WASHINGTON — U.S. Sen. Olympia Snowe, R-Maine, accused her GOP primary challenger of waging a smear campaign Tuesday after he called on Snowe to resign.

The heated exchange between the three-term senator and Scott D’Amboise of Lisbon Falls was prompted by a motion by the U.S. Department of Justice to intervene in a lawsuit against the company that Snowe’s husband chairs.

D’Amboise, a health care technician and small-business owner who is aligned with the tea party, made his statement following news last week that the Department of Justice had filed notice that it would intervene in a whistleblower lawsuit alleging that Education Management Corp. improperly compensated employees who recruit students to the for-profit college company’s institutions.

Snowe, who is up for re-election in 2012, accused D’Amboise of making false and libelous statements and running a smear campaign against her and her husband, John McKernan, a Republican who was Maine’s governor from 1987 to 1995.

McKernan is chairman of the board of Pittsburgh-based Education Management, the nation’s second-largest for-profit college company, with more than 158,000 students. It has 104 schools in 31 states, none of them in Maine.

In a statement released today by Education Management, McKernan said it is “entirely unfounded to suggest that this company did not comply with the regulation.”

Jacquelyn P. Muller, an Education Management spokeswoman, added that the lawsuit “unfairly attacks Education Management and its schools across America, all of which have a robust compliance program to satisfy the complex regulatory requirements imposed by federal, state and local authorities.”

McKernan has been with the company since 1999, when he joined as vice chairman. He was president from March to September 2003 and CEO from September 2003 to February 2007.

The lawsuit was filed in 2007 by a former Education Management employee.

“Snowe has the responsibility to the people of Maine to resign and find a way to give back the money she has been banking through her husband’s ill-gotten business strategies that included stealing and misappropriating taxpayer funding,” D’Amboise said in a news release. “She had to know something was fishy about how her husband was doing business.”

In a statement from her campaign and in a phone interview, Snowe blasted D’Amboise, saying his statement was “libelous” in its treatment of her husband.

“The kind of political flim-flam that Scott D’Amboise is offering is frankly deceptive, and people expect more from people who want to represent them. You have a potential opponent here who suggests that he already has a verdict” against McKernan, Snowe said in the interview. “I haven’t done anything wrong, nor has my husband. He worked according to the law.”

In the statement from her campaign, Snowe said, “I’m not a lawyer and therefore can’t speak to the details of the lawsuit, which I understand was filed by some former employees against the company my husband works for.”

“I do know, though, from the statement that was issued by the company, that the compensation plan the company implemented was thoroughly vetted by outside lawyers who gave the company a legal opinion that the plan met all the requirements of the law, and was adopted by the company before my husband was CEO,” the statement said.

On her Senate personal financial disclosure report covering 2009, the most recent report filed, Snowe reports Education Management stock valued at $6 million to $30 million – belonging to her husband.

Snowe said she has no involvement with the company, and her office said today that she has taken pains to avoid the appearance of conflict on issues involving for-profit colleges that come before the Senate.

In the interview, Snowe said Education Management is “a public company and so I have no involvement, literally no involvement. My husband is busy doing his job and I am busy doing mine.”

A campaign consultant for D’Amboise said D’Amboise was not backing off his criticism.

“The government doesn’t generally step in when something isn’t true, and this comes after a pretty lengthy investigation,” said Tyler Harber.

“Everything we stated in our release has been in the public realm for five or six days. We are heartened that (Snowe) is finally talking about it.”

Education Management has said that it put a compensation plan into effect in 2003 for its “admissions representatives” that complied with federal law. It said that it “intends to vigorously defend itself” against the lawsuit.

For-profit colleges are not supposed to pay admissions recruiters per student, which could prompt a push to enroll unqualified applicants, who might then default on federal education loans. As much as 90 percent of a for-profit college’s revenue can come from federal student loans.

There has been increasing scrutiny of various for-profit college companies. Stricter federal regulations for recruiting are to take effect in July.

A spokeswoman for the U.S. Attorney’s Office in Western Pennsylvania said the Department of Justice’s notice there that it intends to intervene in the case remains sealed. The federal government has until July 5 to file a complaint. The department will not comment until then, the spokeswoman said.

This apparently is the first time the Department of Justice has intervened in a lawsuit against for-profit education companies alleging illegal compensation. California and Illinois have intervened in the lawsuit as well.

The lawsuit alleges that Education Management “tied their recruiters’ compensation directly to the number of students the recruiters enrolled.”

Education Management’s statement said the allegation that the company violated compensation rules is “wholly unfounded and ignores the facts.”

Government rules adopted in 2002 allowed education institutions to consider the number of students in determining a recruiter’s compensation, “So long as enrollments were not the sole factor in setting compensation,” the company said, adding that two education law firms independently told the company that its plan complied.

The company noted that critics of for-profit colleges have criticized the 2002 policy. The Obama administration is now overhauling the policy.

That doesn’t mean the company can be held to have done something unlawful retroactively, the company’s statement said.

McKernan added in his statement that, “If the government wants to address regulatory issues, the solution lies in the legislature and agencies, not the courts. We intend to vigorously defend this baseless suit.”

MaineToday Media Washington Bureau Chief Jonathan Riskind can be contacted at 791-6280 or at:
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