PENNSYLVANIA
The federal government reached a settlement with a for-profit college for illegal recruiting, consumer fraud and other violations, according to officials.
Officials described the $95.5 million settlement with Education Management Corp. or EDMC, the second-largest for-profit education company in the country as a “landmark global” agreement, officials said.
Whistleblowers will get paid $11.3 million out of the $95.5 million for bringing this case to light through a private lawsuit, according to authorities.
EDMC, which is headquartered in Pittsburgh, Pennsylvania, operates nationwide under four post-secondary school brands: the Art Institutes, South University, Argosy University and Brown-Mackie College.
Student enrollment across EDMC’s school brands exceeds 100,000 students.
The U.S. Department of Justice said EDMC violated Title IV of the Higher Education Act or HEA along with state statutes.
“This historic resolution exemplifies the Justice Department’s deep commitment to protecting precious public resources; to defending American consumers; and to standing up for those who are vulnerable to mistreatment, abuse, and exploitation,” said Attorney General Loretta E. Lynch.
Adding, “Operating essentially as a recruitment mill, EDMC’s actions were not only a violation of federal law but also a violation of the trust placed in them by their students – including veterans and working parents – all at taxpayer expense. In the days ahead, we will continue working with our invaluable partners at the U.S. Department of Education, through initiatives like the inter-agency task force on for-profit education, to ensure that our nation’s aspiring learners are finding and gaining access to educational opportunities that are right for them.”
The primary allegation was that EDMC unlawfully recruited students by running a high pressure boiler room where admissions personnel were paid based purely on the number of students they enrolled.
“Companies cannot enrich their corporate coffers at the expense of students seeking a quality education, or on the backs of taxpayers who are funding our critical financial aid programs,” said U.S. Attorney David J. Hickton of Pennsylvania. “Today’s global settlement sends an unmistakable message to all for-profit education companies: the United States will aggressively ferret out fraud and protect innocent students and taxpayer dollars from this kind of egregious abuse.”
The settlement resolves four separate FCA lawsuits filed in federal court in Pittsburgh, Pennsylvania, and Nashville, Tennessee, under the qui tam, or whistleblower, provisions of the act.
The act allows private individuals to sue on behalf of the government for false claims and to share in any recovery, according to authorities.
Officials said the global settlement with EDMC also resolves three additional federal FCA lawsuits in which the government did not intervene, all involving various violations of Title IV of the HEA by EDMC.
Finally, officials said the global settlement resolves a consumer fraud investigation by a consortium of 40 state Attorneys General, into EDMC’s deceptive and misleading recruiting practices.
The consumer fraud settlement requires EDMC to undertake various compliance obligations, including detailed disclosure obligations to students; prohibitions on deceptive or misleading recruiting practices and oversight by an administrator to ensure compliance.
The global settlement amount of $95.5 million reflects EDMC’s financial condition and current ability to pay.
The settlement proceeds will be shared among the United States, the states and the whistleblowers and their counsel in the four FCA cases.
The United States will receive $52.62 million from the settlement, and will pay $11.3 million collectively to the whistleblower cases.