The U.S. Department of Justice on Monday announced a $95.5 million settlement with the Education Management Corporation to resolve allegations that it defrauded the government. The Huffington Postreported on the settlement over the weekend.
The agreement ends a long-running lawsuit that accused the for-profit college chain of illegally paying bonuses to admissions recruiters based on the number of students they enrolled.
Those allegations were brought to light in a whistle-blower lawsuit by a former employee in 2007. The Justice Department, as well as another former employee, joined the suit in 2011.
The Education Management Corporation owns the Art Institutes, Argosy University, Brown Mackie Colleges and South University chains. The company was taken private last month amid falling enrollments and revenue.
Loretta Lynch, the U.S. Attorney General, called the settlement "historic," noting that the payment would be the largest false-claims payment by a for-profit institution in history. EDMC's actions were "were not just a betrayal of students' trust," Lynch said, "they were a violation of federal law."
For-profit, Colorado-based Westwood College has reached a $15 million agreement with the Illinois attorney general, according to a report from a Chicago ABC News affiliate.
The college voluntarily agreed to pay $15 million to wipe out loans criminal justice students have obtained through Westwood since 2004. However, the credit does not cover the students' federal loans.
Illinois Attorney General Lisa Madigan launched the lawsuit almost four years ago after receiving complaints from students and former students about the "exorbitant costs, poorly accredited programs and failure to get a job in the field their degree was in."
A for-profit college owner hired a private investigator to follow a Miami Herald reporter who has written critical articles about the sector, according to court documents given to the South Florida newspaper.
The paper learned last week that reporter Michael Vasquez had been followed by a private investigator hired by Ernesto Perez -- the founder and majority owner of Dade Medical College. The situation was brought to light following a lawsuit by the private investigator against Perez for allegedly failing to pay the $4,971.87 contract.
Submitted by Paul Fain on October 29, 2015 - 3:00am
Stratford University, a for-profit institution based in Virginia, this week announced that it has become a public benefit corporation. That move, which a handful of other for-profits have made recently, is a legal change to a company's charter, which allows it to focus more on activities that do not generate a profit -- including actions that are aimed at benefiting the public.
"Stratford has a student-first mentality, and as a benefit corporation we have the liberty to make sure we are providing students with the best education in the best environment,” Richard Shurtz, the university's president, said in a written statement.
The university holds national accreditation. It offers credentials in information technology, hospitality, culinary arts, business administration and health care.
A group of Democrats in the U.S. Senate sent a letter Friday to Education Secretary Arne Duncan and Internal Revenue Service Commissioner John Koskinen urging them to stop for-profit colleges from converting to nonprofit status.
Those colleges, they argue, are looking to evade federal income taxes, gainful employment regulations and the so-called 90/10 rule, which restricts for-profits from receiving more than 90 percent of their operating revenue from federal student loans and grants.
"These sham nonprofits make a mockery of traditional nonprofit governing and accountability structures with incestuous leadership arrangements, troubling debt structures, while continuing to make hefty profits for those in charge with questionable results for students," the senators wrote in a news release. "As the agencies responsible for granting nonprofit, tax exempt status and protecting students, the [IRS] and [Education Department] must work together to better assess these conversions based on the priorities and authority of both agencies."
The senators were spurred to action following a recent report from the Century Foundation's Robert Shireman, a former Education Department official who joined the foundation as a senior fellow. Shireman described how several for-profits became nonprofits, arguing that they did so to avoid federal regulations. He also wrote that the IRS and the Education Department haven't cracked down on these entities because of a "regulatory blind spot," so each agency assumes the other is doing the monitoring.
Delaware Senator Tom Carper, Ohio Senator Sherrod Brown, Illinois Senator Dick Durbin, Massachusetts Senator Elizabeth Warren, Rhode Island Senator Jack Reed and Connecticut Senators Chris Murphy and Richard Blumenthal signed the letter.
Submitted by Paul Fain on October 23, 2015 - 3:00am
Three Senate Republicans on Thursday wrote to the U.S. Department of Defense to question its recent decision to temporarily suspend the University of Phoenix's eligibility for military tuition benefits.
The Pentagon's sanction of the for-profit chain was due to allegations about Phoenix improperly sponsoring recruiting events and using the Defense Department's seal on commemorative coins. Newly enrolling students may not use military tuition assistance at the university. Roughly 4,000 Phoenix students currently receive the benefit, which active-duty members of the military are eligible to receive.
Senators John McCain, Lamar Alexander and Jeff Flake, all Republicans, wrote to Defense Secretary Ashton Carter, asking him to "examine and reconsider" the decision. They said the move was unfair and based on vague, technical violations the university has worked to fix. The senators also wrote that the Pentagon's sanction was motivated by partisan congressional critics of for-profits, and criticized that the Defense Department cited ongoing investigations of Phoenix by the U.S. Federal Trade Commission and California's attorney general as part of the justification for the decision.
"We strongly believe that these earned benefits and educational opportunities for our service members should not be jeopardized because of political or ideological opinions of some members of Congress regarding the types of institutions that provide postsecondary education to our troops," they wrote.
Submitted by Paul Fain on October 19, 2015 - 3:00am
ITT Educational Services will suspend new student enrollment at several of its 135 campus locations, including campuses in Wichita, Kans., and South Bend, Ind. The embattled for-profit chain, which is facing financial and legal challenges, has closed eight of its ITT Technical Institute locations during the last two years, according to ITT's national accreditor.
The company made the decision to temporarily supend a handful of locations based on its research about local market demands, said Nicole Elam, an ITT spokeswoman. The campus locations "undergoing market assessments" represent 3 percent of ITT's new student enrollment, she said. ITT enrolls roughly 50,000 students.
"There will not be any disruption to ongoing course work for continuously enrolled students as we will continue to teach classes for those students," Elam said via email. "Our primary focus is on our currently enrolled students at those campuses and providing them with the same level of service and education as they pursue their degrees."
The U.S. Securities and Exchange Commission this year charged ITT and its top two executives with fraud for allegedly concealing massive losses in two student loan programs the company backed. The Consumer Financial Protection Bureau has also sued ITT, and the U.S. Department of Education has begun more tightly monitoring the company and its finances.