An Indiana federal judge has let the directors of collapsed, disgraced for-profit college ITT Tech off the hook, rejecting claims from the company’s bankruptcy trustee that the board’s failure to fire CEO Kevin Modany breached their fiduciary duties.
But U.S. District Court Judge James Patrick Hanlon rejected Modany’s own effort to escape liability, ruling that the trustee, Deborah Caruso, can proceed with her claim that Modany unlawfully put his self-interest above the company when he refused to consider offers to sell the business that required him to step down.
Judge Hanlon found in an opinion released Wednesday that Modany knew that state and federal law enforcement agencies were refusing to settle their claims against ITT Tech unless he resigned or was fired. Yet Modany, who risked losing a big severance payment if he was terminated for cause, resisted. The judge found that Caruso had presented sufficient facts to indicate “that Mr. Modany pursued a strategy designed to maximize his compensation and allow him to remain as CEO and acted with a purpose other than ITT’s best interests.”