Education Management Should Face Recruitment Aid Lawsuit, U.S. Says

Education Management Corp. (EDMC), the second-largest U.S. for-profit college chain, should be forced to defend a lawsuit alleging its recruiting policies helped the company wrongfully secure more than $11 billion in student aid, government lawyers said in a court filing.

U.S. officials have properly outlined claims that Pittsburgh-based Education Management created an illegal compensation system for admission recruiters to ensure a steady flow of students who receive government aid to pay college expenses, Justice Department attorneys said in the filing made public today.

"EDMC's unlawful compensation scheme emanates from the highest levels of the corporation and represents a conscious effort to do exactly what" federal regulations prohibit in terms of providing bonuses to recruiters, the government said in the filing in federal court in Pittsburgh opposing the firm's request to have the case thrown out.

For-profit colleges have been under scrutiny by Congress, state lawmakers and attorneys general who are investigating sales practices and students’ debt loads. Eleven states and the District of Columbia joined the U.S. as plaintiffs in the case.

Federal Law
The government, which intervened in suits filed by two EDMC whistleblowers, contends the company systematically violated federal law by paying recruiters based on their success in persuading prospective students to enroll in the for-profit school.

EDMC argued in court filings that prosecutors haven’t properly stated claims supporting allegations that the institution launched a company-wide campaign to defraud the government and violate Department of Education regulations.

“EDMC’s mischaracterization of the importance of this case and its efforts to trivialize the magnitude of its own fraudulent conduct are staggering,” Assistant U.S. Attorney Christy Criswell Wiegand said in the filing.

“We are reviewing the governments’ responses to EDMC’s motion to have the court dismiss this lawsuit, and we will have an opportunity to file a reply with the court,” Bonnie Campbell, a legal adviser to the company, said in an e-mailed statement. “Based on what we have seen, we continue to believe the case should be dismissed.”

The case is U.S. v. Education Management Corp., 07-00461, U.S. District Court, Western District of Pennsylvania (Pittsburgh).

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