EDMC claims compensation plan legal in answer to lawsuit
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Downtown-based for-profit college giant Education Management Corp. on Monday night formally answered the accusation that it improperly paid recruiters based on enrollments, five years into a massive fraud lawsuit against the company.
It's not true, and data provided to the federal government proves it, according to EDMC's 83-page answer.
The nationwide network of schools "determined salary adjustments based on quality factors such as job knowledge, business practices and ethics, professionalism, customer service, and initiative, as well as other factors, such as seniority, location and administrative responsibility, in addition to new student enrollments," EDMC's attorneys wrote.
To prove that EDMC's compensation policy was a "sham" and that salaries were based solely on enrollments, the company's attorney's wrote, the plaintiffs must prove "that factors other than enrollments had no independent significance in determining salaries, so that enrollment numbers correlated precisely with the actual salaries of admissions personnel across all of the defendant schools."
EDMC's attorneys wrote that the company gave investigators data on recruiter compensation before the U.S. Department of Justice intervened in the case brought originally by two former employees of the firm.
"Those data thus demonstrate the absence of any company-wide scheme to calculate salaries 'solely' based upon enrollments," the attorneys wrote. "In fact, Plaintiffs have not identified any employee whose compensation was actually set solely on the basis of the number of student enrollments nor any manager who set salaries of admissions personnel in that impermissible way."
EDMC's answer came more than a month after U.S. District Judge Terrence F. McVerry narrowed the claims against the company, saying that its compensation plan was not illegal as written. The judge opted not to dismiss the part of the case that claimed the plan was illegally implemented.
Last year the Department of Justice and five states joined the case filed by two former EDMC employees. Their lawsuit claims that recruiters' pay was based in reality on the number of students they enrolled, which is illegal.
That compensation plan, the plaintiffs have argued, caused recruiters to enroll students inappropriately and improperly brought $11 billion in federal student aid to EDMC since 2003.
EDMC has about 150,000 students in 109 schools nationwide.
First Published June 19, 2012 9:36 am