Education Management Corp. Under Investor Investigation

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Company Name(s): 
Education Management Corp.
Affected Securities: 

An investigation on behalf of current long term investors in Education Management Corp (NASDAQ:EDMC) concerning possible breaches of fiduciary duty and other violations of the law by certain officers and directors at Education Management Corporation was announced.

Education Management Corp., located in Pittsburgh, PA, is a provider of postsecondary education in North America, with approximately 96,000 active students as of October 2007. Education Management Corp.offers education through four different education systems, The Art Institutes, Argosy University, the Brown Mackie Colleges and South University. The investigation by a law firm concerns whether certain Education Management’s directors and officers damaged Education Management by causing or allowing it to engage in fraudulent, deceptive, or otherwise questionable marketing practices.

On August 4, 2010, the Senate Health, Education, Labor, and Pensions Committee conducted a hearing on for-profit education firms, where Government Accountability Office representative, George Kutz, presented the findings of report GAO-10-948T, "For-Profit Colleges: Undercover Testing Finds Colleges Encouraged Fraud in Deceptive and Questionable Marketing Practices." The report detailed undercover investigations into 15 for-profit schools that uncovered misconduct by school staff. According to this GAO study, the college personnel at schools owned by Education Management Corp. may have encouraged applicants to falsify their financial aid forms to qualify for federal aid and pressured applicants to sign a contract for enrollment prior to allowing them to speak to a financial advisor. During the U.S. Senate Health, Education, Labor, and Pensions Committee hearing, GAO representative George Kutz identified Argosy University as one of the schools subject to the investigation. As an apparent result of this report, so the investigation, Education Management's stock dropped to a fifty-two week low. Shares of Education Management Corp (NASDAQ:EDMC) traded recently at $12.71 per share, down from its 52weekHigh of $26.98 per share.

Education Management Corp was able to increase its Total Revenue in the last three years. Education Management Corp reported on June 30, 2007, for the past 12 months Total Revenue of $1.36369billion, on June 30, 2008, for the past 12 months $1.68416billion, and on June 30, 2009, for the past 12 months $2.01146billion. Its Net Income rose within the same time frame from $32.41million in 2007, to $65.99million in 2008, and $104.41million in 2009.