The Justice Department has joined an employee whistleblower suit against Education Management Corp., intervening for the first time in the student recruitment practices at for-profit colleges.
The suit alleges that Pittsburgh-based Education Management, 40 percent owned by Goldman Sachs funds, illegally paid recruiters based on the number of students they enrolled, the company said in a Securities and Exchange Commission filing Monday.
The government, in most cases, forbids such incentive compensation for colleges accepting federal aid because of concern the practice will encourage companies to enroll unqualified students. The Justice Department action in federal court in Pittsburgh follows scrutiny by Congress and the federal Education Department of sales practices, student-loan defaults and job placement claims at for-profit colleges, which can receive as much as 90 percent of their revenue from federal financial aid.
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