Employees who survived layoffs the past several months at for-profit educator Education Management Corporation got some mixed news this week: The Pittsburgh-based company hopes to avoid further layoffs … but is freezing wages in order to do so.

Word of the wage freeze came down Tuesday, in an email sent on behalf of EDMC management. The email, sent to City Paper from multiple sources, says the management committee “made the decision to suspend merit pay increases for fiscal year 2013” which starts July 1 of this year and ends June 30, 2013. (Employees will still have annual employee evaluations.)

The wage freeze, the email says, is happening “only after carefully reviewing and implementing a number of other measures to ensure that we are operating as efficiently as possible.” The email says the company “understands the news is disappointing to us all,” but hopes “most will understand that it is necessary in order to preserve the long-term strength and health of our company.”

EDMC’s health has been beset by numerous problems. Enrollment has lagged, and the company is fighting a U.S. Department of Justice lawsuit over the company’s student recruiting practices. If EDMC loses the case, it might have to repay billions of dollars in federal financial aid given to its students. EDMC is also contending with legislation being pushing by Illinois Sen. Dick Durbin, to limit the amount that for-profit educators can earn from veterans via the G.I. Bill.

Such problems seem to be taking a toll. Despite a stock buyback and hundreds of layoffs in January and after, EDMC’s stock has fallen from $30 at the beginning of the year, to around $6.50 as of this morning.

“An important part of maintaining this commitment in the current economic environment is ensuring that the cost of education for our students remains manageable,” the email reads. “In order to accomplish that goal, we’re working to keep tuition as close to current levels as possible.

“In the past year we have also taken a number of steps to eliminate as much expense as possible across the company … to minimize actions that further reduce our employee base. We will continue those efforts in the coming fiscal year.”

While it appears the wage freeze will be system-wide, the e-mail did not indicate whether top executives and board members — many of whom are tied to Wall Street giant Goldman Sachs — will be sharing the pain. (Last year CEO Todd Nelson, for example, received a base salary of $630,000 and stock-option bonuses worth $11.5 million.) The company will report details of its executive compensation in its annual report, due at the end of August.

This article appears in Jun 27 – Jul 3, 2012.

17 replies on “EDMC to employees: No layoffs, but no raises either”

  2. I guess they’re running out of suckers to scam in spite of all of the empty promises they’re giving at Deviant Art, late night commercials, etc.

  4. They just laid off 70 people June 8th. They will have more layoffs by the end of the year unless the lawsuit goes away.

  5. I don’t understand why they are laying people off, when they are posting open positions for employment all over job boards. I guess that’s what a shady business does.

  6. yeah, it’s like a kingdom here, people gettin laid off, lawsuits, negative press….last year CEO Nelson took about a 240% increase in total compensation to go from $1.3 MILLION to over $13 MILLION in 2011! Edward West took about a 250% total comp increase to go from $1.4 MILLION to OVER $5 MILLION!!! I wont be gettin my 2% increase this year, plus I’d have to work 100 years here to get what they got in ONE year! Long live the kings!

  7. They are cutting back to make sure that the cost of schooling remains affordable for students? What a joke! it was never affordable to begin with!

  8. There is a reasonable chance that the DOJ lawsuit will fail as it is presently filed. However the other lawsuits on behalf of state pension funds are likely to succeed. In the process the deep underside of this company has revealed an organization that is, at best, disdainful. Much of what is being observed is in fact criminal and it is looking more likely by the day that criminal investigations will follow Todd Nelson and John McKernan for a long time to come. It is unlikely that the fraternal relationship that Nelson has with Romney and the investment by Goldman will do more than delay the inevitable. In the end, a bad investment is a bad investment. A diploma mill is a diploma mill and is never an education. A criminal is an officer or an employee of EDMC.

  9. EDMC should have known what they were getting when they hired Todd Nelson to run their organization, especially since he used the same tactics at the Apollo Group (parent of University of Phoenix), but was able to get away with it due to a much more lax regulatory environment in the past that basically enabled organizations like this to prey on uninformed consumers. Nevertheless, he was able to walk away with a good severance package in the past, but it will be interesting to see if the legal troubles EDMC is now facing will also lead to legal actions against their current leaders.

  10. That Todd Nelson and John McKernan are not more than Snakes In Suits is hardly new.

    Apollo is not at all shy about admitting that they hired Nelson to boost stock, They regret the move. They fired him because he knew nothing about education, and like to brag about it.

    Apollo settled a lawsuit that charged Nelson with promoting LDS (Mormons) over other employees. They have made no secret that they were shamed by his actions.

    Todd Nelson and Mitt Romney funded the great Utah scam Full Sail University. Full Sail has been the target of criminal investigations by the DOJ.

    Todd Nelsons’ wife, Amy, has given sums as great as $50,000.00 to the Romney Campaign through a P.O. Box in Utah.

    Please get it in focus here. If this is just a taste of what is uncontested and in the popular business press, then EDMC knew exactly what it was doing when it hired Nelson. They have had plenty of time to observe him. They must like if not love him. Get it in focus, Hare is right, Snakes in Suits slither together.

    Todd, Mitt, John, and Olympia, and now Amy are now all grotesque companions. Kozlowski of Tyco could not have given a better show, perhaps when he is paroled in 2014 (favored by Mitt) he can come to the party: better yet, maybe they will loan him some Title IV money to take courses from Lincoln Correctional.

    Lets Face it EDMC Aviation is on a par with Kozloski’s debauchery. Jet fuel from Salt Lake City to Boston has got to be a bear.

  11. The Stock is at $5.20 right now. More importantly there are regional accreditation issues that have been raised.

    Accreditation issues involve the many lawsuits such as the lawsuit in Texas where the Julie Johnson law firm successfully sued EDMC for defrauding applicants and students. The students were told that their psychology degrees would be accredited by the American Psychological Association (APA). The APA in an article in its “Monitor” (June, 2012) made it clear that the EDMC style schooling was of no interest the psychological profession and would not be considered for accreditation. The Julie Johnson firm is searching for other people who have been abused by this company.

    Other regional accreditation issues range from the obvious fraudulent education to some very technical economic and demographic factors. The first concern is that adjunct faculty have been found to have academic deficiencies ranging from no credentials (no kidding, Dr. LaVerne Boone did not have degree one when teaching at the graduate level in Argosy University) to the very common practice of a person with an actual degree teaching in courses for which h/she had no training nor exposure.

    Some programs such as the masters of forensic psychology and the doctorate in leadership have multiple issues. The degrees are not relevant to the job market and the curriculum is frequently not consistent with training of employed persons in those fields. For instance, the evidence, trauma, ethics, and multi cultural courses courses for the forensic psychology degree are antiquated and have been for nearly a decade. There are numerous courses where the curriculum was designed for a textbook not used by the school.

    So then comes the technical question–just where are all of these graduates and how did they get into graduate school without even having to matriculate nor pass entrance and graduate examinations? The answers are easy: they do not exist and anybody that can smoke a mirror can enroll in this school. Students have been reporting plagiarism to the regional accreditation offices for a decade, it now has caused the agencies to take notice.

    It is reasonably safe to assume that Todd Nelson will not be joining other reputable Pittsburgh names such as Carnegie, Mellon, Rockwell, Denny, and and Heinz. However Nelson and McKernan may soon be bargaining for protective isolation with the Federal corrections system.

  13. No one is getting raises so the people only making 33,000 are screwed but the big wigs that already make over 100,000 will be just fine. Why not save money and cut a lot of the higher paid people’s wages, especially since they are just running the school into the freakin ground anyway? Why should they get paid more? Morons…

  15. Given that they just announced another round of layoffs today Thursday 8.23.12, the old “low water mark” has yet to be reached. The public statement read that the layoffs will keep tuition costs down. EDMC tuition is 400% of a competitive state school education. Of course most competitive school executives are not taking home $40 million per year.

    Somebody else bogged here that morale in general at EDMC is so bad that even the HR people no longer care. These statements from Jacquelyn Muller have been so juvenile and defensive for so long that it is very possible that the place just goes through the mechanics of public relations. Ten years ago I thought that Todd Nelson and crew were just liars. Listening to their conference calls was good entertainment. Then I began to believe that Nelson and crew actually thought that the American business community were stupid. However as Meredith Whitney has said of the likes of EDMCs’ board and executives, before 2008 we knew they were evil. Now we know that they are also stupid!

    It is very possible that these bottom feeders actually believe that by cutting a few hundred thousand dollars in salaries they can actually lower the $300/400 per hour tuition that they charge 122,000 students. They are for certain very stupid to make announcements containing explanations that not even one of their students would believe.

    Seriously there is not an ounce of honor in any of them. They will lay off workers whose families likely depend on that income. They are laying these workers off because they created a legal and ethical nightmare that will take the American economy and education system decades to recoup. These are not the heroes of industry who take pay cuts–these are the cutthroats of industry who will throw any employee under the bus, hurt the employees’ family and community, leave the employee with a job history that may actually hurt the employee, embarrass the country, rob taxpayers, then fly out to Salt Lake City on a corporate jet to make a quiet but enormous political donation to the candidates most likely to perpetuate a corrupt business environment.

  16. Olympia Madoff Nelson,

    Your response is completely accurate. I am one of those whose life they literally distroyed.

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