Suit accuses for-profit college of cheating government

AIU strongly denies the accusations.

“We are proud of the educational opportunities we provide to our students,” Mark Spencer, communications director for AIU’s parent, Career Education Corp., said in a statement. “We believe the allegations contained in the lawsuit are simply wrong both factually and legally, and we have asked the court to dismiss the case in its entirety.”

Atlanta attorney Joseph Wargo, who represents the former AIU employees, said his legal team has assembled “a very clear case of the government being cheated.” The suit seeks to recover between $300 million and $500 million in damages, he said.

The case is now at an important juncture: U.S. District Judge Richard Story must decide whether it can proceed to trial.

AIU, founded in 1970, operates one metro location in the Dunwoody area.

The lawsuit alleges that between 2005 and 2009 AIU orchestrated a fraudulent scheme to obtain more than $1.7 billion in federal funding. It targeted “an unsophisticated demographic of households” by running TV ads on shows like “Jerry Springer” to obtain enrollments from students who needed federal loans, the motion said.

To carry out the scheme, AIU had to fool SACS, the motion said. Federal financial aid is available only to students at accredited institutions.

In 2004, SACS became dissatisfied because AIU was putting more of a priority on enrollment than retaining the students it had, the motion said. The following year, SACS placed AIU on a one-year probation after learning the university forced its admissions advisers to achieve daily and weekly enrollment quotas, the motion said.

In 2006, SACS extended AIU’s probation another year. Because students who attend institutions that are on probation for more than two years cannot receive federal tuition aid, this put AIU at grave risk of losing its revenue stream, the motion said.

AIU did all it could to keep SACS in the dark about its aggressive recruiting tactics during the accrediting agency’s investigation and the two years AIU was on probation, the motion said. It said AIU kept two sets of documents it used to interview and hire admissions advisers — one to show to SACS and another to use in actual practice. Employees were also instructed to remove documents from personnel files so there would be no evidence the admissions employees had sales backgrounds, the motion said.

“Thus, AIU chose to tell SACS what it wanted to hear — in other words — to lie, while keeping its core business plan of aggressive sales tactics intact,” the motion said.

AIU, in court filings, called these allegations “wildly false.” Accusations that AIU hid information about its admissions advisers from SACS are “absurd,” and AIU never lied to SACS about its employees’ backgrounds, its motion said.

SACS did not suspect anything was amiss with AIU’s record keeping, SACS President Belle Wheelan said. With the documents AIU shared, “we had no reason to believe they were anything other than what they presented to us.”

AIU withdrew from SACS in 2009 in order to be accredited by the North Central Higher Learning Commission, a SACS spokeswoman said.

Nationwide, more than a dozen state attorneys general have begun investigations into recruitment practices, graduate certification and student lending activities at several other for-profit colleges, including Career Education Corporation, which operates AIU.