McKernan, Snowe cite frustration with federal lawsuit

Former Maine Governor John McKernan and his wife, Sen. Olympia Snowe, take a moment to speak with Maine Delegate Kathy Watson of Pittsfield at a luncheon for Republicans Committed to Higher Education in Minneapolis during the Republican National Convention in September 2008.
Caroline Bennett
Former Maine Governor John McKernan and his wife, Sen. Olympia Snowe, take a moment to speak with Maine Delegate Kathy Watson of Pittsfield at a luncheon for Republicans Committed to Higher Education in Minneapolis during the Republican National Convention in September 2008.
Posted Aug. 09, 2011, at 3:44 p.m.
Last modified Aug. 10, 2011, at 5:27 a.m.

Former Maine Gov. John McKernan on Tuesday denied allegations that the for-profit college corporation where he is board chairman broke federal laws when compensating its recruiters.

McKernan is chairman of the board and a former chief executive officer of the Pittsburgh-based Education Management Corp., which operates 105 schools in 32 states and Canada. He issued a statement Tuesday saying the company had taken extra steps to ensure it was in compliance with federal law.

“The government’s intervention in this case against EDMC ignores the fact that EDMC has gone to great lengths to ensure compliance with the law,” McKernan said. “As we have said before, EDMC engaged two law firms with expertise in education law to help design the company’s compensation plan to make sure it complied with the law.”

The Justice Department and four states on Monday intervened in a whistle-blower lawsuit against Education Management Corp. The suit alleges the company broke a 1992 law prohibiting for-profit colleges from paying recruiters incentive compensation.

McKernan’s wife, U.S. Sen. Olympia Snowe, was asked about the lawsuit during a walking tour of Saco. Snowe said her husband was frustrated by the lawsuit considering the lengths it went to comply with the law.

In his statement, McKernan described the safeguards that were put in place to ensure compliance.

“EDMC has been providing quality education to its students for more than 40 years and has long had a robust compliance program including procedures for employees to report violations of company policy. The company worked rigorously to ensure that the plan was properly implemented companywide, wrote and distributed detailed training manuals, and conducted training sessions on how to implement the compensation plan,” McKernan said. “It maintained an anonymous telephone hot line for employees to report policy violations, and required multiple layers of internal approval and sign-off for each employee compensation review. All of these efforts are consistent with the company’s commitment to full compliance with the law.”

Bonnie Campbell, an adviser and spokesperson for Education Management Corp.’s legal counsel, called the federal government’s pursuit of the action “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,” Campbell said in a statement. “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.”

According to the company’s website, McKernan served as executive chairman from February 2007 to December 2008 and chief executive officer from September 2003 until February 2007. McKernan joined the company in 1999. In March 2003, he became president and served in that office until September 2003.

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