At least 12 former employees of

Career Education

(CECO) - Get Report

say the college operator doctored both student records and its own financial statements to inflate its stock price, a lawsuit claims.

The allegations are contained in an amended class-action suit that names Illinois-based Career Education, its chief executive and its chief financial officer. It seeks to represent anyone who bought the stock between Jan. 28, 2003, and Dec. 2, 2003.

"Career Education, according to more than a dozen former employees, engaged in a pervasive practice and pattern which consisted of falsifying student records in order to obtain financial aid monies and portray Career Education schools as having increasing and revenue to garner the favor of the investing public, and manipulating Career Educations' schools financial statements in order to inflate revenue, lower bad debt reserves and to avoid cessation of funding from financial aid sources," the complaint states.

Career Education, which twice in the last year has been forced to defend itself from similar allegations, said the suit is baseless.

"The company continues to believe the complaint is without merit," Career Education said in a statement. "The company and individuals named in the complaint will vigorously defend themselves against it."

Shares were recently down $7.98, or 12%, to $59.05. Even with the hit, however, Career Education remains a big performer, having started 2003 at about $20.

The stock fully recovered from similar allegations that surfaced in early December and briefly lopped off about a quarter of its market capitalization. The stock continues to fetch a rich 33 times 2004 earnings estimates and 26 times next year's.