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For-profit education firm denies lawsuit charges

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A large for-profit education company that operates two schools in Indianapolis has asked a judge to throw out a Department of Justice lawsuit that claims it used improper sales tactics to lure unqualified students and the billions of dollars in financial aid they bring.

Education Management Corp. runs more than 100 higher-education programs across the country, offering diplomas and degrees in fashion, culinary arts, business and other fields, some through online courses.

Locally, Education Management operates Brown Mackie College and the Art Institute of Indianapolis. It also has Brown Mackie College outlets in South Bend, Merrillville, Michigan City and Fort Wayne.

A whistleblower lawsuit backed this year by the Department of Justice accuses the company of paying illegal incentives to recruiters to sign up students, in violation of a 1992 law that bans such practices. The company received $11 billion, nearly all its revenue, from student financial aid from 2003 through this year, the government's lawsuit said.

The company, in its response Wednesday, said the law prohibits schools from considering only enrollment figures when setting an admission officer's pay. However, the company said, it also weighs five other "quality" factors: job knowledge, business ethics, professionalism, customer service and initiative.

"Notably, (employees) with fewer New Student Points but more Quality Points could receive a higher salary than those with more New Student Points but lower Quality Points," the company said in its motion to dismiss the case.

The 1992 law grew out of reports of overly aggressive sales procedures in the for-profit education industry that led to the enrollment of unqualified students and high student-loan default rates.

Education Management, based in Pittsburgh, offers classes at 105 locations in 32 states and Canada, as well as online. It said many of its 100,000 yearly students are non-traditional — working adults, single parents and low-income and minority students.

The company operates diploma, undergraduate and graduate programs at its Art Institutes, Argosy University, Brown Mackie College and South University, and it employs more than 22,000 people, according to the response.

The government said the company inflated its career placement opportunities, preyed on applicants' psychological vulnerabilities and enrolled students regardless of their qualifications.

The 2007 lawsuit was filed by former employees Michael Mahoney and Lynntoya Washington but was unsealed only this year after the Department of Justice and the attorneys general of California, Florida, Indiana and Illinois intervened. If they prove their case, Education Management could be forced to repay three times the damage, plus penalties, with the whistleblowers able to collect 15 percent to 25 percent of the recovery.

The company said that the government's case relies exclusively on "two isolated, low-level employees with virtually no relevant knowledge" and that the allegations in the complaint are "contradicted by what little knowledge the relators purport to have, the government's own exhibits, or both."

The case is pending in federal court in Pittsburgh.

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  • Very unsatisfied student
    I finished my degree at Brown Mackie College in 2009. Unfortunately in my experience the school was a complete joke. starting off with scheduling me in wrong classes, that I still had to take. Parades of an unexperienced, untrained teachers/ instructors. and to me the cherry on the top gradebook scores being completely wrong. My psychology class was where the gradebook incident occurred. the teacher was absent on several occasions throughout the month and as a student in her class it was not a well structured environment. I feel embarrassed to admit this but I should not have passed that class but did. watching movies, smoke breaks, and classroom discussions about weekend adventures are not really equivalent to a degree. Several students including myself went to the Dean to complain about this teacher on day one. by week four, the end of the class we were still persistently visiting the dean's office to complain. the night before our grades were in the teacher was fired and unfortunately took the great book with her. the grades that were left plugged in for the students were grades of 180 percents. which obviously can't be because you can only get no more than 100. I took this to the Dean and showed her. I also noticed that my final said I had 100 percent. I know for a fact I did not get a hundred percent. I know I should have failed that test. I didn't have any answers written down, how is this possible?? The Dean swept it under the rug and that was it. I passed and moved on. Unfortunately I have so many more unethical stories about Brown Mackie College. I would advise anyone to never go to Brown Mackie College. good luck to anyone from Kentucky! Hope this lawsuit goes through!

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