Education Management to Pay $95.5 Million to Settle Federal, State Charges

Federal prosecutors announced a $95.5 million settlement with a for-profit education company on Monday to settle allegations the firm used "high pressure boiler room" tactics to unlawfully recruit students.

The settlement was announced by the Justice Department, the Department of Education and state officials, ending a lawsuit that charged Education Management Corp. had violated federal and state False Claims Act provisions.

Authorities charged the firm violated the Higher Education Act by paying admissions personnel solely on the basis of the number of students they enrolled. The settlement grew out of four separate whistleblower suits filed against the firm and resolves an investigation by 40 state attorneys general into EDMC's practices.

Based in Pittsburgh, EDMC operates four postsecondary schools: the Art Institutes, South University, Argosy University and Brown Mackie College. EDMC has more than 100,000 students enrolled in its schools and is the second-largest for-profit education company in terms of the amount of federal aid it receives for its students' tuition.

"EDMC's actions were not only a violation of federal law but also a violation of the trust placed in them by their students—including veterans and working parents—all at taxpayer expense," said Attorney General Loretta Lynch.

About 90% of the tuition collected at the four schools comes from federal aid, according to the government.

Education Secretary Arne Duncan said the financial penalty "should be a warning to other career colleges out there: We will not stand by while you profit illegally off of students and taxpayers."

The company didn't admit any wrongdoing as part of the settlement. EDMC President and CEO Mark McEachen said the company plans to "take the lead in developing the best ways to address each one of these concerns, and we have done so" by creating a one-page clearly worded disclosure form. "Though we continue to believe the allegations in the cases were without merit, putting these matters behind us returns our focus to educating students," he said.

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

November 16, 2015 13:05 ET (18:05 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.