IBJNews

Judge says lawsuit can proceed against for-profit educator

Back to TopCommentsE-mailPrintBookmark and Share

A federal judge has ruled that a lawsuit can proceed against a large for-profit education company accused of using improper sales tactics to lure unqualified students and the billions of dollars in financial aid they bring.

Judge Terrence McVerry said in a ruling Friday that the whole case against Education Management Corp., which operates two colleges in Indianapolis, shouldn't be dismissed.

The whistle-blower lawsuit, which the Department of Justice backed last year, alleges the company paid recruiters billions of dollars in illegal incentives to sign up students, in violation of a 1992 law.

The judge called the case "massive and complex" and said there are legal grounds to give the plaintiffs the opportunity to prove the allegations of company-wide fraud.

Education Management, based in Pittsburgh, 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. Many of its 100,000 yearly students are non-traditional — working adults, single parents and low-income and minority students.

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.

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

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.

The 2007 lawsuit was filed by former employees Michael Mahoney and Lynntoya Washington but was unsealed only last 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 damages, plus penalties, with the whistle-blowers able to collect 15 percent to 25 percent of the recovery.

The judge dismissed claims by the District of Columbia from the lawsuit and limited claims by Indiana and Minnesota.

Education Management, which had asked for the whole case to be dismissed, said in a statement it is pleased that the judge threw out part of the case but isn't surprised at the decision to allow the rest to proceed. The company said the compensation plan for its recruiters complied with the law.

ADVERTISEMENT

  • for profit med schools
    And these schools are only the domestic schools, there are also foreign medical schools that do the same thing, such as AUA and UAG school of medicine based in san Antonio TX
  • This Will Get Worse
    As the young men and women of our military arrive home, these types of education scams will increase. It is all about the billings, not the education of young people. This is not the only "for profit" that pulls this scam, it just happens to be the one they caught. If you know an ex-military person who plans to seek education following their service career, direct them to a viable and honest school system. When in doubt, direct the person to the appropriate state education department for guidance.

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. The east side does have potential...and I have always thought Washington Scare should become an outlet mall. Anyone remember how popular Eastgate was? Well, Indy has no outlet malls, we have to go to Edinburgh for the deep discounts and I don't understand why. Jim is right. We need a few good eastsiders interested in actually making some noise and trying to change the commerce, culture and stereotypes of the East side. Irvington is very progressive and making great strides, why can't the far east side ride on their coat tails to make some changes?

  2. Boston.com has an article from 2010 where they talk about how Interactions moved to Massachusetts in the year prior. http://www.boston.com/business/technology/innoeco/2010/07/interactions_banks_63_million.html The article includes a link back to that Inside Indiana Business press release I linked to earlier, snarkily noting, "Guess this 2006 plan to create 200-plus new jobs in Indiana didn't exactly work out."

  3. I live on the east side and I have read all your comments. a local paper just did an article on Washington square mall with just as many comments and concerns. I am not sure if they are still around, but there was an east side coalition with good intentions to do good things on the east side. And there is a facebook post that called my eastside indy with many old members of the eastside who voice concerns about the east side of the city. We need to come together and not just complain and moan, but come up with actual concrete solutions, because what Dal said is very very true- the eastside could be a goldmine in the right hands. But if anyone is going damn, and change things, it is us eastside residents

  4. Please go back re-read your economics text book and the fine print on the February 2014 CBO report. A minimum wage increase has never resulted in a net job loss...

  5. The GOP at the Statehouse is more interested in PR to keep their majority, than using it to get anything good actually done. The State continues its downward spiral.

ADVERTISEMENT