Florida Education Fraud Lawyer
What is Considered Education Fraud?
Each year the government and the states spends billions of dollars on education. Some of this money comes in the form of direct subsidies and some comes in the form of government backed loans. Education is not just big business for charter schools and for profit colleges; even purportedly reputable institutions are establishing new kinds of degree programs which are often no more than income generators.
Many of these institutors know that with government backed loans, they can attract students who will not be thinking about the day that he loan will come due. For unwitting borrowers, the day of reckoning comes when the loan is due but – in contrast to yesteryear when education was a solid investment — the return on the newer educational products that are being foisted on the market is not enough to cover the loan.
Students, faculty, and administrators could keep their eyes open for the following:
- Compensating individuals or entities who recruit students
- Low graduation rates
- Low placement or broken promises about placement
- More than 90 percent dependence on government loans for revenue
- Misrepresentations as to the educational offerings and the quality of the programs
The U.S. Department of Education (“DOE”) provides billions of dollars in funding to help students participate in education at public, charter, private non-profit, and private for-profit schools. Education fraud occurs when government dollars have been fraudulently obtained or used in the education sector. In order to receive government funding schools and students must meet and adhere to certain criteria and federally regulated standards. When schools or school employees violate the Higher Education Act (HEA) or other federally regulated standards in order to increase profits they are commiting fraud.
Education fraud can be very complicated and the types of fraud involved vary greatly. The U.S. Department of Education, Office of Inspector General encourages people to report any suspected fraud or abuse involving education funds or programs. The perpetrators of violations of Federal regulations pertaining to education programs or funding can include schools, employees, student recipients of funds, contractors, lending institutions, collections agencies, or public officials. The types of violations that constitute education fraud are just as varied, from predatory loan practices on behalf of lenders to sham university staff positions to misrepresenting student credentials.
The price of education fraud eventually burdens itself on taxpayers. The Office of Inspector General encourages people to speak up and blow the whistle against fraudulent practices in education that ultimately undercut young people trying to gain access to education.
What is the False Claims Act & How Does it Affect Education Fraud?
The False Claims Act provides that any person who knowingly submitted false claims to the government is liable to pay damages and penalties. The False Claims Act is a statue that was originally passed during the Civil War in response to widespread defense contractor fraud. Since its original passage, the act has been strengthened many times, including a substantial increase in the mid 1980s. In the 2019 fiscal year alone the Justice Department recovered over $3 Billion dollars False Claims Act cases. Since its strengthening in 1986, that total is at more than $62 Billion.
The Act allows citizens, or whistleblowers, to file claims on behalf of the government and to receive a portion of the damages. In the 1980s Congress strengthened the Act by increasing incentives for those whistleblowers to file on behalf of the government.
This standing is provided by a rare Qui Tam provision of the law that also allows those who choose to sue on the government’s behalf (known as relators) to claim a significant percentage of any recovered damages, ranging between 15 and 30 percent. In several notable cases, relators have been awarded millions for the recovery of public funds. Whistleblowers filed 633 qui tam suits in the 2019 fiscal year.
In relation to Education Fraud, the False Claims Act, prevents fraud involving government funded education programs (including private education institutions where students are receiving federally backed loans or financial aid) by establishing strong standards for reporting, and giving citizens the standing to sue on the government’s behalf. The Qui Tam provision of the Act highly incentives whistleblowers within the education system, and students and contractors who interact with educational institutions, to report fraud.
Before educational institutions can receive government funding, or even be allowed to accept students who have federally backed student loans, the institutions must sign Program Participant Agreements with the Department of Education (ED). By signing these contracts the institutions are agreeing to follow all rules and regulations set forth in the Higher Education Act and any other applicable education related regulations. When any person, institution or company fails to adhere to these rules, citizens can sue on behalf of the government under the False Claims Act to help protect taxpayer dollars and be entitled to a portion of the damages. For this reason, compliance with the False Claims Act, the Higher Education Act and other federal regulations pertaining to education should be a high priority for those involved in the educational sector.
What Are the Types of Education Fraud
The types of fraud that can occur within the education system are widely varied. In addition to the variation in the type of fraud, is the fact that education fraud can occur in many different types and levels of educational institutions from Higher Education to primary school to trade schools, from public school to private school. Below is a list of some of the most common and egregious types of education fraud.
- Federal Student Aid Fraud
- False Enrollment fraud
- Student Recruiter Incentive Fraud
- False Scholarship and Financial Aid Assistance
- Admission Fraud
- Grant and Research Fraud
- Accreditation Fraud
- Charter School Fraud
- Other Abuses
Federal Student Aid Fraud
Title IV of the Higher Education Act authorizes federal student aid programs that are administered by the United States Department of Education. These programs provide students with financial aid to attend colleges and career schools in the form of Federal Pell Grants, Federal Direct Loans, work study programs and a number of other resources. This is taxpayer money that is used to help qualified students afford higher education and may be used to help fund education at private, public and nonprofit post-secondary institutions. The U.S. Department of Education awards $120 billion per year in student aid to approximately 13 million students. Federal Student Aid Fraud encompasses any type of fraud related to those funds whether the fraudulent acts are committed by colleges, students, university employees, recruiters, or lenders. While the definition of Federal Student Aid Fraud is general enough to cover a wide range of abuses that may occur, several types of fraud in particular are common enough to be listed here specifically.
False Enrollment Fraud Rings, Distance Learning
Enrollment fraud rings refers to the use of straw students or ghost students in order to receive federal financial aid benefits on behalf of students who are not actually attending school. For the most part these fraud rings are loosely affiliated groups of people who seek to exploit distance education programs, online programs or small community colleges in order to fraudulently obtain Federal student aid. This can occur in a number of different ways and the perpetrators in these cases can include the individuals claiming to be students or even officials working within the schools. Rings of people involved in this type of fraud have been common across the country for many years. Between 2009 and 2012 the Department of Education estimated approximately $874 million in Federal student financial aid was lost to this type of fraud.
In some cases school officials recruit people to act as straw students. When the straw students’ financial aid accounts are put on hold, due to poor performance or failure to attend classes the school officials override the holds. The students continued to receive federal student aid money, a portion of which is given to the school officials.
Another more common example occurs completely outside the knowledge of the school or the students. Individuals involved in identity fraud rings across the country will claim to be students by stealing personal information and enrolling in schools in order to receive financial aid. This type of fraud is most common in distance learning, online schools or small community colleges.
Institutions of higher education that receive federal student aid are strictly prohibited from making incentive payments or kickbacks to student recruiters based on the number of students they recruit. This incentive compensation ban is an important piece of the Higher Education Act. They also must meet all guidelines to ensure their recruitment practices are not deceptive or misleading. The goal of these regulations is to prevent the enrollment of students in programs for which they are not qualified or do not have the skills necessary to succeed, as well as unsustainable student debt and default rates, the cost of which eventually falls on the students themselves and the taxpayers who help fund federal student aid.
Incentivizing high performance in recruiting students is particularly dangerous when it comes to private institutions, career colleges or private companies who are hired by schools to recruit students because it runs the risk of putting profits ahead of legitimate education. Whistleblower actions are constantly being brought against institutions and companies for these types of practices.
In 2009 the University of Phoenix settled a whistleblower case for 67.5 million which alleged that the institution violated the compensation ban by making incentive payments to recruiters and admissions counselors based on the the number of students they enrolled. The two whistleblowers in that case received $19 million from the settlement. In 2015 a for profit recruiting company, which operated as a recruitment mill for multiple colleges, agreed to pay $95.5 Million to settle illegal recruiting claims brought under the False Claims Act, the proceeds of which will be shared with the whistleblowers.
False Scholarship and Financial Aid Assistance
In order to apply for any type of federal student aid, scholarships or grants students must fill out a Free Application for Federal Student Aid. As the title states, this form and application process is free. However there are many spurious companies that claim to provide this process at a cost to the user. While it is legal to charge a service fee for services such as providing lists of scholarships available or comparing a student’s profile with available scholarships, the Federal Trade Commission (FTC) warns against any services that claim to provide guaranteed scholarships, information not available elsewhere, or scholarships that cost money. The FTC also encourages people to file a complaint if they believe they have responded to a scam service.
Admissions Fraud involves falsifying students records and achievements or waiving admissions requirements in order to gain admissions to schools for which the students are not qualified. Because these schools receive federal student aid funding this type of fraud violates regulations set forth by the federal government and can open such institutions up to False Claims Act allegations.
This widespread practice of admissions fraud has resulted in landmark settlements and major scandals involving top elite schools whose employees knowingly helped wealthy students cheat their way in, as well as for-profit technical and trade schools who manipulated applications in order to accept large amounts of unqualified students for the company’s financial gain.
In 2015 a for profit company that operated numerous technical and trade schools across five states agreed to a $13 million dollar settlement to resolve allegations that it altered admissions test results, falsified federal student aid applications, created fake high school diplomas, and referred applicants to diploma mill websites where they could buy an invalid highschool diploma online in order to accept unqualified students. The five whistleblowers were awarded approximately $1.8 million dollars.
In 2019 a major admissions scandal broke impacting many elite universities across the country. Parents, students, university personnel and a nonprofit organization committed widespread fraud by cheating on entrance exams and bribing coaches and administrators to falsely label students as athletic recruits or minority students in order to gain admission. Many top colleges are under investigation for their involvement in this type of fraud and new legislation is being drafted with the aim of curbing this practice in the future.
Research and Grant Fraud
Most colleges and many secondary schools receive research grants from the federal government to fund ongoing research projects to which students and faculty contribute. These grants constitute agreements between the educational institution and the federal government whereby the federal agency provides financial assistance which is to be used for projects and research that ultimately contribute to public good. By accepting this type of funding educational institutions are agreeing to adhere to all regulations and policies set forth by the federal government. When schools fail to adhere to federal regulations in their application for, use of, or reporting on research grants they are essentially using taxpayer money to commit fraud against the federal government and can be held accountable under the False Claims Act.
In 2019 the Department of Justice sent a strong message to schools in a landmark case where Duke University agreed to a $112.5 million settlement to address False Claims Act allegations that it falsified applications and progress reports related to its use of federal research grants. When educational institutions conduct important research and clinical programs using taxpayer dollars they must make sure the research benefits the common good and they must be diligent in rooting out fraud. The whistleblower who originally brought the allegations that the university knowingly falsified research was allocated $33,750,000 from the settlement. Other major settlements involving grant research fraud between 2009 and 2015 ranged from $2.6 to $19.8 million.
In order to receive any type of federal funding or even accept students using federal financial aid, educational institutions must be accredited by a federally recognized accrediting agency. While the Department of Education does not directly provide accreditation to educational programs or institutions of learning, it does provide oversight and set standards for accrediting agencies, as well as provide information to the public on which accrediting agencies are federally recognized. The goal of accreditation is to ensure that education meets acceptable levels of quality.
Without such oversight many argue there would be little way to prevent the growth of for-profit companies that operate as “diploma mills.” Under the Higher Education Opportunity Act, a diploma mill is an entity that lacks accreditation and offers for a fee credentials such as diplomas or certificates to students who are required to do little to work in exchange. More generally, these are non accredited schools that offer fraudulent diplomas or certificates.
Educational institutions commit fraud when they make false representations related to the school’s ability to meet accreditation requirements. Additionally the accrediting agencies themselves can commit fraud if they fail to meet standards set forth by the federal government.
Charter School Fraud
Charter schools are publicly funded but independently run schools usually established by teachers, parents, or community groups that are supposed to receive greater flexibility in operations while having to meet increased performance accountability under the charter terms of a local or national authority. Because they are independently run and receive greater flexibility in operations the potential for fraud is a rapidly growing concern. This type of fraud includes schools that faked enrollment numbers, fraudulently reported academic monitoring, and perhaps most egregiously schools across the country that received taxpayer dollars through federal funding and never even opened.
A 2019 report on data provided by the Dept of Education found that the Charter Schools Program under the Dept of Ed provided over $500 million federal funding to over 1,800 defunct or never opened charter schools. Michigan, a state where nearly 80% of the charter schools are run by for-profit companies, had the highest number of never opened taxpayer funded schools, also known as ghost schools. An important distinction is that while for-profit charter schools are not able to receive funding through the program, non-profit schools that are wholly owned and operated by for-profit management companies are able to receive federal funds.
A 2018 report by the Dept of Ed found that a lack of oversight puts charter schools at a serious risk of waste and opens the door for bad actors to defraud taxpayers. With little oversight, allegations of fraud rely on whistleblowers. Multiple suits have been filed across the country.