Education Management Corp Hit With $95 Million Settlement


One of the largest for-profit education companies in the nation has agreed to pay $95 million to settle allegations that illegal recruiting practices resulted in staff members’ pay being based on the number of students they enrolled.

Attorney General Loretta Lynch referred to the tactics used by Education Management Corporation as a “high pressure boiler room” situation that targeted specific students based on their abilities.  She added that the actions of the company represent a “betrayal of trust and violation of federal law.”

According to the Justice Department, the settlement, which puts an end to the lawsuit against the company, argued that EDMC violated federal and state False Claims Act provisions. it is the largest False Claims Act settlement involving a for-profit educational institution in US history, reports Kevin Johnson for USA Today.

According to authorities, the schools in question paid admissions personnel based on the number of students they enrolled.  The settlement came after four separate whistleblowers filed suits against the company in 2011, while at the same time ending an investigation by 40 state attorneys general into the alleged practices of the company.

The agreement requires that added disclosure be provided to students, misrepresentation to prospective students bans are upheld, and that the institution will not allow students to be enrolled in unaccredited programs. It also implements an extended period for new students to withdraw without financial obligation.

The school enrolls 100,000 students at the Pennsylvania schools Argosy University, the Art Institutes, Brown Mackie College and South University.  Almost 90% of the revenue EDMC collects is obtained through federal student aid, making the company the second-largest for-profit educational institution.

Education Secretary Arne Duncan said the outcome should be looked upon as a warning to other for-profit institutions that they will no longer be allowed to illegally make a profit off of students and taxpayers, writes Devlin Barrett for The Wall Street Journal.

As part of the agreement, the company has not admitted to any wrongdoing, but does agree to change its business practices.  A written statement was released by EDMC President and Chief Executive Officer Mark McEachen, who said the company was “pleased” to have the situation resolved, says that plans are in the works to “take the lead in developing the best ways to address each one of these concerns, and we have done so” through the creation of a one-page clearly worded disclosure form.

“Though we continue to believe the allegations in the cases were without merit, putting these matters behind us returns our focus to educating students,” McEachen said.

Thomas Perrelli, a former U.S. associate attorney general, will be keeping a close watch over the settlement compliance for three years, issuing annual reports on the progress.

In a separate action, the company has also agreed to forgive $102.8 million in outstanding loan debt that is held by over 80,000 former students.  Students who will be provided with immediate relief must have been enrolled in a program with fewer than 24 transfer credits, and must have withdrawn within 45 days of the first day of their first semester, with their final day of school being between Jan. 1, 2006, and December 31, 2014, reports Dawn Gagnon for The Bangor Daily News.

It is expected that the each student affected will receive an average of $1,370.