For-profit college firm will pay up to settle allegations of false claims

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Attorney General Lisa Madigan announced settlements with the for-profit Education Management Corporation Monday morning. | Rich Hein/Sun-Times

Thousands of Illinois students will have millions in college loan debt forgiven under a settlement announced Monday by Illinois Attorney General Lisa Madigan.

That agreement with Education Management Corp., which operates for-profit colleges across the country, was one of two settlements reached recently with the firm.

In all, $3 million in loans to 2,692 Illinois students will be forgiven, Madigan said; that’s part of $102 million in debt relief nationwide.

Madigan said the company also will return $1.9 million to Illinois as part of a $95.5 million deal with Madigan, the federal government, attorneys general in 11 states and the district of Columbia; that money is being paid to resolve alleged violations of the False Claim Act, as well as claims by the Consumer Protection Consortium.

The company also will be monitored to reform its recruiting and enrollment practices for the next three years, Madigan said in a news conference at the Thompson Center.

“Today’s settlements will provide substantial student loan debt relief and recoup money fraudulently obtained,” Madigan said. “This is also intended to serve as a template for reform across the for-profit college industry.”

Madigan said her office’s investigations of two Education Management schools — Argosy University and the Illinois Art Institutes — include use of high-pressure, emotional, deceptive and unfair recruiting tactics and a violation of the federal ban on compensating recruiters for enrolling students. False claims were allegedly made to prospective students regarding program accreditation and job placement data was misrepresented to prospective students, Madigan said.

“If, at the end of the day, these types of predatory colleges shut down, that would be OK with me,” Madigan said.

In a statement posted on the company’s website, Education Management Corp. President Mark A. McEachen said the company worked with the government to resolve the situation.

“When we started our work together, the attorneys general had many concerns about the ways that some higher education providers recruited students. EDMC wanted to take the lead in developing the best ways to address each one of these concerns, and we have done so,” McEachen said in the statement.

“We are also pleased to have resolved the civil claims raised by the Department of Justice and state attorneys general. Though we continue to believe the allegations in the cases were without merit, putting these matters behind us returns our focus to educating students.”

Students who will receive automatic relief of outstanding Education Management Corp. institutional loans must have been enrolled in an EDMC program with fewer than 24 transfer credits, withdrawn within 45 days of the first day of their first term and their final day of attendance must have been between Jan. 1, 2006 and Dec. 31, 2014, according to the attorney general’s office. This will not be credited to students’ federal loans.

Thomas Perrelli, a former associate U.S. attorney general, will oversee the reform practices agreed upon in the settlements, which include monitoring phone calls and online communication the company has when recruiting students.

Madigan warned prospective college students to ask questions and do research before choosing a place to further their education.

“Start by looking at the price. See if there is a lot of flashy advertising,” she said. “If an institution is spending more money on advertising and marketing than they’re spending on actually teaching, then that’s a red flag.”

In all, Education Management operates 110 schools in 32 states and Canada. In Illinois, it operates branches of Argosy in Chicago and Schaumburg, and Illinois Art Institutes in Chicago, Schaumburg and Tinley Park.

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