Pittsburgh-based Education Management Corporation has settled charges that recruiters for the for-profit education company were paid based on the number of students enrolled. The price tag with the federal government: $96 million.

Commission-based recruiting has been a chronic problem in the for-profit education industry, with "admissions counselors" often incentivized to convince students to enroll at schools because bonus compensation depended on it.  This phenomenon created the potential for schools to over promise and under deliver.

According to one report regarding EDMC's settlement announced in early January 2016, U.S. attorneys alleged that EDMC was running a "high pressure sales business" that "paid its recruiters based only on the number of students they enrolled." A majority of EDMC's multi-billion revenue since 2003 came from federal student loans and grants -- in other words, taxpayers. 

EDMC's schools have included the Art Institutes, South University, Argosy University and Brown-Mackie College.

In a press release, then-U.S. Department of Education Secretary Arne Duncan stated, "We will not stand by while you profit illegally off of students and taxpayers."
Education Management Corp., the Pittsburgh-based for-profit education giant with more than 100 campuses around the country, is undergoing major structural change.

EDMC operates around 110 schools in more than than 30 states, including The Art Institutes, Argosy University, Brown Mackie College and South University.

Eight members of the company's 11-person board of directors have resigned as the company repositions itself by cutting debt in the wake of financial losses and federal regulation, according to news reports.   EDMC's president and chief executive officer Edward West will remain on the company's smaller board.  

According to the Associated Press, "The company is now privately held and two of its new board members announced Tuesday are John Danielson, chairman and managing director of the Chartwell Hamilton Group LLC, a New York-based educational consulting firm; and Johnathan Harber, the founder of Schoolnet Inc., a firm that develops online learning solutions and helps schools implement learning standards, including Common Core."

The AP noted that  the changes come at a time when the company has lost $684 million during the last year "and could face penalties from the federal government based on the alleged recruiting violations as well as a class-action suit by investors filed in U.S. District Court in Pittsburgh in September."

"The company is still attempting to settle U.S. Justice Department litigation accusing it of illegally using enrollment incentives to pay its recruiters, and Tuesday's moves are believed to be part of an overall effort to solve the company's regulatory, legal and financial troubles," the AP said.