An article in the May 3, 2011 edition of The New York Times reports that "the Justice Department plans to intervene in a lawsuit charging that one of the nation's largest for-profit college companies, the Education Management Corporation, defrauded the government by illegally paying recruiters based on the number of students they enrolled."
Several states also plan to join was has come to be called the False Claims Act case, claiming that the company violated their state laws.
The case is noteworthy because, as the Times article goes on to report, this is the first time prosecutors have joined such a case.
A number of for-profit colleges stand to be affected by the case. The Art Institute, Argosy University, South University, and Brown Mackie College all are operated by Education Management Corp.
If past suits offer any indication, plaintiffs stand to gain a significant amount of money from the case. In 2009 Apollo Group Inc., best known as the parent company of University of Phoenix, paid $78.5 million to settle a similar case.
The case comes as one of the many actions taken by the U.S. Department of Education to reign in abuses by the for-profit sector. The most controversial regulation, the "gainful employment" rule, has yet to be instituted. If it is, those schools whose students have a high default rate would be denied federal funding. This would deal career colleges a severe financial blow from which they might never recover.