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Justice Department Accuses Education Management of False Claims on Loans

The U.S. Justice Department filed a claim Monday against Education Management Corporation (EDMC) alleging the company's recruiting compensation structure violates the federal Higher Education Act. Goldberg Kohn is co-lead counsel to the whistleblowers who originated the case against EDMC.

The Justice Department and four states on Monday sued Education Management Corp., alleging the operator of for-profit colleges falsely certified that it was eligible to participate in federal student loan programs.

The legal complaint came in a false-claims lawsuit that was originally filed by two of the company's former employees. A federal judge in Pittsburgh, where the company is based, unsealed the lawsuit in May after the Justice Department indicated that it planned to intervene in the case.

The department said the company's compensation system for its admissions personnel violates the federal Higher Education Act because admissions employees are paid based on how many students they recruit. The law prohibits schools from paying admissions officials bonuses, commissions or other incentives based on their success in enrolling students. The provision is designed to discourage schools from enrolling unqualified students and taking advantage of the federal funds they bring.