The U.S. Department of Justice is investigating Walden University, an online for-profit college, over allegations it misrepresented aspects of a nursing program to students and an accreditor, according to an SEC filing.
Adtalem Global Education, a for-profit college operator seeking to acquire Walden University, notified investors Thursday that the Justice Department is investigating whether school officials falsely advertised the content and cost of its master's of science in nursing degree to students.
The company has launched its own investigation into the allegations and is evaluating whether the situation will impact its planned acquisition of Walden.
Adtalem announced on Sept. 11 that it planned to buy the Minneapolis-based Walden University from Laureate Education, another for-profit college operator, for $1.5 billion in cash. The online college enrolls more than 50,000 students, three-quarters of whom are in health sciences programs.
Laureate Education told Adtalem on Sept. 16 that the Justice Department and several other government agencies are investigating whether Walden U violated federal law, according to Adtalem's latest quarterly report.
Allegations include that officials made misrepresentations to the program's accreditor, the Commission on Collegiate Nursing Education, and that is falsely advertised aspects of the degree to students, including the availability of clinical site placements required to complete the program.
"We are cooperating fully with the inquiry and Walden continues to operate as an accredited institution," a Laureate spokesperson wrote in an email.
Adtalem CEO Lisa Wardell told analysts on a call Thursday that the company intends to complete its own investigation into the matter before closing on the transaction. "Should our investigation into the Walden matter substantiate the allegations contained in the DOJ inquiry, we will pursue all options available to us to protect the interests of our stakeholders," she said. The transaction was expected to close in mid-2021.
In mid-October, Laureate told Adtalem that Walden received a letter from its accreditor, the Higher Learning Commission, that it is seeking to place the university under its public governmental investigation designation, according to its quarterly report. Walden requested the designation not be imposed.
The designation allows HLC to alert students that the institution is being investigated. While under the designation, institutions are required to "submit regular reports about its financial or legal situation" or undergo other special monitoring, according to its website.
If imposed, Walden will remain under the designation until HLC's president determines the university has resolved the issues that prompted the investigation, according to Adtalem's SEC filing.
The investigation could complicate Adtalem's planned acquisition of the university. HLC must approve the university's substantive change application for Adtalem to take ownership, but its website notes that institutions under investigation by the government won't be considered unless the schools can show that "there is a compelling reason for the change."
"Any substantive change application from an institution with a current designation will be subject to strict scrutiny and may be deferred by staff or by the Institutional Actions Council for consideration by HLC after it has removed the designation, or the application may be denied," it states.
Laureate's spokesperson said the company won't "speculate" about whether the investigation could complicate or stop the acquisition. HLC and Walden didn't immediately respond to requests for comment emailed Thursday evening.