Education Management Corp., the second-largest for-profit college in the country, has agreed to pay $95.5 million to settle charges it unlawfully recruited students by running a high-pressure boiler room where admissions staff were paid based on the number of students they enrolled, the U.S. Justice Department said Monday.
In addition to resolving these and other claims, the settlement also includes findings from an investigation by a group of state attorneys general of consumer-fraud charges involving 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.
“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,” Lynch said.
EDMC operates four colleges nationwide: the Art Institutes, South University, Argosy University, and Brown-Mackie College. More than 100,000 students are enrolled in EDMC’s schools nationwide.
The settlement resolves four lawsuits filed in federal court in Pittsburgh, Pa., and Nashville, Tenn., under whistleblower provisions of the False Claims Act. The FCA allows private individuals to sue on behalf of the government for false claims and to share in any funds recovered.
The United States and five states intervened and actively litigated one of those four whistleblower lawsuits.
The settlement with EDMC also resolves the three federal lawsuits in which the government didn’t intervene.
The settlement also resolves the consumer fraud investigation by 40 state attorneys general into EDMC’s recruiting practices. The consumer fraud settlement requires EDMC to make disclosure to students; prohibits it from using deceptive or misleading recruiting practices, and requires oversight of its operations by an administrator.
The settlement money will be shared among the U.S., the five states who intervened, and the whistleblowers and their attorneys in the four FCA cases. It also includes funds for the compliance expenses of the state consumer fraud settlement, including the costs of the administrator and the purchase and use of a voice system to record and analyze recruiters’ calls with students.
The U.S. will receive $52.62 million from the settlement and will pay $11.3 million to those involved in the four whistleblower cases.
