EDUCATION MANAGEMENT CORPORATION
Education Management Corporation (“EDMC”) was founded in 1962. EDMC was publicly traded from 1996 until 2006, when the company was purchased for nearly $3.5 billion by two private equity rms and Goldman Sachs. In 2009 EDMC once again became publicly traded until it delisted from the Nasdaq in 2014. EDMC operates multiple brands, including the Art Institutes, Argosy University, Brown Mackie College, and South University, enrolling more than 110,000 students online and at more than 100 campuses with multiple accreditors including the Accrediting Council for Independent Colleges and Schools.
Corporate Instability
Following an October 8, 2014 notice from Nasdaq that EDMC was not in compliance with rules requiring timely ling of reports with the Securities and Exchange Commission,45 EDMC announced that it would voluntarily delist from Nasdaq on October 23, 2014.46 This followed three straight years of losses that totaled more than $2.3 billion. In January 2015, Moody’s credit rating service dropped EDMC to its lowest rating, as it reached junk bond status.
After years of failing to post any pro ts and numerous government investigations, Edward West resigned as Chief Executive Of cer in August 2015,48 followed by Mick Beekhuizen resigning as Chief Financial Of cer in January 2016.
Revenue and Stock Value
EDMC’s corporate lings show that its net revenue for the nal quarter of 2014 had fallen fteen percent to $503 million, compared to $595 million the year before.50 Its stock was valued at $0.07 a share on March 8, 2016, down 99.6 percent from five years earlier.
Investigations and Allegations
EDMC settled in 2013 with the Colorado Attorney General for $3.3 million for deceiving students about their job prospects.
In recent years, EDMC has faced multiple accreditation issues. The Art Institute of Colorado was placed “on notice” from July 2013 until June 2015, and three programs offered at The Art Institute of Fort Lauderdale, Brown Mackie College - Louisville, and South University have been placed on probation by their programmatic accreditors.
On November 16, 2015, EDMC entered a $95.5 million settlement with the Department
of Justice, twelve state attorneys general, and the District of Columbia that alleged the company ran a “high pressure boiler room” scheme for years that defrauded taxpayers out
of at least $11 billion in Title IV funding from 2003 to 2011.53 The size of the settlement was not a re ection of the seriousness of wrongdoing but rather the ability of EDMC to pay, as the government could have by law recovered three times the amount defrauded plus additional penalties.
REGULATING TOO-BIG-TO-FAIL EDUCATION
The same day as that settlement agreement, EDMC agreed, in a separate settlement with 39 state attorneys general and the District of Columbia, to forgive $102.8 million in private loans it provided to students who dropped out shortly after enrolling. This second settlement closed state-level investigations into whether the company was advertising false job placement statistics.
In the second report of the Special Master for borrower defense, it was reported that borrowers had submitted 931 claims against the Art Institute, more than any other school not owned by Corinthian Colleges.
Taxpayer Support
For the 2014-2015 school year EDMC schools received $1.3 billion in Title IV funding. The percentage of its colleges’ net revenues derived from Title IV programs ranged from 55% to approximately 81% in scal 2014.
Department Oversight
All EDMC owned schools appear in heightened cash monitoring due to nancial responsi- bility issues. The Art Institute of Pittsburgh is the most recent EDMC owned school assigned a nancial composite score — it received a -1.0, the lowest possible score, for 2013.
EDMC currently has posted a letter of credit to the Department of $271,519,009 that expires on May 31, 2016. After reviewing EDMC’s 2015 audited financial statements, the Department noti ed EDMC that they would be require to post a letter of credit of 15%, totaling $240,616,147, to continue to participate in Title IV programs. That letter of credit would expire on May 31, 2017.