By Charlie Deitch
Pittsburgh Current Editor
I’ve written about the problems with for-profit education companies for the past 12 years or so. My stories in one way or another focused on the high costs, broken promises and shady recruiting tactics by one of these companies, EDMC.
EDMC, located in Pittsburgh, owned the Art Institute and several other colleges across the country. They made their living mostly by getting kids with few other educational options to apply for massive student loans to train for a job that would never allow them to repay the loans and make a decent living. But while the students typically got the shaft — high dropout rates, degrees that didn’t lead to jobs, loans they could never repay — the folks at the top of the food chain, the ones who were making the rules at one time or another made out like bandits.
At one time, EDMC’s stock price neared $50 and it was owned partially by investment-banking behemoth, Goldman Sachs. At one-time in the mid-aughts, EDMC was making more than $1.2 billion in revenues. By 2010, it had more than $400 million in cash lying around on its balance sheet. But rather than investing it that back into the schools, the board decided to spend a lot of that money — more than $290 million — buying back its own stock as it began announcing its first of what would be several rounds of layoffs.
When it sold the company to the nonprofit Dream Center in 2015, the stock was worthless. Then, last week, the Dream Center closed Pittsburgh’s Art Institute and 2,200 students and a few hundred employees lost their jobs. But that didn’t mean the school didn’t help people make a better life for themselves and their families. Unfortunately, not many of those people were actual students or employees. Here’s a look at the former company’s top four success stories.
Todd S. Nelson, former CEO, EDMC
Summa Cum Laude
Nelson is the top of the heap of former EDMC “leaders” who rode the sinking ship to big salaries and bonuses. Nelson came to EDMC in 2007 and almost immediately took the company public. It was the beginning of high profits for the company and lucrative pay for executives and shareholders. Unfortunately, it was also the beginning of the end of EDMC and the Art Institute of Pittsburgh. Nelson came to Pittsburgh after 20 years at the parent company of the University of Phoenix, the largest for-profit education company in the country. In 2004, he made $40 million in total compensation at Apollo. He was consistently on Forbes list of the country’s 25 best-paid executives. While there, however, the school was the subject of lawsuits over a Department of Education report that criticized the school’s recruitment tactics. The government got involved and brought suit against the company which was eventually settled for $9.8 million, a record at the time. However, Nelson was sued individually along with the school. He was later found to be 30 percent culpable for the recruitment tactics in the lawsuit that brought a $280 million award. During his time at EDMC, the company was again dogged by claims of illegal recruitment tactics. By 2015, Nelson was gone from the company and EDMC agreed to pay a total of $200 million to settle the charges and forgive $102 million in student debt. But at that point, the damage was done. Nelson made millions during his time at EDMC, including an annual best of $13.1 million. That’s probably why, despite apparently being bad for education, Nelson is still good for business. Since 2015, he has been the CEO of Career Education Corp. making annual total compensation of between $4-5 million per year.
John McKernan, former CEO, EDMC
Magna Cum Laude
“Jock” McKernan, as he likes to be called, was the CEO of EDMC from 2003-2007 and was involved with the company in some manner between 1999 and 2015. This former governor of Maine (1987-1995), certainly managed to see his share of cashola from the school because he was there when fat-cat investors from Goldman Sachs came in and bought a giant chunk of the company. As a result of that merger, McKernan, who is married to former U.S. Sen. Olympia Snowe of Maine, turned his 603,525 shares of unrestricted stock into more than $14.1 million. His 42,500 shares of restricted stock was cashed in for $1.8 million. Now, before you go running around claiming that good ole’ Jock didn’t deserve his money, look what else he did for EDMC. According to a brilliant three-month investigative project by the Maine Sunday Telegram in 2016, McKernan also ran a non-profit arm of EDMC out of his offices in Portland Maine. The paper reported that from 2003-2012, the EDMC Foundation was run and staffed by former aides and employees of McKernan and Snowe. Essentially, the paper claimed that the foundation’s sole purpose was to provide scholarships for EDMC students. It was granted non-profit status by the IRS, but in the preceding months, the majority of the governing board was made up by EDMC’s investors, directors and employees. According to the paper, “Experts say this arrangement was troubling, as charitable nonprofits are not supposed to primarily benefit a for-profit entity, especially one whose officials set up and controlled the foundation in question.”
Ed West, former CEO, EDMC
Joining the company in 2006, West was Nelson’s right-hand man and Chief Financial officer. He also took over as CEO in 2012 when the company’s stock went into freefall. But not to worry, if EDMC taught us nothing, it’s that bad stock prices rarely get in the way compensation. He resigned as head of EDMC in August 2015. By December of that year, he was named Chief Operating Officer of a company called Cardtronics, which makes ATM machines. Between 2009 and 2013, West’s total compensation at EDMC (which includes cash and stock options) was $23.5 million.
Mark McEachen, Final CEO of EDMC
Most likely to step in dog crap and come out smelling like a rose
Although he just gets an honorable mention here, McEachen may be pound-for-pound the top of the class. When EDMC sold what was left of the company to Dream Center, settled its lawsuit brought by the United States Government and declared bankruptcy, McEachen was in charge. Aside from his salary, McEachen left his post with a hefty $14 million in bonuses and severance pay.