Fed suit against for-profit colleges can proceed

PITTSBURGH (AP) -- A Justice Department lawsuit against a Pittsburgh-based company that runs more than 100 for-profit secondary schools for artists, chefs and other trades nationwide can continue even though the company has provided statistics that it claims shows its recruiters weren't illegally paid, a federal judge ruled.

The lawsuit contends Education Management Corp. has exaggerated its career placement abilities and paid recruiters using illegal enrollment-based incentives. The Justice Department and attorneys general from 13 states want the school to forfeit more than $11 billion the company received in federal and state student aid it's received since 2003.

The school said the allegations aren't true. Two years ago, it presented reams of statistics and records it says prove recruiters weren't solely paid on enrollment statistics, which is illegal.

But U.S. District Judge Terrence McVerry says the company-generated statistics don't prove anything and could support the government's claim of a company-wide conspiracy.

"To put it starkly, plaintiffs allege a coordinated, multibillion-dollar corporate-wide fraud," McVerry wrote in an 11-page opinion Tuesday. "The fact that EDMC's paperwork and salary database appear to be compliant, on its face, is entirely consistent with plaintiffs' theory of the case."

EDMC spokesman Chris Hardman said the company believes the case is "without merit" and will continue to defend itself.

The lawsuit was filed in 2007 by two former whistle-blowing employees but had remained sealed and unknown to the public until the U.S. Justice Department and the attorneys general of California, Florida, Indiana and Illinois intervened to join the lawsuit in 2011.

The company has 110 colleges and universities across North America, including Argosy University, The Art Institutes, Brown Mackie Colleges and South University. It offers academic programs through campus-based and online instruction.

If the government wins the lawsuit, EDMC could be forced to repay triple the amount of student aid it received, plus penalties. The company, which has about 23,000 employees, including 2,000 in Pittsburgh, has laid off about 200 employees nationwide and sold off its Art Institute of Pittsburgh building in recent months.