(CN) - One of the largest for-profit college systems in the U.S. agreed to settle claims that it paid recruiters based on the number of students they enrolled, the government said Monday.
Education Management Corp. will pay $95.5 million in a settlement to resolve allegations that the company violated federal and state False Claims Act provisions by falsely claiming it was in compliance with the Higher Education Act and similar state laws, according to a U.S. Department of Justice press release.
EDMC was accused of unlawfully recruiting students by paying admissions personnel based only on the number of students they enrolled, the press release states. The Pittsburgh, Pa.-based education company operates nationwide as the Art Institutes, South University, Argosy University and Brown-Mackie College.
The settlement resolves four separate False Claims lawsuits filed in Pittsburgh and Nashville, Tenn., according to the Justice Department. The federal government and five states stepped in and actively pursued one of the whistleblower cases in Western Pennsylvania.
An intervening complaint accused EDMC of falsely certifying to the U.S. Department of Education and state offices that it was in compliance the Higher Education Act's "incentive compensation ban," so it could continue to receive grant money. The company was actually running a high-pressure sales business, the lawsuit claimed.
U.S. Attorney General Loretta Lynch called the settlement a "historic resolution."
"Operating essentially as a recruitment mill, EDMC's actions were not only a violation of federal law but also a violation of the trust placed in them by their students - including veterans and working parents - all at taxpayer expense," Lynch said.
In addition to the four whistleblower complaints, the global settlement announced Monday resolves a consumer fraud investigation by 40 state attorneys general.
The $95.5 million will be shared among the federal government, co-plaintiff states, whistleblowers and their counsel, the Justice Department says.
U.S. Education Secretary Arne Duncan said in a statement that the federal government will enforce colleges' compliance with the law.
"Now more than ever, a college degree is the best path to the middle class, but that path has to be safe for students," Duncan said. "This settlement should be a warning to other career colleges out there: We will not stand by while you profit illegally off of students and taxpayers."
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.