The education vertical for domain names has been doing well for several years but may take a big hit as the United States along with 5 states and the District of Columbia, just filed a massive 122 page lawsuit against “one of the largest for-profit providers of post- secondary, higher education in the United States”, according the complaint.
The Defendants include “Education Management Corporation, Education Management Holdings LLC, Education Management LLC, The Art Institute, Argosy University, and Brown Mackie College which together operate over 100 schools.
The states joining the suit and seeking damages and renouncement of payments are; Florida, California, Illinois, Indiana, and Massachusetts and the District Of Columbia.
Here is some of the allegations of the complaint:
The United States of America, and the states are seeking to recover treble damages, civil penalties and costs under the False Claims Act and to recover damages and other monetary relief under the common law and equitable theories of unjust enrichment and payment by mistake.”
This action arises from false statements and claims that Defendants Education Management Corporation and its subsidiary corporations.EDMC knowingly presented and/or made, or caused to be presented or made, the false claims and statements at issue, in order to participate in the federal student aid programs
The United States seeks to recover damages and civil penalties arising from EDMC’s knowingly false, misrepresented, and/or improper certifications of eligibility to the Department of Education.From July 1, 2003 to the present, EDMC knowingly submitted, or caused to be submitted, numerous claims for payment to the Department of Education based upon these false certifications.From July 1, 2003, to the present, EDMC and/or students enrolled in its institutions received over eleven billion dollars ($11,000,000,000.00) in federal funds through Title IV, HEA programs.Because EDMC’s compensation system bases changes in admissions personnel compensation upon the number of students recruited by each admissions employee, EDMC’s compensation system, as designed, violates Title IV of the HEA’s incentive compensation ban.
In addition, EDMC’s compensation system is not eligible for Title IV of the HEA’s regulatory safe harbor, because the compensation awarded under EDMC’s system does not constitute “fixed compensation” within the meaning of the regulatory safe harbor. Instead, the compensation EDMC awards constitutes a form of incentive payments. Because EDMC’s compensation system as designed violates Title IV of the HEA’s incentive compensation ban and is not eligible for the regulatory safe harbor, and because EDMC misrepresents to the federal government it compliance with Title IV’s incentive compensation ban, EDMC is liable to the United States under the common law theories of unjust enrichment and payment by mistake of fact.
EDMC maintains one physical campus in Pittsburgh, Pennsylvania, The Art Institute of Pittsburgh, along with three online programs, Argosy University Online, South University Online, and The Art Institute of Pittsburgh Online Division.
EDMC has approximately 101 traditional primary campuses in 31 states and Canada, and nationwide online programs, which are operated through the wholly-owned subsidiary Defendants.
According to EDMC’s Fiscal 2011 Third Quarter Report, at the start of the April 2011 quarter, EDMC’s schools enrolled a total of 148,800 students.
Congress enacted the prohibition against paying commissions, bonuses, or other incentive payments based on success in recruiting students because such payments were associated with high loan default rates, which in turn resulted in a significant drain on program funds where the government acts as a loan guarantor. When Congress amended the HEA in 1992 to prohibit schools from paying these incentives, it did so based on evidence of serious program abuses, including incentive compensation. 72. United States Department of Education calculations reflect that from July 1, 2003 through June 30, 2011, EDMC received over $11.1 billion ($11,100,000,000.00) in Title IV funding for students enrolled in EDMC institutions. A copy of a chart depicting Title IV funding received by EDMC for each year from July 1, 2003 through June 30, 2011 is attached hereto as Exhibit 11. (Ex. 11, EDMC – Funding by Year and Program chart prepared by Department of Education.)
For the 2003-2004 Title IV “Award Year,” which runs from July 1, 2003 to June 30, 2004, Department of Education calculations reflect that EDMC received, at a minimum, $656,268,775.00 in Title IV funding for students enrolled in EDMC institutions.
From July 1, 2004 to June 30, 2005, Department of Education calculations reflect that EDMC received, at a minimum, $768,476,757.00 in Title IV funding for students enrolled in EDMC institutions.
From July 1, 2005 to June 30, 2006, Department of Education calculations reflect that EDMC received at least $893,170,978.00 in Title IV funding for students enrolled in EDMC institutions.
From July 1, 2006 to June 30, 2007, Department of Education calculations reflect that EDMC received at least $919,187,428.00 in Title IV funding for students enrolled in EDMC institutions.
From July 1, 2007 to June 30, 2008, Department of Education calculations reflect that EDMC received at least $1,205,247,718.00 in Title IV funding for students enrolled in EDMC institutions.
From July 1, 2008 to June 30, 2009, Department of Education calculations reflect that EDMC received at least $1,732,083,724.00 in Title IV funding for students enrolled in EDMC institutions
From July 1, 2009 to June 30, 2010, Department of Education calculations reflect that EDMC received at least $2,410,125,719.00 in Title IV funding for students enrolled in EDMC institutions.
From July 1, 2010 to June 30, 2011, Department of Education calculations reflect that EDMC received at least $2,578,159,501.00 in Title IV funding for students enrolled in EDMC institutions.
EDMC’s records reflect that during the 2002-2003 academic year, EDMC received at least $428,166,072.00 in Title IV funding for students enrolled in its Art Institute and Argosy University divisions of educational institutions.
EDMC’s records reflect that during the 2003-2004 academic year, EDMC received at least $625,872,781.00 in Title IV funding for students enrolled in its Art Institute and South University educational institutions.
EDMC’s records reflect that during the 2004-2005 academic year, EDMC received at least $719,206,175.00 in Title IV funding for students enrolled in its Art Institute and South University educational institutions.EDMC’s records reflect that during the 2005-2006 academic year, EDMC received at least $800,977,892.00 in Title IV funding for students enrolled in its Art Institute and South University educational institutions.EDMC’s 2010 Form 10-K reflects that, for the fiscal year ending June 30, 2010, EDMC received $2,239,400,00.00 in Title IV funding for students enrolled in all EDMC institutions. Title IV funding for fiscal year 2010 constituted 89.3% of EDMC’s net revenue.Of course each state has their own claim for money’s paid to the Defendants.
Making a buck is tough these days. When it rains, it pours.
I still have fate in you America. 2012 will be a better day.
I’m glad to see them going after this sort of thing.
These “entrepreneurs” are running worthless diploma mills for the purpose of harvesting student loans from the unsuspecting and then leaving them in a ditch.
These same guys then turn around and complain about the “danged gummint”.
They are not entrepreneurs, they are grifters.
Thank you, @ John Berryhill!
@John Berryhill, well said.
Another government tit cottage industry.
“If you don’t feel like working and have been denied social security, call us for a free consultation…”
“If you’re a recipient of medicaid, we can send you free adult diapers, or diabetic supplies, or an electric mobility chair… Call now…”
These BS for-profit corporate colleges are simply milking Federal Student Aid dollars. If FSA didn’t exist, they wouldn’t exist. The tragic thing is what they’re doing to the naive students who actually believe this is giving them a leg up in life.
If you know someone who works as a HR weeder (and know them well enough so they’ll speak freely), ask them what they do when they get a CV from a “University of Phoenix” graduate. It goes from their desk to the trash so fast, it leaves a visible vapor trail.
Aren’t campus tuitions high and ever increasing in part because of enormous budgets and complexes for sports – like football and basketball – and where revenues from these sports are earmarked to promote other sports and women’s sports that do not break even .
Are federal student aid programs subject to the same high tuitions resulting from this ?
Possibly these “U of Phoenix” type schools should not be isolated altogether ?
Brian you raise a good point, and while I wouldn’t want to paint with too broad a brush, there are poor educational values in a range of price brackets.
i agree with posts so far, and as a taxpayer its stinks to see this $11 billion in effect, stimulus, go out this way.
at least if were going to re-allocate $11 billion, lets cure something, or provide a safety net – i guess now we know where that magic 18-24 demographic is getting their money.
page howe
America20.com
If govt wasn’t involved with education in the first place this would never have happened. The fact that this crap was ignored for years is proof the government cannot run anything efficiently. Free market solutions… free market student loans would never have allowed this.
Does anyone know if there is anything being done for students who were victims of this schools scam?
how do you know that diplomas are worthless?
our country runs by ivy league graduates, look such a wonderful job they are doing
as far as i concerned “diplomas” of all those who are running our country are worthless
all they can do is sue and make speeches
certified business obstructionists and unqualified demagoguery pros
“If govt wasn’t involved with education in the first place this would never have happened.”
And if they didn’t have armies, we wouldn’t have wars.
But what is most amusing about your observation here is that it is the “free market” schools which are bilking the system here. State supported educational institutions aren’t the ones running the scams.
These schools get onto the radar first by having abnormally high student loan default rates. Overall, the default rate is well below anything to get excited about. News that the garden is being weeded is not an indication that the crop has failed.
Default rates for various types of institutions and individual schools can be found here:
http://www2.ed.gov/offices/OSFAP/defaultmanagement/cdr.html
i do not know what school attended those who are making comments here but there is such thing as presumption of innocence and lawsuit is the easiest way to extort money, after all, it is yet a very big question who are grifters here , those schools or those who want to extort money from them
“there is such thing as presumption of innocence”
That’s a jury instruction, not words to live by.
“after all, it is yet a very big question who are grifters here , those schools or those who want to extort money from them”
Hello…. McFly…. The states and feds are trying to get their own money back. That’s where those schools got the money in the first place.
So the government put in place a system ripe for exploitation as usual.
WHy are we blaming the folks that exploited the system the way it was setup?
Let’s blame the root cause.. ill-conceived (but well intended) government programs. The government needs to stop wasting our money and get our of the business of loans, education, etc.
Today, EMC stock is up 2%. I guess this was a good advertising for them because even if they lose the lawsuit they got plenty of cash to cover that “business expense” same way apolo group did some time ago.
I agree with free market edu and mortgage loans, get the govt and our taxpayer $ out of losing businesses.
My concern is how this translates to current/past students.
Will EDMC be back charging student accounts to make up for the loss/error should they lose?
Pete Skenandore
OnlineStudentCoalition.com
“State supported educational institutions aren’t the ones running the scams.”
Could it be that State supported education wastes (or buries) the same amount of tax payer money as “U of Phoenix” types rip off from the tax payers ?
And moving down to the grade school and high school level – aren’t “charter schools” an admission that most public education is nothing more than an extension of the welfare system – therefore the “charter school” funds are appropriated in a similar fashion “U of Phoenix” funds.
“But what is most amusing about your observation here is that it is the “free market” schools which are bilking the system here.”
BUT – the free market schools are NOT bilking the free market!! They are bilking the government programs put in place that USURP the free market.
There are always unintended consequences to well-intended government programs.
This kind of abuse of federal funding is an atrocity. I’m currently working towards earning my Master’s in Education and while I’m glad my school is not the subject of such inquiries, I feel for those that were students at the accused schools. The students have been swindled, in addition to the American people. Here’s an article that helps me feel better about what my school is doing to give back to the community: http://www.cu-portland.edu/news/detail.cfm?news_id=6266
Note that the same key figures running the show at EDMC now were running the show at Apollo/University of Phoenix when t hey were hit with their big suit. Let’s hope they don’t get off so easy this time. For more info check http://tampastudents.net/TampaWeb/DejaVu.html
Amusingly enough, the worst thing to happen to the early University of Phoenix graduates was the program becoming very well known ‘for what it was’. Prior to that, they rode a golden wave of hire-vetting apathy, where HR just assumed “University of Phoenix” was an entity in Arizona’s state run post secondary system.
Oh yeah brother, these guys definitely “get” what makes an inspirational name, as good as the finest domain speculators. They realize that diplomas with an “official institution” sounding moniker meant as much as anything else they could offer, in terms of actually educating the students.
Just like an aggressive Southern bank once known as NationsBank bought a small regional California bank known as “Bank of America” interested in acquiring the name as much as the assets, these corporate colleges are all about buying up those “credible sounding” school names, then milking FSA dollars in the process. The sad thing is, the jig is now up. People realize these schools are garbage and HR is stonewalling the graduates something fierce.
The sad reality is, these sorts of places don’t attract the ‘brightest’. Matter of fact, they often attract the exact opposite of that. Still, just because someone isn’t cut out to be a surgeon doesn’t mean they deserve to be lied to, exploited and have their lives derailed so shareholders can profit from your tax dollars.
Great program on this- “College, Inc” done by PBS’s Frontline.
You can watch it online. These things are a disgrace.
What is a “vertical?”
I attended an AI. I went to a fairly exclusive private girls academy for high school and took 2 years at a well respected private Catholic women’s university and then transfered to an AI. I can promise you the the majority of the students in my program at AI were very “bright.”