by Brian Mahany
The feature article in this month’s Milwaukee magazine was intriguing. There are up to 40 for profit colleges (sometimes called proprietary schools) in the Milwaukee area and many of them have abysmal track records. High costs and little prospect of a paying job at the end of 2 or 4 years of study. One school, Everest College (part of Corinthian Colleges), apparently had a placement rate of just 6%.
Students who enroll in for profit colleges have little recourse at the end of their career path if they can’t find a job. Although many of these proprietary schools have paid out millions of dollars in lawsuit settlements, finding a lawyer to take such a case and waiting for years for the court’s to decide can be difficult. Especially since most students rely on student aid and the student loan folks still must be repaid.
Therein lies an opportunity for whistleblowers. Since the federal government stands behind most of the student loans, any losses to the student loan program are potentially actionable. According to the U.S. Senate Committee on Health, Education, Labor and Pensions, for profit schools like Everest, University of Phoenix, Herzing and others can get up to 90% of their money from federal student loans.
Just because some schools have a low placement rate does not automatically make for a federal false claims act case. That law, which dates back to the Civil War, requires fraud. Google some of the for profit schools, however, and it soon becomes clear that several have paid millions in claims from disgruntled students misled by false placement and income statistics. In other words, there is plenty of fraud to be found with some such schools.
Under the False Claims Act, whistleblowers with inside information are entitled to up to 30% of what the government collects from the defendants. In this case, that could mean the operators of for profit institutions that cause a loss to federal student aid monies because of false advertising. In simple terms, if Johnny borrowed $50,000 based on the promise of a high paying job and those promises are false leading to Johnny’s default, then the taxpayers have a potential claim.
The false claims act was passed in 1863. During the Civil War, the federal treasury was broke and many vendors had defrauded the government with bad ammo, lame mules and rancid rations for the troops. Congress passed a law to allow private citizens to file a suit in the name of the government. The citizen (whistleblower) in essence became partners with the government and shared the wealth.
To be a whistleblower, you must have inside information. Facts gleaned from a magazine aren’t enough. For that reason, most whistleblowers are present or former employees with knowledge about the false statistics or other fraud. A former student who obtained inside information through discovery might qualify as well, however.
The fraud lawyers at Mahany & Ertl represent the whistleblower in the largest pending federal false claims act case in the nation, HUD’s $2.4 billion case against Allied Home Mortgage. The potential returns in that case – as well as the for profit school cases – are huge.
If you have inside information about a fraud affecting taxpayers give us a call. All inquiries are protected by the attorney – client privilege and kept in strict confidence. Health care billing, false lending practices, military procurement and Buy America cases are potential false claims cases.
Mahany & Ertl – America’s Fraud Lawyers (c) , Proudly Giving Whistleblowers A Voice. Offices in Milwaukee, Wisconsin; Portland, Maine; Detroit, Michigan; Minneapolis, Minnesota and San Francisco, California. Services available in most locations.
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