PITTSBURGH (AP) — Education Management Corp. said Friday that the chairman of its board will step down next month and be replaced by the for-profit education company's chief executive. Its chief financial officer, in turn, will become its new CEO.
The news sent the company's shares up almost 8 percent in afternoon trading.
John McKernan Jr., who has been the company's chairman since 2006 and its CEO from 2003 to 2007, will remain a member of the board.
Todd Nelson, 53, Education Management's CEO since 2007, becomes chairman, while Edward West, 46, the company's president and chief financial officer, becomes CEO. West has served as chief financial officer since 2006 and added the title of president in 2008, the company said.
Randall Killeen, 50, the company's vice president and controller, will serve as acting chief financial officer.
McKernan said in a statement that the company "has long planned for this potential succession." The changes are effective Aug 15.
Its shares rose 29 cents, or 7.5 percent, to $4.07 in afternoon trading. Its shares have dropped 86 percent from a high of $29.90 in late December. Its shares traded as low as $3.72 on Thursday,
Education Management, based in Pittsburgh, runs more than 100 higher-education programs across the country, offering diplomas and degrees in fashion, culinary arts, business and other fields, some through online courses. Many of its 100,000 yearly students are non-traditional — working adults, single parents and low-income and minority students.
The appointments come as the company faces a whistle-blower lawsuit accusing it of using improper sales tactics to lure unqualified students and the billions of dollars in financial aid they bring.
The lawsuit alleges the company paid recruiters billions of dollars in illegal incentives to sign up students. It was filed in 2007 by two former employees but had remained sealed and unknown to the public until the U.S. Justice Department and the attorneys general of four states intervened to join the lawsuit last year.
Last month, the company filed an 83-page response with the court contending that it gave statistics and other data to the Justice Department, even before the government intervened in the lawsuit, that disprove the illegal recruitment allegations.
The company said that data shows there wasn't a company-wide scheme to calculate salaries solely based upon enrollments.