If you have inside knowledge about college recruitment fraud through your employment at a college, university, or with a college recruiter, fling a lawsuit under the False Claims Act can put an end to such misconduct and enable you to claim a whistleblower reward. Newman & Shapiro understands how these lawsuits work and can help you take action.
In March 2019, dozens of prominent individuals were caught up in a nationwide college admissions scam. Parents, athletic coaches, and others engaged in extensive fraud and bribery to help students gain admission to elite universities such as Yale, Georgetown, Stanford, and Wake Forest. One major aspect of the scam involved parents paying substantial sums of money to college coaches and administrators to falsely designate them as student-athlete recruits.
The scandal drew national attention to college recruitment fraud, but unfortunately, it’s not the first time this has happened. Fraudulent recruitment practices allow colleges and universities to access taxpayer-funded education subsidies through students who never should have been admitted. This invites lawsuits under the False Claims Act, a federal statute which rewards whistleblowers for alerting the government to the wrongful conduct.
A Brief History Of College Recruitment Fraud
The Higher Education Act of 1965 (HEA) prohibits colleges, universities, and other higher-education institutions from paying bonuses to recruiters based on the number of students they enroll. The law was designed to prevent schools from recruiting students whether they are qualified or not just so the institution can receive student aid funds.
To qualify for federal funding, including participation in the student loan program, schools sign contracts with the U.S. Department of Education. In so doing, they agree to comply with the requirements of the HEA, including the ban on incentive-based pay for recruiters. Schools that violate their agreements and therefore receive federal funds are robbing taxpayers, and thereby run the risk of a False Claims Act (FCA) lawsuit. The FCA allows whistleblowers to file complaints against higher education institutions engaged in fraudulent recruiting practices which defraud taxpayers.
This is what happened in 2007 when two whistleblowers sounded the alarm over Education Management Corporation (EDMC), which formerly operated several for-profit higher education institutions. The company ran schools under the names The Art Institutes, Argosy University, Brown Mackie College, and South University.
A total of four whistleblower lawsuits were ultimately filed against EDMC. The federal government intervened in one of the lawsuits and alleged that EDMC had violated the HEA by paying recruiters based on their success in securing student enrollments.
The scam worked like this: EDMC operated a high-pressure incentive program to pay recruiters based purely on the number of students they enrolled. This was in violation of the HEA’s incentive compensation ban, which is designed in part to prevent colleges from enrolling students who have little success in graduating. The government accused EDMC of using “boiler room” tactics to access student aid through students who never should have been admitted. Approximately 90% of the tuition money that EDMC collected from 2003 to 2011 came from federal student aid.
In November 2015, EDMC agreed to pay $95.5 million to settle the illegal recruiting claims, among others. Although EDMC did not admit wrongdoing, the whistleblowers were allowed to share in a portion of the settlement proceeds. EDMC later filed for bankruptcy protection.
Filing A Lawsuit Under The False Claims Act
Over a dozen FCA lawsuits have been brought against for-profit colleges and other institutions in the last decade. Whistleblowers file what are called qui tam lawsuits on behalf of the federal government based on material inside information they have about fraudulent activities. These are activities, such as college recruitment fraud, that rip off taxpayers. The FCA also protects whistleblowers from workplace retaliation, such as termination.
Whistleblowers are entitled to between 15 and 30 percent of the funds successfully recovered by the federal government. Several factors will affect the actual amount of the reward. They include:
- Whether the government intervenes in the case (the reward is generally lower if the government intervenes)
- The quality of the information the whistleblower provides
- The degree to which the whistleblower and his or her counsel assist the government
The actual reward amount will be negotiated, and having an attorney for this process will make a difference in how much you can recover. Whistleblowers are also entitled to reasonable court costs and attorney’s fees to be paid by the defendant.
Am I Eligible To File Under The FCA?
If you have information about college recruitment activity that may be defrauding the government, there are some important requirements you should know.
First, the evidence you have must be non-public. If you learned about misconduct through a news report or a government investigation, it will not support a qui tam lawsuit under the FCA.
Second, the FCA is a first to file statute. This means that if someone else files a lawsuit using the same evidence you have, you will not be able to file another one. The FCA rewards whistleblowers who bring their claims first.
Finally, there are complicated requirements for actually filing FCA lawsuits. For example, the lawsuit has to be filed under seal in United States District Court, and supported by a written statement that details the evidence you have. There are procedural rules for serving the complaint as well. If you fail to file and serve your lawsuit as prescribed by the FCA, your lawsuit could be dismissed and you won’t be able to recover. For these reasons and more, having an experienced attorney is essential.
Contact Our College Recruitment Fraud Attorney Today
There are important time limitations to filing qui tam lawsuits under the False Claims Act. If you have inside information about college recruitment fraud and wish to receive a whistleblower reward, you need to contact Newman & Shapiro. We will review the evidence you have and, if you are eligible, work with you to file a qui tam lawsuit. Contact us today to schedule your confidential consultation.