salary qualifications, duration and cost of the program, or financial aid. Representatives at schools also employed hard-sell sales and marketing techniques to encourage students to enroll, so the report.
On August 13, 2010, after the market closed, the U.S. Department of Education released data on federal student-loan repayment rates at the nations colleges and universities. The data showed that repayment rates were 54% at public colleges and 56% at private non-profit institutions, compared to just 36% at for-profit colleges. Specifically, the data showed that the repayment rate at Capella Education Company was just 40%. On this news,so the lawsuit, the price of Capella Education Company stock dropped 13.19%, or $9.26 per share, from a closing price of $70.20 per share on August 13, 2010 to a closing price of $60.94 per share on August 16, 2010, the following trading day, on a 438% increase in trading volume.
Shares of Capella Education Company (NASDAQ:CPLA) recently traded at $54.61 per share, down from its 52weekHigh of $98.01 per share.

Recently the Attorney General of Florida Bill McCollum launched an investigation into some for-profit education companies in that regard.