Archive

ShareThis Page
Hedge fund drops out of EDMC lawsuit, but 2nd remains | TribLIVE.com
Local Stories

Hedge fund drops out of EDMC lawsuit, but 2nd remains

One of two hedge funds suing to block a restructuring deal at Education Management Corp. has dropped out of the case.

Magnolia Road Capital this week dismissed its claims against the Downtown-based operator of for-profit colleges. The New York hedge fund gave no reason but said that it would not rejoin the case at a later date.

When reached by phone Wednesday, Magnolia founder Jame Donath declined to comment.

“We would refer to the publicly available documents in the court,” he said.

Magnolia’s dismissal does not mean that EDMC is in the clear. The other plaintiff, Marblegate Asset Management, is continuing to pursue its claims against the company.

Spokesmen for EDMC and Marblegate declined to comment on Wednesday. Telephone and email messages left for attorneys representing all parties were not returned.

Marblegate’s lawsuit aims to stop a deal that would wipe out most of EDMC’s debt and make creditors the majority owners of the troubled company. If the restructuring goes forward, it would lower EDMC’s $1.5 billion debt to $400 million.

The investor lawsuit has been only one headwind facing EDMC as it fights for survival. The company, which reported a $664 million loss last year, is the subject of whistle-blower lawsuits accusing it of using deceptive recruiting practices. One brought by six EDMC admissions officers and a former paratrooper accuses the company of lying on student financial aid applications to collect more money under the GI Bill. Another whistle-blower case, which includes the Justice Department, alleged EDMC pays recruiters based on the number of students they enroll — a violation of federal law.

EDMC has previously said that both cases are without merit.

EDMC has 125,560 students on campuses in 32 states and in Canada, and employs 20,800 people, including 2,000 in Pittsburgh. Its schools include The Art Institutes, Argosy University and Brown Mackie College.

Chris Fleisher is a staff writer for Trib Total Media. He can be reached at 412-320-7854 or cfleisher@tribweb.com.


TribLIVE commenting policy

You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.