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User:WWB Too/EDMC (Legal issues)

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Legal issues edit

Financial aid and recruitment complaints edit

In 2007, two former EDMC recruiters filed a whistleblower complaint regarding recruitment and compensation practices at EDMC institutions. As a result of these complaints, the U.S. Department of Justice initiated a federal lawsuit in 2011 on behalf of eleven states and the District of Columbia.[1] The civil lawsuit was filed under the False Claims Act, which allows whistleblowers to file lawsuits when they believe the federal government has been defrauded.[2] The lawsuit seeks to recoup $11 billion dollars, the amount of federal money EDMC institutions received in the form of federal student aid between 2003 and 2011. The Department of Justice argued that EDMC violated federal rules banning incentive-based compensation and therefore acquired the federal funds illegally.[3] In response to the charges, EDMC stated that the compensation plan in question was in compliance with then-current federal rules and had been reviewed and approved by two education law firms.[4][3] In May 2012, the charges that the compensation plan was illegal were dismissed with other charges allowed to stand.[5] During this time EDMC settled with a former South University recruiter alleging similar practices. The details were not public.[6][7]

A separate whistleblower lawsuit, filed by a former South University recruiter, was initiated in January 2010 and officially filed in March 2012. This lawsuit alleged that the company deliberately misclassified data to inflate the job-placement rates of its graduates and make the school more attractive to prospective students. Unlike the federal whistleblower lawsuit initiated in 2011, the U.S. Department of Justice has not joined the lawsuit.[8] In October 2012, a U.S. magistrate judge dismissed allegations that the company failed to notify the U.S. government when students left their program and that the company misled prospective students about program costs. The remaining allegations were recommended for further review.[9]

As of March 2013, both the federal whistleblower case begun in 2007 and the case initiated in 2010 are pending. EDMC has responded to the claims saying that both cases "are wholly without merit".[10]

Investigations edit

Four states initiated investigations in recent years with Florida in October 2010, New York, California[5][11] and a subpoena of documents regarding Brown Mackie College from the Office of Consumer Protection of the Kentucky Attorney General in December 2010.[12] In August 2010, EDMC and other private sector schools were investigated by the U.S. GAO, which reported that Argosy University (Chicago) recruiters misled undercover students about tuition and program quality.[13][14] The GAO later revised parts of its original report from the investigation, which was the focus of testimony at a U.S. Senate HELP committee September, 2010 hearing.[15]

Dismissal of shareholder lawsuit edit

In 2010, several EDMC shareholders initiated a lawsuit alleging that EDMC had misled investors prior to the company's 2009 IPO, causing investors to lose money when the company's stock fell in 2010. The lawsuit was later joined by EDMC shareholders OPPRS and SEPTA. The case was dismissed by a federal judge in September 2011, as the shareholders were unable to show that the company had lied to investors.[16]

  1. ^ John Hechinger (3 May 2011). "Education Management Suit Brought on Behalf of 11 States". Bloomberg. Retrieved 29 March 2013.
  2. ^ Tamar Lewin (2 May 2011). "U.S. to Join Suit Against For-Profit Chain". The New York Times. Retrieved 28 February 2013.
  3. ^ a b Tamar Lewin (8 August 2011). "For-Profit College Group Sued as U.S. Lays Out Wide Fraud". The New York Times. Retrieved 29 March 2013.
  4. ^ Chris Kirkham (24 October 2011). "With Goldman's Foray Into Higher Education, A Predatory Pursuit Of Students And Revenues". The Huffington Post. Retrieved 14 February 2013.
  5. ^ a b Andrew Conte (15 May 2012). "EDMC: Party's off at for-profit juggernaut". Pittsburgh Tribune-Review. Retrieved 14 February 2013.
  6. ^ Thomas Olson (30 January 2013). "Education Management's profit falls 51%; sale-leaseback of Art Institute studied". Pittsburgh Tribune-Review. Retrieved 20 March 2013.
  7. ^ Brian Bowling (24 June 2011). "Ex-employee settles lawsuit against for-profit university". Pittsburgh Tribune-Review. Retrieved 28 March 2013.
  8. ^ Chris Kirkham (15 March 2012). "Education Management Corp. Engages In 'Predatory Lending,' Whistleblower Claims". The Huffington Post. Retrieved 29 March 2013.
  9. ^ Robert Long (25 October 2012). "U.S. judge: Parts of McKernan-linked lawsuit can stand". Bangor Daily News. Retrieved 14 February 2013.
  10. ^ Andrew Conte (28 February 2013). "Education Management CEO praises back-to-basics strategy". Pittsburgh Tribune-Review. Retrieved 04 March 2013. {{cite news}}: Check date values in: |accessdate= (help)
  11. ^ Scott Travis (21 October 2010). "Florida attorney general investigating 5 for-profit universities". Florida Sun-Sentinel. Retrieved 14 February 2013.
  12. ^ Miriam Reimer (21 December 2010). "Education Management Subpoenaed". TheStreet.com. Retrieved 14 February 2013.
  13. ^ John Hechinger (5 August 2010). "Goldman Schools Students on Debt". Bloomberg Businessweek. Retrieved 8 February 2013.
  14. ^ Becky Yerak (10 January 2011). "For-profit colleges fight for credibility; Industry leaders claim federal report tarnishes schools' reputations". Associated Press. Retrieved 29 March 2013.
  15. ^ Charles Huckabee (7 December 2010). "GAO Revises Report on Recruiting Practices at For-Profit Colleges". The Chronicle of Higher Education. Retrieved 17 April 2013.
  16. ^ Richard Lord (29 September 2011). "Federal court throws out investor suit against EDMC". Pittsburgh Post-Gazette. Retrieved 29 March 2013.
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