The Facts

Federal law limited the share of a for-profit college’s revenue that could come from specified federal programs. Under the rule then known as “90/10,” at least 10 percent had to come from non-federal sources. After the 2008 financial crisis drove private lenders away from the for-profit education market, ITT had a problem: it remained heavily dependent on federal aid but needed private revenue to preserve its eligibility.

ITT and Deutsche Bank established PEAKS in 2010. A trust sold securities to investors and used the proceeds to make loans to ITT students. The arrangement generated non-federal revenue for the school and gave students access to credit that had become difficult to obtain elsewhere.

How the PEAKS System Worked

The critical feature was ITT’s guarantee. Outside investors agreed to buy securities supporting PEAKS because ITT assumed responsibility for significant losses if students didn’t repay. The program therefore looked externally financed while leaving the school exposed to defaults behind the scenes.

By late 2011, the loans were performing far worse than expected. The opinion says ITT covertly made payments on delinquent accounts, postponing defaults and delaying the guarantees those defaults would trigger. Those payments concealed tens of millions of dollars in anticipated liabilities and made the portfolio appear healthier than it was.

Who Had to Live With the Consequences

The 55,000 loans describe the scale of the PEAKS program, not the size of the class that received the verdict. The appellate opinion doesn’t state how many borrowers were included in the damages class.

For those class members, the documented injury was financial: payments made on loans the jury found were connected to a civil racketeering enterprise and conspiracy. The compensable period ran from April 10, 2016, through September 2020. The verdict form specifically asked whether the conspiracy caused economic injury to the plaintiffs and class members; the jury answered yes for Vervent, Activate Financial and Johnson.

ITT’s collapse created a separate disruption. Campuses closed nationwide in September 2016, leaving thousands of students stranded, according to the opinion. Yet the PEAKS payment obligations didn’t disappear with the institution that had generated them. Borrowers continued facing collection on the loans through a servicing operation that remained active after the school was gone.

Why Borrowers Didn’t Discover the Scheme Earlier

The defendants argued that irregular loan documents should have alerted borrowers. Some applications and agreements omitted the loan amount, interest rate, payment plan or fees. But many documents said those terms would be supplied in an approval disclosure, giving borrowers an apparently routine explanation for the gaps.

Trial evidence also showed how professional servicing could make unusual activity look normal. A defense expert described PEAKS as “a legitimate, functioning program” from a loan-servicing perspective. The same expert said third-party payments on delinquent accounts were unusual but not uncommon in student lending. When one borrower asked about a third-party payment, testimony showed that the defendants falsely said the borrower had qualified for a “recovery program.”

The public investigations weren’t much clearer. The Consumer Financial Protection Bureau sued ITT in early 2014, and the Securities and Exchange Commission followed in May 2015. Those proceedings focused primarily on ITT’s accounting, financial disclosures and balance-sheet management—not alleged wrongdoing by Vervent. A defense expert acknowledged that the cases didn’t appear to accuse Vervent of improper activity.

From Loan Program to Affirmed Judgment

What the Jury Found

The trial included testimony from former students, loan-servicing personnel, experts and other people connected to PEAKS. Jurors heard evidence about ITT’s financial incentives, the program’s structure, Vervent’s role in servicing and concealment, the government investigations, collections after ITT’s collapse and what borrowers could reasonably have understood before 2016.

The jury found that Vervent, Activate Financial and Johnson participated in a RICO enterprise and conspiracy. Civil RICO is the private-lawsuit provision of the federal Racketeer Influenced and Corrupt Organizations Act. In this case, it permitted the borrowers to recover three times the damages awarded by the jury.

Jurors calculated $4 million in economic injury from class members’ loan payments during the limitations period. Tripling that amount produced the judgment challenged on appeal.

What the Ninth Circuit Actually Decided

The central appellate question was whether the borrowers sued too late. Civil RICO claims generally must be filed within four years after a plaintiff knew, or reasonably should have known, about the injury. When fraud conceals the nature of that injury, the deadline doesn’t necessarily begin with the first payment or other apparently ordinary transaction.

Vervent and the other appellants argued that the clock began when the loans were issued, when borrowers started paying or, at the latest, when government investigations became public. The Ninth Circuit held that the evidence didn’t compel that conclusion. A reasonable jury could find that routine payments, incomplete paperwork and complex cases about ITT’s accounting didn’t tell ordinary students that their own loans had been fraudulently induced.

September 2016 was the pivotal point. ITT’s closure and bankruptcy brought the PEAKS program into wider public view. Because the borrowers filed in April 2020, the jury had sufficient evidence to find that the lawsuit fell within the four-year limit.

The appeals court didn’t decide that every borrower must receive four years from a company’s collapse. It upheld this jury’s context-specific finding about what similarly situated student borrowers reasonably could have understood.

The defendants also asked the court to overturn the judgment on proximate causation—the required connection between the alleged conduct and the injury. The Ninth Circuit didn’t reach that argument’s merits. The district court’s pretrial ruling had turned on disputed facts, and the defendants didn’t renew the specific challenge at the end of trial. They also hadn’t objected to causation instructions that largely tracked their own proposed language.

That procedural distinction is narrow but important. The causation verdict remains intact; the appellate court did not independently endorse or reject the defendants’ substantive causation theory.

The Public-Funding Rule Behind the Loans

The PEAKS structure mattered beyond a conventional dispute over loan servicing because it generated the non-federal revenue ITT needed to preserve apparent compliance with the 90/10 rule. That rule was supposed to operate as a market test: if a school’s programs had value, some revenue should come from sources other than the federal government.

PEAKS supplied private money on paper, while ITT’s guarantees placed significant risk back on the school. The opinion describes the program as creating a false impression of compliance. It doesn’t quantify how much additional federal funding ITT obtained because of PEAKS, so the broader cost to the government can’t be calculated from this record.

The episode nevertheless documents a structural weakness in the safeguard. A revenue source could appear external even when the school had privately assumed substantial losses required to attract that outside financing. Borrowers then became the visible participants in a system whose guarantees and regulatory purpose remained hidden from them.

What a Legitimate Fix Looks Like

The court’s record identifies specific points where transparency and oversight could have changed what borrowers and regulators were able to see. Any remedy should address those failures rather than relying on students to reverse-engineer a securitized loan program from monthly statements.

What Remains Unresolved

The published opinion settles the issues presented in this appeal: the borrowers’ claims were timely, the causation challenge wasn’t preserved and the district court’s judgment was affirmed. It doesn’t identify how many class members share the award or how the money will be distributed.

Nor does the ruling resolve the defendants’ appellate causation theory on its substance. That question remained outside the court’s review because of how the defendants handled it after trial. The practical result is unambiguous even if that legal argument remains unanswered: the jury’s finding that the conspiracy caused borrowers’ economic injury continues to support the judgment.