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Justice Dept. accuses college of breaking law

The complaint alleges student enrollment was the sole focus of its compensation system.

The Obama administration and four states are accusing a private for-profit college corporation of illegally paying recruiters to enroll students, the latest action in an examination of the industry’s recruitment techniques and an allegation the company called “flat-out wrong.”

The Justice Department and attorneys general of California, Illinois, Florida and Indiana on Monday intervened in a whistleblower suit against Pittsburgh-based Education Management Corp. Their complaint says the company broke a 1992 law prohibiting for-profit colleges from paying recruiters incentive compensation.

The law was passed to stop overly aggressive sales procedures.

This is the first time the federal government has intervened in a suit alleging a violation of the ban. The suit originally was brought in 2007 by former Education Management workers Michael Mahoney and Lynntoya Washington.

The governments’ complaint says the company, which offers classes online and at 105 locations in 32 states and Canada, repeatedly made false statements to conceal its practices and receive $11 billion in federal and state financial aid.

The complaint alleges student enrollment was the sole focus of its compensation system and that the company had recruiters use high-pressure sales techniques such as playing on an applicant’s psychological vulnerabilities and inflating claims of career placement opportunities to enroll students regardless of ability.

A statement issued by Education Management says federal regulations issued in 2002 allow companies to consider enrollment in compensating admissions officers as long as it isn’t the sole factor considered. The statement says the company’s plan required consideration of five “quality factors” along with enrollment numbers to determine salary.

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