Fall and a rotten economy have people looking at school again. Go to any major US city and you’ll notice signs advertising its local Art Institute, a post-secondary vocational school that teaches art and design, culinary, fashion and media arts. All 50 schools are part of The Art Institutes, run by Education Management Corporation (EDMC) and 40% owned by Goldman Sachs. It was a $3.4 billion transaction in 2006, at $43 per share. With the transition came a new CEO: Todd S. Nelson, former chief executive of the University of Phoenix, the nation’s largest for-profit college.
Now students at the Art Institute in Fort Lauderdale have launched a nationwide petition against EDMC (and Goldman Sachs) as the corporation continues to lay off instructors. The petition cites salary discrepancies between faculty and administration. (Former CEO Nelson – he’s now Chairman of the Board – took home $13.1 million in 2011.) What the petition doesn’t note is the current lawsuit against EDMC, which claims that it aggressively recruited unqualified students for a share of their federal student aid. While at Phoenix, Nelson signed a $9.8 million settlement with the Department of Education and paid the whistle-blower an additional $78 million. The suit contended Phoenix had “systematically and intentionally” broken the federal rules against paying recruiters for students. As of June 2010, EDMC had received more than $2.2 billion in federal student aid, 89% of its net revenue.
