Posts Tagged ‘Education Management Corp’

James Hoyer Part of Global Whistleblower Settlement with For-Profit College EDMC

Jason Sobek - EDMC Whistleblower

Jason Sobek – EDMC Whistleblower

The Department of Justice announced it has reached a landmark, global settlement with Education Management Corporation, the 2nd largest for-profit education company in the country. EDMC agreed to pay $95.5 million to settle allegations that the company violated federal and state False Claims Act laws.

James Hoyer client Jason Sobek, a former EDMC Project Associate Director of Admissions, was one of several whistleblowers who came forward to expose issues regarding how the schools recruited students and reported job placement numbers.

EDMC was accused of using predatory techniques to lure students to sign up, misrepresenting its job placement statistics, and paying employees incentives based on the number of students recruited. EDMC runs several for-profit colleges, including South University, The Art Institutes, Arogsy University, and Brown Mackie College.

“We are gratified that information Jason provided helped lead to the resolution of this case with a landmark, global settlement,” said Chris Casper, James Hoyer Managing Partner. “We are hopeful this will prompt much needed change in practices used by the for-profit college industry.”

The Department of Justice news release explains:

The primary allegation was that EDMC unlawfully recruited students, in contravention of the HEA’s Incentive Compensation Ban (ICB), by running a high pressure boiler room where admissions personnel were paid based purely on the number of students they enrolled.  In addition to resolving these and other FCA claims, the global settlement also encompasses an investigation by a consortium of state Attorneys General, of consumer-fraud allegations involving deceptive and misleading recruiting practices.

In addition to offering information and help to federal investigators, Sobek shared his story with the public to help shed light on EDMC practices, warn students and bring about change.   Among those reports were a story with ABC Network News, WTAE TV in Pittsburgh, and WFTS TV in Tampa.

Sobek’s portion of the settlement amounts to $2.5 million which will be paid out over the course of several years. Under the False Claims Act, whistleblowers are entitled to a percentage of a settlement as a reward for bringing forward information that leads to the recovery of money on behalf of taxpayers.

Click here to read more on the settlement in the Pittsburgh Post-Gazette.

Click here to read more on the settlement in the Pittsburgh Tribune Review.

Click here to read more on the settlement from WTAE TV in Pittsburgh.

Click here to read more on the settlement from CBS News.


EDMC Whistleblower Case Moves Forward

The whistleblower case filed against Education Management Corporation by James Hoyer Law Firm client Jason Sobek has cleared a major hurdle. U.S. District Court Judge Terrence McVerry in Pittsburgh ruled to deny EDMC’s Motion to Dismiss Sobek’s suit.  The case will proceed on three major counts involving misrepresentations of job placement statistics and accreditation and allegations that EDMC failed to adequately record the Satisfactory Academic Progress of students, whereby allowing its schools to collect federal financial aid to which they were not entitled.

Sobek filed the suit in 2010 against EDMC, the country’s second largest for-profit college provider, after witnessing questionable practices while working as an Admissions Representative at the company.

Oral arguments were presented before Judge McVerry in Pittsburgh on May 13, 2013 by James Hoyer Senior Partner Christopher Casper. In response to today’s ruling, Casper said, “We are encouraged by the Court’s ruling.  It sends a message that companies cannot rake in hundreds of millions of dollars in taxpayer money while blatantly violating federal law.”

In his ruling denying EDMC’s Motion to Dismiss,  the judge wrote “EDMC presents several overarching lines of reasoning in support of dismissal.”  One of EDMC’s arguments claimed that even if the company committed the alleged violations, it would not be grounds for the government to refuse paying its schools federal financial aid.  The judge indicated “such a defense is fact-intensive and would not justify dismissal at the pleading stage.”  As a result, Judge McVerry determined “a final determination is premature at this time” and the case should proceed.

The case will now move on to the discovery phase.  “We look forward to taking depositions and the opportunity to put EDMC under oath,”said Casper.

Three additional counts in the suit were voluntarily dismissed.  One of those regarding “incentive compensation” continues on in a separate whistleblower case filed against EDMC.


James Hoyer Client Interviewed in Investigative Report on For-profit Colleges

A hard hitting story on WFTS TV, the ABC station in Tampa, exposed questionable practices in recruiting and job placement at the 2nd largest for-profit college company in the nation, Education Management Corporation, known as EDMC.

The company is at the center of a whistleblower lawsuit filed by former EDMC Admissions Representative Jason Sobek, who is represented by the James Hoyer Law Firm.  EDMC operates several for-profit colleges, including The Art Institutes, South University, Argosy University and Brown Mackie College.

In the report, Sobek was interviewed and explained that recruiters at the schools were encouraged to say whatever it takes to sign students up:

“We were trained to target low-income students, single mothers, women staying at women’s shelters,” Sobek said.

 I-Team investigator Michael George asked Sobek why those groups were targeted.

 “They were easy victims,” Sobek said.

 But there was more to it than that. Sobek says low-income students were desired because they qualify for the most federal aid. EDMC’s schools received $1.8 billion dollars in federal grants and loans in 2010 alone, according a report on for-profit schools by the U.S. Senate. That’s taxpayer money.

Click here to read the full report on the WFTS TV website.

Click here to read another report from WTAE TV in Pittsburgh, the hometown for EDMC’s headquarters.


Powerful Senator Calls for Audit of Job Placement Numbers at For-Profit College EDMC

Senator Dick Durbin

U.S. Senator Dick Durbin (D-IL), the Assistant Majority Leader of the Senate, is calling for an audit of what he termed “baseless” job placement numbers reported by Education Management Corporation (EDMC).  Senator Durbin made that request and issued a press release, after reviewing data exposed by whistleblower Jason Sobek, a James Hoyer Law Firm client.

EDMC is the second largest for-profit college provider in the United States.  The company owns The Art Institutes, South University, Argosy University and Brown Mackie College and has more than 150,000 students.  Senator Durbin called for the audit in a letter sent to EDMC’s accrediting agency, the Southern Association of Colleges and Schools (SACS).

Sobek was interviewed by ABC News in a report which investigated questionable job placement statistics reported by the for-profit college company.  Durbin, who was also interviewed in the report, was so concerned he decided to take action by sending the letter, which said, in part:

The lawsuit highlighted in a recent ABC news report against the Education Management Corporation (EDMC) by a former EDMC employee raises serious concerns about the validity of EDMC’s reported job placement rates. I urge you to carefully audit all job placement rates reported by EDMC.

Among the many questionable job placements counted in the data as students successfully working in their field, were an Accounting graduate working as a McDonald’s cashier, a Business Administration graduate working as a Walmart Customer Service Rep, and a Fashion Marketing graduate working as a shoe salesman.

Durbin reviewed the job placement database material and came to this conclusion in the ABC News story:

“It’s just plain fraud and your whistle-blower has brought it to light,” Durbin told ABC News. “These students get sucked in by these ads, sign up for debt, sign up for courses that lead to nowhere,” Durbin says.

In his letter to the SACS, Durbin says he is “deeply concerned” and urges the accrediting body to take action.

Students and families rely on accreditors for the seal of approval you provide. Given the baseless job placement numbers provided by one of EDMC’s schools with SACS accreditation, the Council should re-evaluate current methodology, documentation and reporting requirements for job placement. I urge SACS to audit other schools owned by EDMC to ensure that all of EDMC’s students are working with accurate information about their post-secondary education.

A Federal Magistrate Judge in Pennsylvania recently recommended that Sobek’s case against EDMC move forward. The suit alleges the for-profit college company misrepresented, not only job placement statistics, but also accreditation, and failed to adequately track student academic progress.

The case is a concern for students and taxpayers, because nearly 90-percent of the tuition paid to the company comes from federal loans and grants. Click here to read Senator Durbin’s entire press release.



Magistrate Judge Recommends Case Against EDMC Move Forward

Positive news for a whistleblower represented by the James Hoyer Law Firm in a case against Education Management Corporation (EDMC), the 2nd largest for-profit college provider in the country. Magistrate Judge Cynthia Reed Eddy, of the U.S. District Court for the Western District of Pennsylvania, recommends that the case move forward on several key counts.

Former EDMC employee Jason Sobek alleges in the lawsuit that EDMC defrauded the federal government by making misrepresentations which led students to sign up for federal student loans and grants.  Among the issues are misrepresentations on program accreditation and job placement statistics and failing to track student academic progress.

Magistrate Judge Eddy recommends that those three main counts put forth in the suit regarding job placement, accreditation, and satisfactory academic progress proceed–  denying EDMC’s Motion to Dismiss those counts. EDMC schools named in the suit include South University, Agrosy and The Art Institutes.

An article in Law360 reports:

U.S. Magistrate Judge Cynthia Reed Eddy said that  several allegations made by Jason Sobek, a former
EDMC associate admissions officer, are strong enough to go forward, including claims that the Pittsburgh, Pa.-based education company lied to students about its programs’ accreditations and their job prospects.

Magistrate Eddy also says Sobek met the burden of evidence for a claim on “incentive compensation”  to continue, but because the plaintiff was not “first filed” on that issue, she recommends dismissing that count. The “incentive compensation” claim will move forward in a separate whistleblower suit which was first to file on that issue.

The Magistrate recommended that there was not sufficient evidence put forth to continue two other counts in the suit, which had to do with misrepresentations of  cost and a “violation of reverse false claims.”

District Judge Terrance McVerry will now take the Magistrate’s recommendation under advisement and is expected to rule in the near future.