For-Profit Education Corp. Ordered To Pay $95.5 Million For Predatory Practices

Nov 16, 2015

Downtown Pittsburgh-based Education Management Corporation, which operates several for-profit education institutions including the Art Institute of Pittsburgh, was ordered Monday to pay the U.S. government nearly $100 million for misrepresentation to authorities.
Credit Michael Sorg / Flickr

The country’s second-largest for-profit education provider will have to pay the U.S. government nearly $100 million in a landmark settlement.

Authorities said in a news conference Monday that Education Management Corporation, or EDMC, which is based in Pittsburgh, agreed to the settlement after receiving billions of dollars in taxpayer money while using predatory recruiting practices.

EDMC operates more than 80 campuses across the country, including its Art Institutes, Argosy University, Brown Mackie College and South University.

U.S. Attorney General Loretta Lynch said the $95.5 million settlement stems from EDMC falsely obtaining federal and state funding and lying about paying recruiters who used predatory practices.

“EDMC pledged to the United States that it was not paying incentive compensation, when in fact it fostered a high-pressure boiler room sales operation that resulted in its recruiters’ use of abusive tactics to enroll students,” said U.S. Attorney David Hickton of the Western District of Pennsylvania.

Lynch said recruiters who brought in more students were paid more money. 

Officials said EDMC actually obtained billions of dollars, with 90 percent of its income coming from taxpayer money. Officials said the settlement was not determined by how much money the company fraudulently obtained, but how much it could repay.

“Let me just say that at the outset that an important part of this settlement was factoring the company’s ability to pay,” Lynch said.

The investigation was specifically targeted toward EDMC’s misrepresentation to authorities, officials said, but additional investigations could stem from potential misrepresentation to students. U.S. Secretary of Education Arne Duncan said the investigation was part of the government’s effort to protect students from “predatory career colleges.” 

“To be clear, what happened here was not misrepresentation to students, but it was breaking the law and lying to (the U.S. government),” Duncan said. “If there is evidence of misrepresentation to students, we want to hear that, and we’re open for business.”