WASHINGTON — The for-profit college company Education Management, chaired by former Maine Gov. John McKernan, today asked a federal court to dismiss a Department of Justice lawsuit alleging the company illegally compensated employees who recruit students.
The dismissal motion filed with the U.S. District Court in Pittsburgh, where Education Management’s headquarters is located, asserts that “the government’s claims are legally flawed and factually insufficient,” said Bonnie Campbell, a spokeswoman for Education Management’s legal counsel who is a former Justice Department official and Iowa state attorney general.
Campbell said that the case is about a “narrow legal issue” over whether Education Management’s “sole basis for EDMC’s compensation of admissions officers was enrollment numbers.” Federal regulations adopted in 2002 “expressly permitted companies to consider enrollment numbers when determining admission officer salaries, as long as compensation was not based solely on enrollment numbers,” she added. The company says it also used five other factors – including professionalism and business practices and ethics – in determining compensation for its recruiters.
In the dismissal motion, lawyers for Education Management contend that, among other things, “the government has failed to show how EDMC presented a false claim because it has not alleged facts showing that the number of enrollments were in practice the ‘sole’ basis for compensation.”
The federal government also is basing its case on a lawsuit brought by “two isolated, low-level (now former Education Management) employees with virtually no relevant knowledge,” the motion to dismiss argues.
Further, “the government does not and cannot allege that the purported violations of the incentive compensation ban caused any loss to the government,” states the motion to dismiss.
The company also asserts that the government’s intervention in the case is motivated by a desire to win financial damages from a deep-pocketed private company.
“The ‘hope of gain,’ unsupported by fact or law, does not permit the government to bring a massive, nationwide fraud claim as leverage with which to fill its coffers,” the Education Management dismissal motion states. “The government should not be allowed to ignore its own law, its own conduct, its own exhibits, and the pleading rules of this court to make a groundless grab for money to which it is not entitled under any theory.”
The motion to dismiss is the latest development in the whistleblower lawsuit first brought in 2007 on behalf of two former Education Management employees, Michael Mahoney and Lynntoya Washington, a case that gained prominence when the Department of Justice in August intervened along with now six other states.
It’s a potentially politically charged lawsuit in Maine, because McKernan, a Republican who was Maine’s governor from 1987 to 1995, is married to three-term GOP Sen. Olympia Snowe of Maine, who is up for reelection next year.
Education Management is the nation’s second-largest for-profit college company with more than 100,000 students enrolled each year and 22,000 employees nationwide. It has more than 100 schools in 32 states, none of them in Maine.
When the Department of Justice formally intervened in the case in August – joined by California, Florida, Indiana and Illinois, with Kentucky and Minnesota recently also announcing they will step into the suit – federal officials said the suit was seeking to recover an unspecified portion of $11 billion in federal and state financial aid – the vast majority of Education Management revenue, like virtually all for-profit college companies. There has been congressional and legal scrutiny in recent years of a number of for-profit college companies, with critics asserting that the companies recruit students that they know are ill-equipped to finish school, obtain employment and pay back their financial aid.
The Justice Department said in August that the government alleged that Education Management broke federal laws banning for-profit college companies from “paying incentive-based compensation” tied to the “number of students they recruit.” The ban is aimed at preventing high student loan default rates.
“Colleges should not misuse federal education funds by paying improper incentives to admissions recruiters,” said Tony West, assistant attorney general for the Civil Division of the Department of Justice, in a statement in August.
Harry Litman, the attorney for the former Education Management employees who brought the initial suit, responded to the charge in the dismissal motion that his clients did not possess relevant information about the company’s recruiting operations by saying, “We look forward to answering their arguments in court. But even a cursory review of the government complaint shows that it relies on mountainous evidence of longstanding widespread and flagrant fraud,” Litman said.
The various plaintiffs, including the Justice Department, now will have a chance to respond to Education Management’s motion to dismiss. It is unlikely the case would go to trial until some time next year.
MaineToday Media Washington Bureau Chief Jonathan Riskind can be contacted at 791-6280 or at: jriskind@mainetoday.com Twitter: Twitter.com/MaineTodayDC.
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