For-profit education company will pay $95.5M to settle illegal recruiting claim
The nation’s second largest for-profit education company has agreed to pay $95.5 million to settle civil claims it ran a high-pressure boiler sales business in which admissions personnel were paid based on the number of students they recruited.
Attorney General Loretta Lynch announced the settlement with Education Management Corp. on Monday, according to a Department of Justice press release, the Chicago Tribune, the Washington Post, CBS Moneywatch and the Wall Street Journal (sub. req.). The company runs the Art Institutes, South University, Argosy University and Brown-Mackie College.
Lynch said in prepared remarks that the company was “operating essentially as a recruitment mill.” The settlement is the largest involving false claims made to the Department of Education.
According to advance coverage of the settlement by the New York Times, the whistleblower suit claimed top recruiters received free vacations, tickets to sports events, chocolates and free lunches.
The settlement resolves a consumer fraud investigation by 40 state attorneys general and four False Claims Act lawsuits filed by whistleblowers. The federal government and five states intervened in one of the suits.
The plaintiffs claimed the company falsely certified it was complying with the Higher Education Act’s ban on incentive compensation at schools participating in financial aid programs. About 90 percent of the company’s revenues come from federal education funding for its students.
The company did not admit wrongdoing.
As a result of the settlement, Education Management will forgive debts owed by former students who left within 45 days of their first term, if their final day of attendance occurred from the beginning of 2006 to the end of 2014, according to the Tribune and the Post. The company will also disclose job placement rates and give students the chance to withdraw at no cost for up to seven days after attending classes on campus, or up to 21 days after attending classes online.
