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William Byrnes (Texas A&M) tax & compliance articles

Which University Paid Over $95 Million for Deceptive Practices & “Betrayal of Students’ Trust”?

Posted by William Byrnes on November 16, 2015


Argosy University includes Western State College of Law (at Argosy University).  Argosy’s parent EDMC has agreed to pay $95.5 million to resolve claims that it falsely obtained Justice logofederal and state education funds – making this the largest False Claims Act settlement with a for-profit educational institution in American history.  “EDMC’s actions were not only a betrayal of their students’ trust; they were a violation of federal law. ”

Excerpts from Attorney General’s Announcement this morning continue below:  

We have come together to discuss a historic step forward in our collective and ongoing fight against fraudulent and abusive practices in the for-profit education industry.  Today, we are announcing a landmark settlement with Education Management Corp., which became the second-largest for-profit education company in the United States.  Education Management Corp., also known as EDMC, operates chains of schools around the country under the brand names Argosy University, the Art Institutes, Brown-Mackie College and South University.  EDMC enrolls more than 100,000 students and approximately 90 percent of EDMC’s revenue comes from taxpayers in the form of federal education funding for EDMC students.

This case not only highlights the abuses in EDMC’s recruitment system; it also highlights the brave actions of EDMC employees who refused to go along with the institution’s deceptive practices.

Beginning in 2007, two EDMC employees blew the whistle on EDMC by alleging that it was running a high-pressure recruitment mill.  Essentially, the more students a recruiter induced to enroll, the more money that recruiter would receive.  These employees alleged that EDMC’s recruitment practices violated the Incentive Compensation Ban of Title IV of the Higher Education Act, which prohibits schools from basing recruiters’ pay on their success in securing new enrollees.  That ban is in place so that schools will account for the unique qualities and needs of potential students, rather than simply treating them as a vehicle for tapping into federal student aid funds.  Despite their alleged conduct, EDMC has certified its compliance with the ban to the Department of Education for over a decade.  Falsely claiming federal grant and loan money is a violation of the False Claims Act – and in 2011, the United States intervened in the case alongside five individual states: California, Florida, Illinois, Indiana and Minnesota.  Since that time, we have aggressively pursued justice in this case on behalf of the students and taxpayers that the Incentive Compensation Ban is designed to protect.

Under the settlement we are announcing today, EDMC has agreed to pay $95.5 million to resolve claims that it falsely obtained federal and state education funds – making this the largest False Claims Act settlement with a for-profit educational institution in American history.  The unprecedented size of the payment – and the stringent compliance measures EDMC has accepted – reflect the fact that this kind of abuse hurts 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.

This resolution exemplifies the Justice Department’s deep commitment to protecting precious public resources; to promoting compliance with the law; and to standing up for those who are vulnerable to exploitation.  It is an extraordinary accomplishment both for the men and women who fought to achieve it and for future EDMC students – and students at educational institutions across the country – who will no longer be victimized by unacceptable recruitment practices.  In the days ahead, we will continue working with our invaluable partners at the Department of Education – through initiatives like the inter-agency task force on for-profit education – to ensure that our nation’s aspiring learners are finding and gaining access to educational opportunities that are right for them and that will help them thrive and achieve for many years to come.

Attorney General Loretta E. Lynch Delivers Remarks at Press Conference Announcing $95.5 Million Settlement with For-Profit College Company, Washington, DC Monday, November 16, 2015

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