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Fraud*
According to the Collins English Dictionary 10th Edition fraud can be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".[1] In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science, to gain prestige rather than immediate monetary gain
*As defined in Wikipedia

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Monday, May 2, 2011

Goldman Sachs and For-Profit Education

In George W. Bush's eagerness to fulfill his ideals of smaller government and more privatization, he apparently went on a deregulation binge before he left the office of President. One result of his actions was the exemptions or "safe harbors" that were put in place that allowed incentive compensation for college recruiters.

As a result, the U.S. Justice Department in conjunction with a whistleblower have filed suit against Education Management Corp. (EDMC) which is 40 percent owned by Goldman Sachs. Wherever there is loose law or lax regulation, you will find Goldman Sachs making out like a bandit!

U. S. Joins Whistleblower Suit Against Education Management
By John Hechinger - Bloomberg

The U.S. Justice Department joined an employee whistleblower suit against Education Management Corp. (EDMC), intervening for the first time in the student recruitment practices at for-profit colleges.

The suit alleges that Pittsburgh-based Education Management, 40 percent owned by Goldman Sachs Group Inc. (GS) funds, illegally paid recruiters based on the number of students they enrolled, the company said in a Securities and Exchange Commission filing today. The government, in most cases, forbids such incentive compensation for colleges accepting federal aid because of concern the practice will encourage companies to enroll unqualified students.

The Justice Department action in federal court in Pittsburgh follows scrutiny by Congress and the U.S. Education Department of sales practices, student-loan defaults and job placement claims at for-profit colleges, which can receive as much as 90 percent of their revenue from federal financial aid. Several states intend to join the Justice Department’s civil action in federal court, Education Management said.

“The design of the compensation plan was based on advice of counsel that the plan complied with” exceptions to federal law banning incentive compensation,” the company said in its filing. “The company intends to vigorously defend itself.”

Shares Fall

Education Management, the second-largest U.S. operator of for-profit colleges, fell 66 cents, or 3.6 percent, to $17.89 at 10:50 a.m. in Nasdaq Stock Market composite trading.

The company, which enrolls more than 148,000 students, operates the Art Institute chain, Argosy University, Brown Mackie College and South University. Analysts project the company will report revenue of $2.89 billion in the year ending in June, according to the average of estimates compiled by Bloomberg News.

In whistleblower, or qui tam, lawsuits, private citizens file fraud complaints on behalf of the federal government. If the government joins a case, the whistleblower may get 15 percent to 25 percent of any money recovered.

Read the full article here

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