College operator settles whistleblower suits for $95M

Accused of illegal recruiting practices, the corporation has finally reached a record-breaking agreement.

College operator settles whistleblower suits for $95M
Education Management Corp., an operator of for-profit colleges partly owned by Goldman Sachs Group Inc., agreed to settle whistle-blower lawsuits in which it’s accused of illegal recruiting practices for $95.5 million, the largest such accord in American history, U.S. Attorney General Loretta Lynch said.

The Pittsburgh-based company operated a “high pressure recruitment mill,” paying recruiters based on the number of students they persuaded to enroll, Lynch said Monday at a Washington press conference.

The for-profit college sector has been imploding, as federal and state regulators have been reining in schools, accusing them of preying on low-income students and saddling them with student loans they can’t repay. Corinthian Colleges collapsed earlier this year in the largest shutdown in U.S. higher education, and the government is in the process of forgiving loans to some former students.

100,000 Students

Education Management, the second-largest U.S. for-profit college operator, with more than 100,000 students, received more than 90 percent of its revenue from U.S. taxpayers in the form of educational funding, she said. It is 38 percent owned by Goldman Sachs, according to data compiled by Bloomberg.

The agreement, announced jointly with U.S. Secretary of Education Arne Duncan, Iowa Attorney General Tom Miller and Pittsburgh U.S. Attorney David Hickton, resolved four lawsuits filed under the federal False Claims Act. Thirty-nine states simultaneously announced the accord. The company in addition will forgive more than $100 million in student loan debt originated by the company and not federally backed, said Kate Hanson at Ohio Attorney General Mike DeWine’s office.

Lynch said the Education Management agreement was part of a more wide-ranging crackdown on practices she called fraudulent.

While the company acknowledged the accords in its own statement, it maintains it committed no wrongdoing.

“When we started our work together, the attorneys general had many concerns about the ways that some higher education providers recruited students. EDMC wanted to take the lead in developing the best ways to address each one of these concerns, and we have done so,” EDMC president and chief executive officer Mark A. McEachen said in the statement. “EDMC is proud to have worked closely with the state attorneys general to produce a new, one-page, easy-to-read disclosure that provides important information for students as they consider their higher education options at one of our schools.”

EDMC operates schools under the brands of the Art Institutes, Argosy University, Brown Mackie College and South University in 110 locations in 32 states and Canada. Students can earn college and graduate degrees in fields including food preparation, business, fashion and information technology.


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