Education Management Corp. CEO West resigns
The departure of Edward West as CEO of Education Management Corp. marks the end of a tumultuous three years at the helm and completes an overhaul of the Downtown company's board as it searches for direction amid upheaval in the for-profit education industry.
West, 49, will step down Aug. 28 “to pursue other interests,” EDMC said Friday. His resignation leaves the company without a chief executive while it struggles with declining enrollment and intense regulatory scrutiny.
“I leave EDMC confident that we have made great strides in our efforts to focus on student outcomes, improve retention and lower the cost of education,” West said in a statement. “It has truly been an honor to represent our 20,000 employees as we provide an exceptional educational experience to over 100,000 students.”
West was not available for interviews, EDMC spokesman Chris Hardman said. He could not be reached at his home in Sewickley Heights.
West joined EDMC nine years ago as its chief financial officer. When he took over as CEO in 2012, he inherited a company with significant challenges.
The recession hurt enrollment across the for-profit college industry, which had heightened scrutiny from federal regulators over allegations of deceptive recruiting practices and a failure to adequately prepare students for jobs while leaving them with hefty student loan debt.
“He was dealt an extraordinarily difficult hand,” said Bradley Safalow, an analyst at the Atlanta investment advisory firm PAA Research. “A lot of the issues surrounding the company were put in place before he took over.”
West leaves four months after a change in ownership at EDMC when creditors took control of the company in exchange for wiping out $1.3 billion in debt. That debt restructuring deal was accompanied by eight of 11 board directors stepping down.
He was the only member on EDMC's five-person board whose tenure extended past a year. Board members Mark McEachen and Kermit Cook were nominated by preferred shareholders shortly before the debt restructuring deal was complete.
McEachen, the chairman, praised West's leadership.
“Through his hard work, Ed leaves a more focused and outcomes-oriented EDMC, with a new board of directors and an infrastructure that will allow our institutions to better serve students,” McEachen said.
EDMC never was profitable during West's tenure as CEO. Three consecutive annual losses include $664 million in 2014.The company faces potentially billions of dollars in penalties from federal lawsuits over its recruiting practices.
Enrollment in EDMC's four college brands — The Art Institutes, Argosy University, Brown Mackie College and South University — declined 29 percent since 2010 to 112,430.
In response, EDMC slashed its workforce and closed schools. In June, it cut 300 jobs, including 70 in Pittsburgh. That was on top of the 1,200 that will be shed in the coming years from the closure of 15 Art Institutes schools.
West collected $3.5 million in total compensation in fiscal year 2014, a decline of 41 percent from the year before, mostly on the lower value of his stock options.
Fourteen states, including Pennsylvania, are investigating EDMC's business practices. A federal lawsuit, filed in 2007 and joined by the Justice Department in 2011, by two former employees accuses the company of paying recruiters based on the number of students they enrolled, a violation of federal law. The case is ongoing.
Meanwhile, regulators raised standards. Department of Education rules that went into effect last month require for-profit colleges to prepare students better for “gainful employment” or risk losing federal funding for student loans. The rules are designed to address concerns about for-profit colleges saddling students with large debts for careers that don't pay enough to repay the loans.
The lawsuits and regulations add to the challenges at EDMC, but it is unlikely to share the same fate as its bankrupt competitor, Corinthian Colleges, Safalow said. The Education Department forced Corinthian to close or sell off its locations during the past year because of concerns about its high-interest loans and that it misled students. Regulators could be reluctant to do that again, he said.
Shutting down another school system would put the educations of more than 100,000 students in jeopardy and charge taxpayers with billions of dollars to cover college loan forgiveness programs. Under federal law, students can walk away from loan debt if their school closes.
“If EDMC files (for bankruptcy), it is an epic disaster for the Department of Education,” Safalow said. “These are huge numbers for the government and taxpayer to have to eat.”
EDMC has started a search for West's replacement, said Hardman, the EDMC spokesman. He declined to say whether candidates were being considered.
EDMC will be managed by a new five-person Office of the Chairman that includes McEachen, Cook, CFO Mick Beekhuizen, General Counsel Devitt Kramer and Senior Vice President of Human Resources Mark Novad.
Chris Fleisher is a staff writer for Trib Total Media. He can be reached at 412-320-7854 or email@example.com.