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[ATG] AG: Parent company of Brown Mackie College and The Art Institutes settles federal whistleblower suit and multistate suit
Start Date: 11/16/2015Start Time: 12:00 AM
End Date: 11/16/2015
Entry Description
INDIANAPOLIS – The parent company of Brown Mackie College and The Art Institutes has reached two important settlements today that include the State of Indiana. One is a global settlement of a federal whistleblower suit involving the parent company’s fraudulent claims. The other is a related settlement with Indiana and 38 other states to reform the company’s recruiting and enrollment practices which will result in a total $5.7 million in loan forgiveness to 5,530 Indiana students of Brown Mackie College and The Art Institutes, Attorney General Greg Zoeller announced today.

Loan forgiveness is part of a much larger settlement that imposes significant consumer-protection changes to the marketing, recruiting and enrollment practices of the parent company, Education Management Corporation (EDMC) and appoints an independent administrator to monitor the EDMC schools’ compliance with the settlement. Under the agreement, EDMC will pay Indiana, four other states and the federal government a combined $95.5 million over a period of years to settle whistleblower lawsuits alleging EDMC illegally paid incentives-based compensation to its admissions recruiters, tied to the number of students they recruited. Indiana will receive a net $1.2 million to reimburse the public treasury for costs associated with EDMC’s fraudulent practices.

“This settlement requires EDMC to forgive certain student loans and correct its deceptive and misleading recruitment practices that led students to get overextended with debt without the benefit of a useful degree. The enforcement effort by state attorneys general and our federal colleagues recovered public funds and puts strict monitoring in place to ensure EDMC’s compliance and restore some integrity and consumer protections to the process," Zoeller said.

Those eligible for forgiveness of outstanding student loans are certain students of:
• Brown Mackie College in Indianapolis, Fort Wayne, South Bend, Michigan City and Merrillville; and
• The Art Institute of Indianapolis.

This includes students enrolled in an EDMC program with fewer than 24 hours of transfer credit who withdrew within 45 days of the first day of their first term, where their final day was between January 1, 2006, and December 31, 2014.

Within 90 days of the effective date of the agreement, EDMC must send a notice letter to each qualifying former student and each of the credit reporting agencies. The notice that those students eligible for student loan debt forgiveness will receive in the mail from EDMC within 90 days will include more information about their accounts. Students and former students who have questions about whether they are eligible for student loan forgiveness also can contact EDMC at a number the company has set up to address such questions. That number is: 1-855-725-4301. Students should not contact the Attorney General’s Office with questions about their accounts or eligibility as the AG’s Office does not have that information.

Pittsburgh-based EDMC is the parent company of Brown Mackie College, The Art Institutes International LLC, Argosy University of California and South University. The consumer protection settlement between EDMC and the 39 states and the District of Columbia – providing $102 million in loan forgiveness to approximately 80,000 students in the U.S. and Canada, as well as other regulatory changes – is intended to resolve many of the issues uncovered in a multistate investigation launched by state attorneys general in response to consumer complaints by current and former students about the abusive recruiting and enrollment practices of the for-profit colleges that EDMC operates.

“A common scenario in the consumer complaints states heard was that students were lured into enrolling in Brown Mackie College or The Art Institutes through deceptive advertising and misleading promises. Students who borrowed student loans discovered too late the courses were non-accredited or the quality was questionable and did not translate later into job opportunities, leaving former students owing significant student loan debt without a return on their college tuition investment nor their time spent. This multistate settlement will assist some former students by canceling outstanding student loan debt while putting new requirements on EDMC going forward to end abusive recruiting practices so future students are not misled,” Zoeller said.

Under the settlement, newly enrolled students in online courses shall be permitted to withdraw without financial penalty within 21 days of the first day of the student’s semester, quarter or payment term; and students in on-site courses will be permitted to withdraw without financial penalty within seven days of the student’s first term or first day of class, whichever is later.

In addition to forgiveness of loans for certain former students of Brown Mackie College, The Art Institutes and other EDMC schools, EDMC will be required to reform its recruiting and enrollment practices, under the settlement agreement with the state attorneys general and as part of the global settlement agreement with U.S. Department of Justice. If EDMC violates the terms of the settlement, the state attorneys general or federal government could take legal action to enforce the agreement and seek additional sanctions.

Among other things, EDMC must not make misrepresentations to students or prospective students about accreditation, graduation rates, job-placement rates, transferability of credits, financial aid, veterans’ benefits or licensure requirements. EDMC must not engage in misleading advertising or deceptive or abusive recruiting practices to persuade students to enroll or remain enrolled, and must record online chats and telephone calls with prospective students. Students will be able to obtain a refund for the unused portion of the tuition and fees.

Moreover, EDMC must provide a personalized single-page disclosure to each prospective student including their anticipated total cost, median debt, default rate, warnings that credits may not transfer to other institutions, median earnings of who those who complete the program and job-placement rates. As part of that requirement, EDMC must provide disclosure that certain programs are non-accredited and will not enable students to obtain licensing in a licensed profession in the state. Also, EDMC must reform its job-placement rate calculation methodology to provide more accurate disclosures to students about their likelihood of obtaining gainful employment in their chosen careers.

The settlement agreement also requires EDMC to create an online financial disclosure tool for all prospective students who use federal student aid or loans. The online system, called the Electronic Financial Impact Platform, still is under development by the U.S. Consumer Financial Protection Bureau. When operational, the system will produce for prospective students a detailed financial report that includes the student’s projected financial commitment, living expenses and potential future earnings.

An independent administrator, Thomas Perrelli, former U.S. Associate Attorney General, will independently monitor EDMC’s compliance with the settlement agreement for three years and issue annual reports. The fees and costs of the administrator will be paid by EDMC.

In August 2011, the State of Indiana, three other states and the federal government intervened in one of the three whistleblower lawsuits against EDMC, filed in the U.S. District Court for the Western District of Pennsylvania, a case that Minnesota later joined – see this link: The complaint alleged EDMC violated a federal law that bans incentive compensation for college recruiters based on the number of students they enroll. EDMC will pay the State of Indiana approximately a net $1.2 million to partially reimburse the public treasury for the amounts of state financial aid EDMC received after making misrepresentations to the state over a period of years.

Zoeller noted the settlement successfully recovering public funds resolves the whistleblower lawsuit where the group of states including Indiana intervened as well as the two similar whistleblower suits where the states were not intervenors. Other states not part of any whistleblower litigation also joined the consumer protection settlement, into which was negotiated the detailed conditions imposed on EDMC schools going forward. Wrapped into this is the student loan forgiveness for some former students carrying loan debt whether they had completed programs at EDMC schools or dropped out. In Indiana, 5,530 students are eligible for a combined $5,729,910 in loan debt forgiveness.

The consumer protection portion of the settlement specifically states that the EDMC schools within 90 days of the finalization of the agreement will mail to eligible former students at their last known addresses a formal notice, stating their student loan debt has been reduced to zero dollars. Former students are encouraged to look for the notice from EDMC in the mail that should arrive within 90 days and use the contact information listed in that notice. Under the agreement, EDMC also will notify the three credit-reporting bureaus – Equifax, Experian and TransUnion – that the student’s outstanding student loan debt has been reduced to zero.  In the meantime, students with questions can call 1-855-725-4301 to reach EDMC directly.

Since only a subset of former EDMC students are eligible for loan forgiveness, individuals with other types of disputes about EDMC schools not related to student loans can continue to file complaints, with the Indiana Commission for Higher Education (CHE) at this link,, and with the Consumer Protection Division at .

Attorney General Zoeller thanked Deputy Attorney General Patricia Orloff Erdmann, chief counsel of the Litigation Division, Deputy Attorney General Richard Bramer, director of the Consumer Protection Division, and Deputy Attorney General Amanda Lee for their work on the case.

States participating in the settlement agreement with EDMC and its subsidiary schools are Alabama, Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, Wyoming as well as the District of Columbia. In signing the settlement, EDMC does not admit wrongdoing.


NOTE: A video clip of Attorney General Zoeller’s comment on the case is at this link:  .

Attached is a copy of the multistate consumer protection settlement with EDMC as well as a copy of the global settlement by the federal government and states with EDMC.

Students with questions about student loan debt forgiveness should contact EDMC directly at: 1-855-725-4301

Location Information:
Allen County

Lake County

LaPorte County

Marion County

St. Joseph County

State House

Attachments For This Entry:
    > Indiana v. EDMC, complaint and multistate settlement, 11.16.15
    > DOJ and States, global settlement agreement, EDMC 11.16.15
Entry Type:
Press Release
Entry Category:
  • Announcements
  • Category:
  • Education
  • Government
  • Agency Name
    Attorney General

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