College accused of being a 'high-pressure recruitment mill' agrees to a record $95.5 million settlement

Education Management Corporation (EDMC) is paying $US95.5 million to settle a case alleging it falsely obtained federal and state education funds.

The nearly $US100 million settlement is the largest false claims settlement with a for-profit educational institute in history, US Attorney General Loretta E. Lynch said during a press conference Monday announcing the resolution.

The college operated as a “high-pressure recruitment mill” and illegally paid recruiters based on how many students they enrolled, according to Lynch.

EDMC is the nation’s second-largest for-profit college system and the parent company of four higher education systems: Argosy University, The Art Institutes, Brown Mackie College, and South University. It was acquired by Goldman Sachs in 2006, which retains 40% ownership in the company today.

“This settlement should be a very clear warning for other career colleges out there,” Secretary of Education Arne Duncan said at the press conference. “We will not stand by when you profit illegally off of students and taxpayers.”

The settlemen comes amid a shaky environment for the for-profit college industry. In October, Apollo Education Group, the parent company of The University of Phoenix (UoP), was suspended from recruiting military student by the Department of Defence (DoD).

The school has been accused of using predatory tactics to lure in military personnel. Another for-profit behemoth, Corinthian Colleges, abruptly filed for Chapter 11 bankruptcy protection in April after an ongoing investigation by the ED and a $US30 million fine.

That fine, which was just the latest blow for the troubled for-profit network, set into motion a number of events that led Corinthian to announce that it would close its remaining campuses for good.

Across the entire for-profit sector, there have been allegations that the schools focus on signing up students and depositing their federal financial aid checks rather than providing a quality education.

Almost all of the biggest players in the for-profit sector have been investigated by state attorneys general, including EDMC, ITT, Career Education Corporation, Kaplan, DeVry, and Bridgepoint.

Business Insider reached out to EDMC and will update this post if we hear back.

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