Texas For-Profit College to Pay As Much As $2.5 Million to Resolve False Claims Act Lawsuits

June 21, 2013 — When institutions of higher learning try to cheat the government by seeking federal funding for which the schools are not entitled, they hurt taxpayers, students and school employees. Administrators and recruiters may feel pressured to lie to the government about how many students they teach, or the qualifications of the students, or the percentage of federal funding the institution receives under the “90/10 Rule.” To encourage whistleblowers to notify the government of education fraud, the qui tam language of the federal False Claims Act allows tipsters to file suit on the government’s behalf keep a share of any recovery.

American Commercial Colleges Inc. Violated 90/10 Rule in Connection With Federal Financial Aid Packages

American Commercial Colleges Inc. (ACC) has consented to a settlement of up to $2.5 million to resolve two False Claims Act lawsuits filed by whistleblowers alleging that the for-profit educator falsely certified that it complied with the 90/10 Rule governing eligibility for federal student aid. To take part in federal student aid programs under Title IV of the Higher Education Act of 1965, for-profit colleges are not permitted to receive more than ninety percent of their yearly income from Title IV student aid programs. A minimum of ten percent of a for-profit school’s revenue must be derived from tuition paid by students using their own resources or relying on private loans.

ACC is a privately-owned for-profit college with many campuses in Texas. In this case, Juan Delgado and Shawn Clark, former directors of ACC’s Abilene and Odessa campuses, alleged in a whistleblower lawsuit that ACC violated the False Claims Act by arranging for students to receive short term private loans that ACC then repaid with federal funds from Title IV funds to make it appear that ACC received a higher percentage of private funding than it actually did. The students themselves did not seek out the additional loans. Instead, ACC allegedly contrived the short-term-loan operation solely to better the school’s position for purposes of the 90/10 Rule.

To settle the whistleblower suit, ACC will pay $1 million, plus interest, over a five year period. ACC could be required to pay an additional $1.5 million. The whistleblowers, Delgado and Clark, will keep $170,000 of the $1 million settlement and could receive $255,000 more should ACC be obligated to pay the additional $1.5 million settlement in the future.

Institution Insiders Use False Claims Act to Fight Education Fraud

Educational institution insiders are usually the best positioned to unearth educational fraud and notify the government. School administrators, educators, recruiters or accounting personnel may be given financial incentives to defraud the government, or simply be told to do so without any inducement other than continued employment. While Waters & Kraus is not handling this particular case, we are handling similar cases. If you have similar claims against a different for-profit college or technical institute, contact us or call our attorneys at 855.784.0268.

Informants should learn their rights. The whistleblower attorneys at Waters & Kraus have long experience in representing government collaborators. Contact us by email or call our qui tam lawyers at 855.784.0268 to discuss our educational fraud practice and how we can protect your interests.

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