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Education Fraud

Fraud in federal and state education programs, including federal student aid fraud, can be reported by whistleblowers, who may be eligible to receive a reward

Every year, federal, state, and local governments spend hundreds of billions of dollars on education.  These funds provide financial aid to post-secondary students, maintain a vast network of primary and secondary schools, provide critical support for children with disabilities, and finance cutting-edge research at universities across the country.  Unfortunately, they are also a prime target for fraud and abuse.

The False Claims Act (FCA) is the foundation of the U.S. whistleblower reward system and plays a critical role in rooting out education fraud.  Under the FCA, whistleblowers can bring claims on behalf of the government to report fraud and misconduct in government contracts and then receive a share of the recovery.  When it comes to education fraud, schools and other entities can violate the FCA in a variety of ways.

Federal Student Aid Fraud

The U.S. Department of Education awards $120 billion every year in student aid.  This federal student aid takes the form of grants, low-interest loans, or work-study funds.  These taxpayer dollars help students afford higher education at colleges, universities, trade schools, and other post-secondary education programs. The schools may be public or private and non-profit or for-profit.

Both the students and the schools must meet eligibility requirements to receive these federal funds.  The federal Higher Education Act requires that the schools must be accredited by an independent agency, must enter into a program participation agreement with the Department of Education, and must follow certain standards to maintain accreditation and be eligible for student aid dollars.

In order to fraudulently secure federal student aid dollars, schools may violate the Higher Education Act, accreditation requirements, or program participation agreements.  Fraudulent federal student aid schemes that may violate the False Claims Act include:

  • Coercive and improper student recruitment techniques that violate the Dept. of Education’s Incentive Compensation Ban;
  • Paying kickbacks to student recruiters;
  • Obtaining federal student loan funds for ineligible students, including by falsifying student academic records; and,
  • Misrepresenting graduation, job-placement rates, or other standards of educational quality.

Fraud and abuse are particularly common during the recruitment of prospective students.  Federal and state laws prohibit higher-education institutions receiving student aid from paying recruiters bonuses based on their success in signing up new students.  This “incentive compensation ban” not only protects students from coercive recruitment practices but also curtails waste of government funds.  All too often, however, schools simply disregard this ban in a push for higher enrollment and profits. But schools that engage in this reckless behavior can face millions of dollars in liability under the FCA.  For example, Constantine Cannon attorney Harry Litman represented two whistleblowers in an $80 million incentive-compensation-ban case, which was the largest-ever settlement in an FCA suit involving the U.S. Department of Education.

Grant and Research Fraud

Fraudsters also frequently target state and federal research grants.  Grant fraud can take many forms, such as lying on a grant application, misrepresenting grant-funded activities and research results, embezzling and misappropriating grant funds, or paying bribes to help obtain a grant in the first instance.

Fraud in Education Spending

In addition to federal spending on education programs, local school districts and other state education programs devote substantial resources to elementary and secondary education.  By some estimates, non-federal direct spending totals over $600 billion annually.

  • Charter schools inflating attendance rates and learning hours to obtain excessive reimbursements;
  • Admitting unqualified students into disability-related programs;
  • Overcharging public education purchasers for goods or services, including fraud in the E-Rate program;
  • Paying kickbacks or bribes to secure contracts;
  • Embezzling public funds.

Where fraud involves state of local entity spending, it may be possible to bring a whistleblower action under an applicable state or local false claims act.

Blowing the Whistle on Education Fraud

These schemes affect a wide variety of institutions, from traditional public schools and universities, to online charter schools and for-profit institutions.  No matter where the abuse takes place, whistleblowers play a vital role in exposing fraud that would otherwise go undetected.  If you would like more information or would like to speak to a member of the Constantine Cannon whistleblower lawyer team, please Contact us for a Confidential Consultation.

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