Two whistleblowers, Lynntoya Washington and Michael Mahoney, filed a lawsuit against Education Management Corp. on basis of fraud, and the Justice Department along with four states – California, Florida, Illinois and Indiana – have joined in on the multi-billion dollar case.
The for-profit college operator allegedly violated federal law by paying recruiters on an incentive-based policy, where staff were compensated based on the number of students they enrolled. Congress had outlawed that policy in 2002 after the for-profit college industry reported abuses as a result of the practice, such as enrolling unqualified students in order to gain benefits from the government.
Whistleblowers also claimed that the company sent false statements to the government to participate in a program for student financial aid that would enrich the company with guaranteed Pell Grants and loans. Lawyers said that the company received over $11 billion in federal funds from those programs since July 2003. According to the attorney who represents the two whistleblowers, Education Management was fully aware of its false statements, yet it continued to lie to the government every year. In 2010, the company received $2.2 billion in federal funds, which was almost 90% of its total revenues.
More than 148,000 students are enrolled in Education Management, which includes The Art Institutes, Argosy University, Brown Mackie College and South University. We can only hope that the suit recovers the billions that were wrongly obtained from the government “at the expense of innocent individuals seeking a quality education.”