Department Of Justice, Four States File Fraud Suit Against For-Profit College Company

The for-profit college industry has earned a reputation for shady methods of operation, such as peddling flimsy academic credentials for high prices and minimal effort in the classroom, and now the government is taking one of the largest corporations in the industry to court.

The New York Times reports the U.S. Department of Justice and four states are suing the Education Management Corporation (EDMC), which operates the Art Institutes, Brown Mackie College and several other institutions, seeking $11 billion. The plaintiffs, which include California, Illinois, Indiana and Florida, contend that EDMC received $11 billion financial aid from 2003 to 2011.

The suit accuses EDMC of violating a federal law against paying recruiters based on the number of students they manage to enroll. Each year, EDMC certified that it was in compliance with the law.

A lawyer who’s filing the suit says EDMC is representative of system-wide exploitation:

“The depth and breadth of the fraud laid out in the complaint are astonishing. It spans the entire company — from the ground level in over 100 separate institutions up to the most senior management — and accounts for nearly all the revenues the company has realized since 2003.”

EDMC countered in a statement:

“The pursuit of this legal action by the federal government and a handful of states is flat-out wrong. EDMC’s 2003 compensation plan followed the law in both its design and implementation, as EDMC’s response to the governments’ complaint will show.

“Federal regulations issued in 2002 permitted companies to consider enrollments in admission officer compensation, so long as enrollments were not the sole factor considered. To ensure compliance with this regulation, EDMC worked closely with outside experts in both human resources and education law to develop a plan that required consideration of five quality factors along with enrollment numbers to determine salaries.”

If you’ve studied at a for-profit college, was your education worthwhile?

For-Profit College Group Sued as U.S. Lays Out Wide Fraud [The New York Times]