Education Management Corporation Schools to Pay More than $95 Million in Deceptive Recruitment Settlement
Posted By Eliana Osborn on December 9, 2015 at 11:26 am
In a boon for students everywhere, Education Management Corporation has reached a settlement to pay more than $95 million over claims of deceptive recruitment. Attorney General Loretta Lynch and Secretary of Education Arne Duncan announced the settlement, along with $103 million in loan forgiveness for students who briefly enrolled.
EMC currently enrolls more than 100,000 students and received over $1 billion in federal aid last year. Whistleblower employees told of illegal recruitment tactics, like paying for each enrollment achieved. Allegations that students were misled during recruitment mean specific disclosures will now be required of the schools during the enrollment process.
The Justice Department press release calls this a landmark settlement since EMC is the second largest for-profit education company in the U.S. While EMC has not admitted guilt, the settlement means that 39 states will drop their investigations into the company.
Prosecutors say that loans taken out by EMC students were ‘destined to fail’ as they were vigorously recruited without any worry about their ability to succeed in school or any truth about post-graduation job prospects. Similar claims have been made against other for-profit schools, leading to settlements requiring specific transparency in enrollment materials.
Of the $95.5 million settlement, “proceeds will be shared among the United States, the co-plaintiff states and the whistleblowers and their counsel,” as well as funds to pay for compliance regulation of current recruitment phone calls to students.
The EMC settlement used the False Claims Act, which allows whistleblowers and authorities to prosecute against companies that are defrauding the government. By lying about recruitment practices in order to be eligible for federal student aid, EMC was able to take government funds for a decade. As such, not just individual students were harmed, the weight of the entire federal system was defrauded and involved.
Attorney General Loretta Lynch has called EMC a ‘recruitment mill’ serving simply to get students in, get their money, and give no attention to what would happen next. This settlement stems from a lawsuit originally filed in 2007, which expanded in 2011 to include another employee, several states, and the federal government.
EMC campuses include the many Art Institutes, Argosy University, Brown-Mackie College, and South University. They will all continue functioning and enrolling new students, with special attention given to recruitment practices and disclosures as a result of the settlement. Some campuses have closed and student numbers are down, with financial struggles galore.