According to recent reports, for-profit college operators continue to run afoul of federal regulations related to student recruitment, admission, retention and job placement. In May, for example, Pittsburgh based Education Management Corp. (EDMC) lost its bid to have claims dismissed that alleged the company obtained more than $11 billion in federal student aid since July 2003 under the false pretense that it was complying with the Higher Education Act of 1965’s ban on paying admissions personnel incentives to recruit new students. U.S. District Judge Terrence McVerry, in the Western District of Pennsylvania, denied EDMC’s motion for summary judgment, finding that while the defendant’s plan was compliant with federal regulations “as written,” it was not “as implemented.”
The federal government, 11 states, and the District of Columbia have intervened in the litigation, filed by a former admissions worker. The whistleblower alleges EDMC increased student enrollment from 4,500 in 2006 to 50,000 in 2011 by accepting all potential students who completed an application, regardless of high school grades or the quality of their written essay. EDMC’s receipt of federal funds increased from $656 million in 2003-04 to $2.578 billion in 2010-11. EDMC operates approximately 70 schools nationwide, including The Art Institutes, Agrosy University, Brown Mackie College, and South University. In 2006, EDMC was acquired by Goldman Sachs and Providence Equity Partners for $3.4 billion.
Lawyers in the Consumer Fraud Section at Beasley Allen continue to investigate whistleblower claims involving the misuse of federal funds in the for-profit education industry. We have learned that recruiters, admissions counselors and career services personnel are often in the best position to uncover such fraud. As pointed out above, successful whistleblowers are rewarded with a percentage of the recovery obtained on behalf of the government. For further information on this type litigation, contact Archie Grubb or Andrew Brashier, lawyers in the Consumer Fraud Section, at 800-898-2034 or by email at Archie.Grubb@beasleyallen.com, or Andrew.Brashier@beasleyallen.com.
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