The Education Management Corporation, which enrolls more than 100,000 students at for-profit trade schools across the U.S. and Canada, will pay $95.5 million to settle a lawsuit that claims it illegally paid recruiters and exaggerated the career-placement abilities of its schools.
The U.S. Department of Justice, which joined the suit 2011, announced Monday that the Pennsylvania-based company has also agreed to forgive $102.8 million in loans it made to more than 80,000 former students, according to the Canada Journal.
Filed in 2007, the case began when an EMC employee and a recruiter filed a whistleblower lawsuit in federal court in Pittsburgh.
The lawsuit alleges that the firm relied on deceptive recruiting tactics to enroll students it knew were unlikely to succeed or finish its programs, reported The Guardian. Doing so by paying recruiters illegal enrollment-based incentives in hopes of obtaining government financial aid, which comprised the majority of the company's income.
Along with the Justice Department, 12 states and the District of Columbia joined the suit and had initially sought the $11 billion EMC received in federal and state student aid since 2003.
"A fundamental compact exists between the government and the public that prioritizes the funding of an education system, accessible to all and free from fraud and abuse," said David Hickton, the U.S. attorney in Pittsburgh. The company, he said, had "turned that compact on its head by placing the pursuit ahead of profits ahead of a legitimate educational mission."
The Company has denied the allegations, with company president and chief executive Mark A. McEachen saying the allegations "were without merit," but wanted to put "these matters behind us" and return its focus to educating students, according to the Associated Press.
The company faces financial and regulatory troubles, losing $684 million last year and cutting hundreds of jobs. However, it still has more than 20,000 corporate and school employees.
