For-Profit College Group Sued as U.S. Lays Out Wide Fraud

[alp227]

Source: The New York Times

The Department of Justice and four states on Monday filed a multibillion-dollar fraud suit against the Education Management Corporation, the nation’s second-largest for-profit college company, charging that it was not eligible for the $11 billion in state and federal financial aid it had received from July 2003 through June 2011.

While the civil lawsuit is one of many raising similar charges against the expanding for-profit college industry, the case is the first in which the government intervened to back whistle-blowers’ claims that a company consistently violated federal law by paying recruiters based on how many students it enrolled. The suit said that each year, Education Management falsely certified that it was complying with the law, making it eligible to receive student financial aid.

“The depth and breadth of the fraud laid out in the complaint are astonishing,” said Harry Litman, a lawyer in Pittsburgh and former federal prosecutor who is one of those representing the two whistle-blowers whose 2007 complaints spurred the suit. “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.”

Education Management, which is based in Pittsburgh and is 41 percent owned by Goldman Sachs, enrolls about 150,000 students in 105 schools operating under four names: Art Institute, Argosy University, Brown Mackie College and South University.

Read more: http://www.nytimes.com/2011/08/09/education/09forprofit.html

[Aviation Pro]

1. Once again....

...the motherfuckers of this nation despoil everything they touch.

[Maine-ah]

12. Maine story on it

http://bangordailynews.com/2011/08/08/business/company-violated-federal-student-aid-rules-under-mckernan-u-s-says/

Company violated federal student-aid rules under McKernan, U.S. says

Education Management Corp., the second-largest U.S. for-profit college chain, used improper recruitment practices to secure more than $11 billion in U.S. student aid partly while being run by former Maine Gov. John McKernan, prosecutors said in a civil lawsuit.

Education Management, 41 percent owned by Goldman Sachs Group Inc. funds, illegally paid recruiters based on the number of students signed up, a violation of rules for colleges that get U.S. student grants and loans, the Justice Department said today in a complaint filed in federal court in Pittsburgh.

Prosecutors spelled out their case against the company for the first time since May, when the Justice Department joined an employee whistle-blower suit. Colleges that receive federal aid are barred from paying recruiters incentives tied to enrollment because it may encourage companies to register unqualified students. The government claimed Education Management enrolled students who appeared to be under the influence of drugs.

Education Management “fraudulently induced” the Education Department to make the company eligible for more than $11 billion in federal grants and loans since 2003, according to the complaint. “Each and every one of the claims it submitted or caused a student to submit violated” the U.S. False Claims Act, the government said.

[Snoutport]

2. ouch...goldman sachs just took a gut punch

[jerseyjack]

5. Actually, they didn't take a punch, it was more like a mosquito bite.

Just a small amount of $$ compared to what they are worth. It would be like the rest of us getting a parking ticket.

[roxiejules]

10. It's Lucrative, Baby

http://www.nydailynews.com/ny_local/education/2010/05/07/2010-05-07_albany_charter_cash_cow_big_banks_making_a_bundle_on_new_construction_as_schools.html

Under the New Markets program, a bank or private equity firm that lends money to a nonprofit to build a charter school can receive a 39% federal tax credit over seven years.

The credit can even be piggybacked on other tax breaks for historic preservation or job creation.

By combining the various credits with the interest from the loan itself, a lender can almost double his investment over the seven-year period.

.

[Mnemosyne]

3. Tip of the iceberg. Nail those sobs. K&R n/t

[greiner3]

4. "Art Institute;"

Been a long time since I've seen one of those 'Draw a pirate/parrot/clown." Wonder how many suckers that got on the hook?

[Tunkamerica]

9. Not the same thing. I'm currently across the street from the Art Institute

in Durham and they have a culinary program that seems to be fairly popular.

[supernova]

13. AI culinary program

I've been looking for a culinary program (former IT worker) and looked at the program here in Durham. It SEEMS nice. And the people who work in that program seem legit (one instructor was an ex food stylist for Food Network).

BUT,

The whole open house, orientation spiel, is designed to get you into the business office and sign up for loans. I got a distinct whiff of used car salesman from the business mgr. Definitely hard sell tactics. "How can I get you to sign up today?" Didn't like it so didn't' sign up.

To sum up, the instructors may really be decent people in their disciplines. If that's the case, the instructors are being ripped off as much as the students in that they are working for an unscrupulous firm. But the business tactics of the schools are bad.

I'll go to one of the community colleges. Safer. Much cheaper.

[Tunkamerica]

15. They just opened a new culinary school in Chapel Hill.

I only know of it through their commercials, but it's another option.

[MaineDem]

6. Did you notice the connection to Olympia Snowe?

"In 2003, Education Management’s chief executive was Jock McKernan, a former governor of Maine who now serves as chairman of the board. Mr. McKernan is married to Senator Olympia J. Snowe, a Maine Republican whose 2010 financial disclosure form lists Education Management stock and options worth $2 million to $10 million."

This has been big news in Maine.

[lutefisk]

7. Just another bene of the privatization of education. The door is being opened to privatize K-12, too

"The complaint said the company had a “boiler-room style sales culture” in which recruiters were instructed to use high-pressure sales techniques and inflated claims about career placement to increase student enrollment, regardless of applicants’ qualifications. Recruiters were encouraged to enroll even applicants who were unable to write coherently, who appeared to be under the influence of drugs or who sought to enroll in an online program but had no computer.

According to the suit, recruiters were also led to exploit applicants’ psychological vulnerabilities — for example, a parent’s hopes of moving a child out of a dangerous neighborhood."

Lovely. And in Wisconsin, our vile governor and Republican legislature are doing their best to starve and kill public K-12 and higher ed in order to privatize education.

[roxiejules]

11. The 'business model'

will prove to be another scam on the American public at the expense of our children and our future. How do you get back public education once it is gone?

[roxiejules]

8. Quelle surprise!

Our schools are being taken over by corporations, using taxpayer money.

We will be witnessing the education equivalent to the foreclosure crisis...aka the next bubble....where high profits and compensation in private multinational corporations take over education.....break the system and then leave the taxpayers high and dry.

[No Elephants]

14. Neo theos started schools, too, based on being supported by tuition via student loans.

Students graduate, if at all, deeply in debt and sometimes wholly unsuitable for hiring in their field of study.