U.S. Files Complaint Against Education Management Corp. Alleging False Claims Act Violations. Washington, DC., August 08, 2011

Published by the Department of Education, Office of Inspector General on 2011-08-08.

Below is a raw (and likely hideous) rendition of the original report.

OIG Investigative Report, U.S. Files Complaint Against Education Management Corp. Alleging False Claims Act Violations
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Monday, August 8, 2011
U.S. Files Complaint Against Education Management Corp. Alleging False Claims Act Violations
WASHINGTON – The United States   has intervened and filed a complaint in a whistleblower suit pending under the   False Claims Act against Education Management Corp. (EDMC) and several   affiliated entities, the Justice Department announced today.   In its complaint, the government alleges that   EDMC falsely certified compliance with provisions of federal law that prohibit a   university from paying incentive-based compensation to its admissions recruiters   that is tied to the number of students they recruit.   Congress enacted the incentive compensation   prohibition to curtail the practice of paying bonuses and commissions to   recruiters, which resulted in the enrollment of unqualified students, high   student loan default rates and the waste of program funds.
“Colleges should not misuse   federal education funds by paying improper incentives to admissions recruiters,”   said Tony West, Assistant Attorney General for the Civil Division of the   Department of Justice. “Working with the Department of Education, we will   protect both students and taxpayers from arrangements that emphasize profits   over education.”
“Federal tax dollars must be   protected from abuse,” said David J. Hickton, U.S. Attorney for the Western   District of Pennsylvania. “This action against EDMC seeks to recover a portion   of the $11 billion in federal student aid which EDMC allegedly obtained through   false statements and which enriched the company, its shareholders and executives   at the expense of innocent individuals seeking a quality education.”
The False Claims Act allows for   private citizens to file whistleblower suits to provide the government   information about wrongdoing.   The   government then has a period of time to investigate and decide whether to take   over the prosecution of the allegations or decline to pursue them and allow the   whistleblower to proceed.   If the United   States proves that a defendant has knowingly submitted false claims, it is   entitled to recover three times the damage that resulted and a penalty of $5,500   to $11,000 per claim.   When the   government intervenes, the whistleblower can collect a share of 15 to 25 percent   of the United States’ recovery.
The suit was originally filed by   Lynntoya Washington, a former EDMC admissions recruiter, who later filed an   amended complaint, jointly with Michael T. Mahoney, a former director of   training for EDMC’s Online Higher Education Division.   The states of California, Florida, Illinois   and Indiana have also intervened as plaintiffs.
The suit is United States ex   rel. Washington et al. v. Education Management Corp. et al., Civil No. 07-461 (W.D. Pa.).
This matter was investigated by   the Commercial Litigation Branch of the Justice Department’s Civil Division; the   U.S. Attorney’s Office for the Western District of Pennsylvania; and the   Department of Education, Office of Inspector General.
The claims   contained in the complaint against ACC are merely allegations and do not   constitute a determination of liability
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Last Modified: 03/26/2012
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