Education Fraud

August 3, 2022

William Richard “Rick” Carter, Jr. will spend 66 months in prison and pay over $1.3 million in restitution for his scheme to defraud the Alabama State Department of Education, in a conspiracy to commit wire fraud, wire fraud, and aggravated identity theft. Carter and his co-conspirators fraudulently enrolled students in public virtual schools to receive payments from Alabama’s Education Trust Fund, and then took portions of the money for their own use through direct cash payments and payments to third-party contractors owned by the various co-conspirators—William L. (“Trey”) Holladay, III, Gregory (“Greg”) Earl Corkren, David Webb Tutt, and Thomas Michael Sisk.  USAO MDAL

August 2, 2022

Denver Public Schools paid over $2.1 million to resolve a False Claims Act investigation into its misuse of AmeriCorps funds. AmeriCorps funds are used to address critical community needs such as fighting poverty, mentoring youth, and increasing academic achievement. To that end, AmeriCorps provides education awards to their volunteers a/k/a “members” for performing a specified number of service hours in these communities. DPS recruited their existing employees for AmeriCorps programs and double-counted hours spent on their employment duties as being on service, which is disallowed as it deprives the students of the net benefit of the additional support they would have received from non-DPS-employed AmeriCorps members. USAO CO

April 15, 2022

Caribbean Saint James School of Medicine a/k/a Human Resource Development Services, Inc., and its operator Kaushik Guha will pay $1.2 million in refunds to students who were lured by exaggerated promises of future success. For a period spanning at least 4 years, the defendants misrepresented their students’ medical license exam pass rate and misrepresented their residency match rate, stating that theirs was equal American schools’ match rate. Defendants violated the FTC’s Holder Rule, which requires specific notice to credit-holding consumers informing them of their right to assert claims, and also failed to provide a CPR disclosure in their credit agreements. FTC

March 7, 2022

Ashford University, an online, for-profit school, and its parent company, Zovio, Inc., have been ordered to pay $22.37 million in penalties after a California court ruled in favor of the state attorney general’s office by finding that they presented false and misleading information to students to encourage them to enroll.  The lawsuit had alleged that Ashford’s promises about career outcomes, cost and financial aid, and ability to transfer credits caused many students to be saddled with debt and nothing to show for it.  CA AG

January 14, 2022

Conduent Education Services LLC, f/k/a Xerox Education Services LLC, d/b/a ACS Education Services LLC (CES)—a contractor that serviced student loans for lenders—has agreed to pay $7.9 million to resolve allegations of submitting or causing the submission of false claims to the Department of Education (DOE) between 2006 and 2016.  In violation of Federal Family Education Loan (FFEL) program rules and the False Claims Act, CES allegedly failed to accurately report required data on the impact of monthly student loan repayments, principal capitalization, and other changes to DOE.  Under a prior remediation plan, CES paid DOE $1.4 million to partially resolve its liability, which it received credit for in the current settlement.  DOJ

January 13, 2022

One of the nation’s largest student loan servicers, Navient, f/k/a Sallie Mae, has agreed to a $1.85 billion settlement with 39 states to resolve allegations of widespread deceptive and predatory lending practices in the early-to-mid 2000s.  $95 million of the settlement proceeds will be in the form of restitution payments of approximately $260 each to about 357,000 borrowers, while the remaining $1.7 billion will be in the form of cancelled debts for about 7,400 borrowers.  In addition to the monetary settlement, Navient has also agreed to substantial injunctive terms.  CA AG; FL AG; VA AG

September 22, 2021

Jonathan Dean Davis, the owner of the Retail Ready Career Center, a for-profit trade school, was sentenced to nearly 20 years in prison following his conviction on fraud charges.  Davis marketed his school’s HVAC training course to veterans by falsely securing certification of his program by Texas state agencies in order qualify the program to charge veterans’ tuition and fees to the Veteran’s Administration under the Veteran’s Educational Assistance Act.  In fact, Retail Ready used up veteran’s GI Bill benefits and failed to prepare them for careers while collecting more than $72 million in GI Bill benefits from the VA.  Davis was also ordered to pay $65.2 million in restitution and forfeit $72.5 million.  USAO ND TX

September 2, 2021

Jonathan Dean Davis, the owner of for-profit trade school called Retail Ready Career Center, has agreed to forfeit over $72 million after being convicted of defrauding the U.S. Department of Veterans Affairs.  According to evidence presented at trial, Davis falsely certified that he was not personally facing any criminal or civil actions, and that his school was an established, financially-secure educational institution—neither of which were true.  The scheme unraveled after student veterans realized the HVAC training they received at the school was insufficient for entry-level jobs in the industry.  USAO NDTX; subsequent sentencing

February 5, 2021

Michael Malone, the founder and former executive director of the St. Louis College Prep Charter School, was sentenced to one year in prison and ordered to pay restitution of $2.4 million, following his guilty plea to charges arising from a fraudulent scheme to obtain education funds from the Sate of Missouri by inflating the school’s average daily attendance in reports to the state and falsely claiming regular school days and hours as summer school or remedial hours.  USAO ED MO