U.S. Reaches $95 Million Settlement With For-Profit Schools Who Exaggerated Claims

PITTSBURGH (AP) — A Pennsylvania company that enrolls more than 100,000 students at for-profit trade schools and colleges across the U.S. and Canada has agreed to pay $95.5 million to settle claims it illegally paid recruiters and exaggerated the career-placement abilities of its schools.

Under deals announced Monday by the Justice Department and state attorneys general, Education Management Corp. also agreed to forgive $102.8 million in loans it made to more than 80,000 former students.

“This case not only highlights the abuses in EDMC’s recruitment system; it also highlights the brave actions of EDMC employees who refused to go along with the institution’s deceptive practices,” U.S. Attorney General Loretta Lynch said at a news conference.

The company runs 110 schools in 32 states and Canada for chefs, artists and other trades, including The Art Institutes, Argosy University, Brown Mackie College and South University. Under the settlement, it didn’t acknowledge wrongdoing but said it has “worked with state attorney generals to develop new, more transparent recruiting and disclosure standards.”

The case began in 2007 when a recruiter and the EDMC employee who trained her filed a whistleblower lawsuit in federal court in Pittsburgh.

That lawsuit, and others like it, claimed the company signed up students it knew likely wouldn’t succeed or finish its programs. It did so by paying recruiters using illegal enrollment-based incentives in hopes of raking in government financial aid, which provided the bulk of the company’s income, the lawsuit said.

Eventually, the Justice Department, 12 states and the District of Columbia intervened and, initially, sought to have Education Management forfeit more than $11 billion it received in federal and state student aid since 2003.

“A fundamental compact exists between the government and the public that prioritizes the funding of an education system, accessible to all and free from fraud and abuse,” said David Hickton, the U.S. attorney in Pittsburgh. The company, he said, had “turned that compact on its head by placing the pursuit ahead of profits ahead of a legitimate educational mission.”