College: State's Lawsuit 'Flat-Out Wrong'

State Says Brown Mackie Received Financial Aid Illegally

A college being sued by the state over millions in questionable financial aid is defending its practices.

The attorney general's office claims Brown Mackie College illegally received financial aid on behalf of students who weren't eligible, adding up to about $12 million since 2003 in Indiana alone.

Indiana is among several states that have filed a federal lawsuit against the school, which has 27 branches in all, including six in Indiana -- Fort Wayne, Indianapolis, Merrillville, Michigan City and South Bend, as well as The Art Institute of Indianapolis.

The lawsuit alleges the college violated a federal law that bans incentive compensation for college admissions employees based on the number of students they enroll.

According to the lawsuit, the college offered recruiters trips to Mexico and Las Vegas for bringing in the most students.

A current employee, who asked to remain anonymous, told 6News' Rafael Sanchez the college's recruitment practices are still questionable.

"The whole idea is to get as many bodies in to start classes as possible so that they can be charged so that the school can reap the benefits of those charges," the employee said. "When you are working under a quota you're doing whatever you can get to get the students into the school. I mean, under any circumstances."

The suit was filed in federal court in Pittsburgh, where Brown Mackie's parent company, the for-profit Education Management Corporation, is based.

In a statement, the company said the basis of the lawsuit is "flat-out wrong."

"Federal regulations issued in 2002 permitted companies to consider enrollments in admission officer compensation, so long as enrollments were not the sole factor considered," the statement read. "To ensure compliance with this regulation, EDMC worked closely with outside experts in both human resources and education law to develop a plan that required consideration of five quality factors, along with enrollment numbers, to determine salaries."

In June 2010, the company reported that it received $2 billion in financial aid for all of its students nationwide, which accounted for 89 percent of its net revenue.

The attorney general's office said the state is relying on inside information from a whistle-blower to make its case against Brown Mackie.

Despite the allegations against Brown Mackie, the state will still issue financial aid to students this year.

Other states involved in the lawsuit are Florida, California and Illinois.

More Information: Education Management Corporation's Statement