U.S. to Join Whistle Blower Suit Against For-Profit College Company

May 3, 2011

The U.S. Justice Department has decided to intervene in a lawsuit alleging that Education Management Corp. violated federal law barring incentive compensation for recruiters, the company announced Monday. Qui tam lawsuits, as they are known, are filed under the federal False Claims Act by an individual who believes he or she has identified fraud committed against the federal government, and who sues hoping to be joined by the U.S. Justice Department. Interventions by the Justice Department, which in this instance came in a case filed in a Pennsylvania federal court, are rare, though. Education Management, which operates the Art Institutes, Argosy University, and South University, among others, said in a filing with the Securities and Exchange Commission that it expected several states to join the qui tam action alleging violations of their state False Claims Acts, too.

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