Nation’s second largest for-profit college corporation sued for fraud

Washington, D.C., United States (AHN) – The Justice Department and several states are suing Education Management Corp., the nation’s second largest for-profit college company, for allegedly obtaining $11 billion in federal aid by illegally giving bonuses to admissions workers.

The agency on Monday announced that it has intervened in a whistleblower complaint filed by former EDMC employees. The complaint accuses the EDMC of providing commissions to recruiters and falsely certifying compliance with the law that prohibits such incentive compensation.

The False Claims Act bans post-secondary schools from compensating admissions employees based on the number of students recruited, which results in the enrollment of unqualified students, and the pay out of federal grants and student loans.

The allegations against EDMC were made by Lynntoya Washington, who worked as a recruiter, and Michael Mahoney, a former training director for the company’s online education division.

The Justice Department decided to intervene in the case along with the states of California, Florida, Illinois and Indiana after investigating the whistleblowers’ claims. The agency filed friend-of-the-court briefs and did not intervene in the whistleblower case against the nation’s largest for-profit college, the University of Phoenix, which agreed to pay $67.5 million to settle allegations of incentive compensation.

EDMC has about 148,000 students enrolled in its schools, which include Argosy University and Brown Mackie College, in 104 branches in the United States and Canada.

The company has not issued a statement on the Justice Department’s decision to intervene. Early this year, it said it adopted the compensation system under scrutiny in 2003 “based on the advice of and good faith reliance on the opinion of outside counsel that [it] was lawful.”

Pittsburgh-based EDMC said it “has long maintained an uncompromising commitment to sound business principles with an emphasis on compliance with laws and regulations.”

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