The U.S. Justice Department said Monday that it had reached a “landmark global settlement” with Education Management Corporation, the second-largest for-profit education company in the nation, in which the company agreed to pay $95.5 million to resolve whistleblower allegations that it used unlawful methods to recruit and enroll students to its campuses.
Education Management Corporation, which is headquartered in Pittsburgh, Penn., operates four post-secondary school brands: the Art Institutes, South University, Argosy University, and Brown-Mackie College. Student enrollment across the company’s schools exceeds 100,000 students.
Accusations against Education Management Corp.’s practices have been raging for years, including allegations that its Art Institutes division has been preying on military veterans by enticing them with false graduation data and pushing them to take out excessive amounts of financial aid, just so it could get a cut of GI Bill funds.
Federal prosecutors said the settlement announced Monday resolved a number of allegations. Primary among them was the accusation that the Education Management Corp. unlawfully recruited students by paying its admissions personnel purely on the basis of the number of students enrolled – an illegal tactic that put admissions personnel under extreme pressure to enroll students at any cost.
The settlement also resolves an investigation by a consortium of state Attorneys General of consumer fraud allegations involving the company’s deceptive recruiting practices.
“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 in a press conference Monday.
“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,” she added.
The allegations stemmed from four separate lawsuits filed on behalf of the federal government by private individuals in federal courts in Pittsburgh and Nashville under the whistleblower provisions of the False Claims Act. The whistleblowers who exposed the fraud at Education Management Corp. will share an award of $11.3 million.
“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 Hickton of the Western District of Pennsylvania, who helped prosecute the case. “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.”