EDMC agrees to settle investor lawsuit
Education Management Corp. has agreed to pay $2.5 million to settle an investor lawsuit claiming the company misled shareholders about its compliance with state and federal education laws, according to court documents filed Thursday.
The shareholders sued in 2014 based on a separate federal lawsuit in which former employees, the Justice Department and 11 states seek to recover more than $11 billion in federal and state student aid, claiming that the Downtown-based, for-profit educator knowingly violated the law. EDMC denies the claim.
No trial date has been set.
Shareholders used the arguments in the government lawsuit to maintain they were misled about the company’s compliance with state and federal law.
The settlement, which has to be approved by U.S. District Judge David Cercone, would set aside $250,000 to administer the payments, up to one-third of the $2.5 million for attorney fees and an undisclosed amount to cover court costs.
The remainder would be divided among people who can prove they owned EDMC shares between July 1, 2011, and Sept. 16, 2014, according to court documents.
Attempts to reach EDMC officials for comment were not successful.
EDMC has four college brands — the Art Institutes, Argosy University, Brown Mackie College and South University — with enrollment that has declined 29 percent since 2010 to 112,430.
The recession hurt enrollment across the for-profit college industry. Department of Education rules that went into effect in July require for-profit colleges to prepare students better for “gainful employment” or risk losing federal funding for student loans.
Brian Bowling is a staff writer for Trib Total Media. He can be reached at 412-325-4301 or email@example.com.