Office of the Attorney General
Attorney General Conway Files Claim against Second For-Profit School
As part of his ongoing investigation of the for-profit college industry, Attorney General Jack Conway today announced that his office has filed a motion to intervene in a whistle-blower lawsuit in the Western District of Pennsylvania against Education Management Corporation (EDMC), the parent company of Brown Mackie College. EDMC is one of the nation's largest for-profit providers of higher education with nationwide online college programs and more than 100 campuses in 31 states and Canada. Brown Mackie College has three Kentucky campuses in Louisville, Hopkinsville and Ft. Mitchell.
The federal whistle-blower suit alleges that EDMC defrauded the government by illegally paying recruiters based on the number of students they enrolled in EDMC programs and campuses, in violation of Title IV of the Higher Education Act. The whistleblowers accused EDMC of operating a "boiler room" program that paid incentives, including trips to Cancun and LasVegas, to entice recruiters into signing up more students.
The complaint alleges that EDMC's violation of the incentive compensation ban made Brown Mackie Colleges ineligible to receive financial aid in the form of need-based and merit-based grants from the Kentucky Higher Education Assistance Authority (KHEAA).
"This type of practice puts both students and taxpayers at risk," General Conway said. "Overaggressive recruiters increase the likelihood that unqualified students are unable to complete their education and unable to repay their loans, which leaves taxpayers footing the bill."
In his intervening complaint, Attorney General Conway is seeking restitution from EDMC for financial aid grants paid by KHEAA to Brown Mackie Colleges due to false claims made by EDMC to the US Department of Education and KHEAA. General Conway asserts these are violations of the Kentucky Consumer Protection Act.
KHEAA has paid more than $6 million in need-based and merit-based financial aid grants to Brown Mackie Colleges from fiscal year 2004 through 2011.
The Department of Justice also filed an intervening complaint that was joined by attorneys general from California, Florida, Illinois and Indiana.
General Conway is leading a national multi-state working group investigating the for-profit college industry. Currently 20 states are involved in the working group.
Two weeks ago, Attorney General Conway announced his office is suing Daymar College after receiving information that Daymar was preventing students from buying their textbooks and supplies cheaper from other sources. The Attorney General's investigation concluded that Daymar College had been engaged in a sophisticated practice of deceiving and misleading students about their textbooks and financial aid so that students would be forced into purchasing books and supplies from Daymar College at prices substantially higher than other vendors. The complaint alleges that the defendants' actions also amount to an unlawful restraint on trade.
The Attorney General also alleges that Daymar provided false and misleading information to students about the transferability of credits earned at the for-profit school. In addition to telling students their credits will transfer, the complaint alleges that the written information Daymar College provides to students about the transferability of credits omits the material information that credits are not likely to transfer to other schools.
The complaint further alleges that some of the programs offered at Daymar College do not meet the standards of its institutional accrediting organization and that Daymar has enrolled some students who do not meet the school's criteria for admission or general standards for admission to career colleges. This increases the likelihood that a student will withdraw from the program, be unable to pay the debt they incurred while attending Daymar and be unable to get a job in their career field.
Attorney General Conway also has active investigations examining the activities of six proprietary colleges operating in Kentucky.