Feds Sue Second Largest For-Profit Education Company, Allege Fraud

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August 9, 2011

“We are forced to do anything necessary to get people to fill out an application. Our jobs depend on it.”

“Dig deep. Get to their pain. Get to what’s bothering them, so that way, you can convince them that a college degree is going to solve all their problems.”

“Create a sense or urgency … Push their hot button … Don’t let students off the phone .. Dial, dial, dial.”

Yesterday, the Justice Department and the states of Illinois, Florida, Georgia and Indiana joined a lawsuit against Education Management Corporation (EDMC), the nation’s second largest for-profit education company. The suit, initially filed by employee whistleblowers, alleges that the company tied recruiter compensation to how many students they convinced to sign up. Doing so would make them ineligible for the more than $11 billion in state and federal financial aid EDMC has received since July 2003.

“The depth and breadth of the fraud laid out in the complaint are astonishing,” Harry Litman, who is representing one of the whistleblowers, told The New York Times. “It spans the entire company — from the ground level in over 100 separate institutions up to the most senior management — and accounts for nearly all the revenues the company has realized since 2003.”

A representative for EDMC told Bloomberg News that the government’s allegations were “flat-out wrong” and said that the company’s compensation plan “followed the law in both its design and implementation.”

In our reporting for the 2010 film College, Inc, we heard countless stories of intense pressure put on recruiters to bring in students, and therefore the government’s financial support for those students. Higher education, once primarily the realm of large non-profit or government institutions, has exploded into a $400 billion a year for-profit industry. The federal government banned incentive-based compensation for recruiters in an effort to ensure that government support for students seeking a higher education wasn’t exploited by the industry.

Goldman Sachs owns 41 percent of EDMC, which operates more than 100 schools under four names — Art Institute, Argosy University, Brown Mackie College and South University.

The quotes at the top are, in order, what a former enrollment counselor at Ashford University told the Department of Education, the instructions former Ashford University enrollment adviser Tami Barker told FRONTLINE she got from her bosses and what the director of admissions at Argosy University wrote in an internal e-mail.


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