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California Association of Private Postsecondary Schools

Whistle-Blower Suit Against Education Management Corp. to Proceed

05/08/2014

The Chronicle of Higher Education. May 7, 2014.

A federal judge has ruled that a multibillion-dollar whistle-blower lawsuit against the Education Management Corporation can continue, according to reports by the Pittsburgh Post-Gazette and the Bloomberg news service.

The for-profit education company had asked Judge Terrence F. McVerry of the U.S. District Court in Pittsburgh to dismiss the lawsuit, but in a ruling issued on Tuesday the judge said it would be premature to do so before the plaintiffs had been allowed to gather evidence. The case’s discovery process “must proceed,” he said. “The parties may then seek summary judgment, if appropriate.”

The lawsuit was originally filed in 2007 by former employees of Education Management and subsequently was joined by the U.S. Justice Department, 11 states, and the District of Columbia. It accuses the company of illegally obtaining federal student aid by paying its admissions recruiters commissions based on the number of students they enrolled.

The company denies the plaintiffs’ allegations, saying its statistical analysis of 15,000 pay decisions proves that it paid its recruiters based on a variety of factors.

But Judge McVerry did not find such documentation convincing. “What EDMC portrays as ‘getting behind the numbers’ may really be only manipulation of its numbers,” he wrote.

Chris Hardman, a spokesman for Education Management, said in a written statement to reporters on Tuesday: “We believe the case is without merit, and we will continue to defend ourselves.”