A multi-year whistleblower lawsuit came to a close Monday, as Education Management Corporation (EDMC) agreed to pay more than $95 million in a settlement with the Department of Justice. The company will also be required to forgive more than $100 million in student loans, as the result of a multi-state consumer fraud investigation.
Attorney General Loretta Lynch announced the settlement during a press conference Monday morning, saying EDMC – the second-largest for-profit college chain in the United States – had operated as a “recruitment mill.” The original lawsuit was filed in 2007 when two EDMC employees claimed that the company had paid admissions officials based on how many students they enrolled, which is prohibited under Title IV of the Higher Education Act (HEA). Still, EDMC certified that it was in compliance with HEA. The Justice Department joined the lawsuit in 2011.
Mark McEachen, president and CEO of EDMC, said in a statement that the company is pleased to have the claims resolved.
“Though we continue to believe the allegations in the cases were without merit, putting these matters behind us returns our focus to educating students,” he said.
Although the Pennsylvania-based company admitted no wrongdoing as part of the settlement, Lynch said during the press conference that the company’s actions harmed “not only taxpayers, but also the students – many of them non-traditional learners like veterans, older individuals and working parents – who trusted EDMC to provide an education that would address their individual needs.”
“EDMC’s actions were not only a betrayal of their students’ trust; they were a violation of federal law,” Lynch said.
The settlement also encompasses a separate investigation conducted by a consortium of more than three dozen state Attorneys General into consumer fraud allegations, which requires EDMC to forgive nearly $103 million in student loans. That settlement further requires EDMC to distribute disclosures to students about graduation rates and other information, and have Thomas Perrelli, a former U.S. associate attorney general, independently monitor the company for compliance.
“Instead of caring about whether a student would be successful in EDMC’s programs, the company seemed to only care about revenue at significant cost, both to students and taxpayers,” Education Secretary Arne Duncan said during the press conference. “The settlement should be a very clear warning to other career colleges out there – we will not stand by when you profit illegally off of students and taxpayers.”
Publication Date: 11/17/2015