Colleges and universities that use unsavory recruiting practices may be subject to liability under the False Claims Act, a federal law that rewards whistleblowers for alerting the government to misconduct involving federal funds. In particular, the incentive compensation ban, which applies to institutions of higher education that receive federal student aid, prohibits payment of compensation to recruiters or admissions employees based on their successes in securing either enrollments or student aid awards.
If you have inside knowledge about college recruitment fraud through your employment at a college, university, or recruiter, filing a lawsuit under the False Claims Act can put an end to the misconduct and enable you to claim a whistleblower reward. Newman & Shapiro has experience with how these lawsuits work and can help you take action. Contact us today for a confidential, free consultation.
A Brief History Of College Recruitment Fraud
Since 1992, Congress has banned schools participating in federal student aid programs from paying commissions, bonuses, or other incentive payments to individuals based on their success in enrolling students or securing financial aid for them. Congress instituted this ban to eliminate abusive recruiting practices in which schools enrolled unqualified students who then received federal student aid funds.
To qualify for federal funding, including participation in student loan programs, schools sign contracts with the U.S. Department of Education. In so doing, they agree to comply with the ban on incentive-based pay for recruiters. The ban applies to all schools, including schools outside of the United States, that have contracted with the Department of Education and enroll students who received federal financial aid.
Schools and recruiters that violate the incentive compensation ban may be causing the submission of false claims to the government and thus subject to liability under the False Claims Act. That law enables whistleblowers to file complaints against higher education institutions engaged in fraudulent recruiting practices and to receive a percentage of any recovery.
In 2015, for example, Education Management Corporation (EDMC), then the second-largest for-profit education company in the country, agreed to pay $95.5 million to resolve whistleblower allegations that it was running a high pressure sales business and paid its recruiters based only on the number of students they enrolled. Approximately 90% of the tuition money that EDMC collected came from federal student aid.
More recently, in 2019, North Greenville University (NGU), based in Greenville, South Carolina, paid $2.5 million to resolve allegations that it hired Joined Inc., a company partially owned by NGU, to recruit students to NGU and compensated Joined based on the number of students who enrolled in NGU’s programs. Similarly, in 2020, San Diego Christian College (SDCC) paid $225,000 to resolve allegations that it compensated Joined with a share of the tuition that SDCC received from the enrollment of recruited students.
Filing A Lawsuit Under The False Claims Act
During the past decade, whistleblowers have brought over a dozen False Claims Act lawsuits against for-profit colleges and other institutions that allegedly violated the incentive compensation ban. Whistleblowers file what are called qui tam lawsuits on behalf of the federal government based on material inside information they have about misuse of federal funding. The law also protects whistleblowers from workplace retaliation, such as termination.
Whistleblowers are entitled to between 15 and 30 percent of any funds the government recovers as a result of a whistleblower complaint.
If you have information about college recruitment activity that may be defrauding the government, please contact us for a confidential consultation. We will review the evidence you have and, if you are eligible, work with you to file a compelling qui tam lawsuit.