For-profit educator was running an illegal enrollment racket.
By Raif Karerat
Federal officials on Monday said they reached a $95.5 million settlement with the nation’s second-largest for-profit educator, which stood accused of running a high-pressure racket that saw admissions personnel paid purely on the number of students they enrolled.
According to a report by CBS News, the civil settlement with Education Management Corporation (EDMC) is the largest yet involving false claims to the Department of Education. It was catalyzed by a case first brought by whistle blowers who were ultimately joined by the Department of Justice and several states in August 2011.
EDMC allegedly violated a federal ban on per capita incentive compensation at schools that take part in government financial aid programs.
“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,” Attorney General Loretta E. Lynch said in a statement.
EDMC, which is partially owned by Goldman Sachs, enrolls more than 100,000 students through a chain of schools in 32 states and Canada under “brand names” including The Art Institutes, Brown Mackie Colleges, and South University. Roughly 90 percent of its revenue — or $11 billion between July 2003 and June 2011 — is garnered from taxpayers through federal education funding for its students.
Asked at a press conference whether the fine being paid by the EDMC was insignificant compared to the billions the company received in federal funds at a Department of Justice press briefing, Attorney General Loretta Lynch replied that the company’s ability to pay was admittedly a large factor in the agreement.