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MD Education Company to Pay $13M to Settle Whistleblower Lawsuit

On June 24, 2015, the Department of Justice announced that Education Affiliates, a Maryland-based for-profit education company, will pay $13 million to settle a whistleblower lawsuit. The suit, filed under the False Claims Act, alleged that the White Marsh, Maryland company altered test results in order to admit unqualified students in order to funnel federal student loans to the company.

Education Affiliates runs 50 schools throughout the United States under a variety of names, including:

  • All State Career,
  • Fortis Institute,
  • Fortis College,
  • Tri-State Business Institute,
  • Technical Career Institute,
  • Capps College,
  • Driveco CDL Learning Center,
  • Denver School of Nursing, and
  • Saint Paul’s School of Nursing

Education Affiliates allegedly created fraudulent high school diplomas, falsified federal student aid applications, and altered admissions test results.

“Schools have an obligation to live up to their commitment to the government and their students when they accept federal student aid funds,” Benjamin Mizer, head of the Justice Department’s Civil Division, said in a statement.

Two of the company’s admissions reps, Barry Sugarman and Jesse Moore, and a test proctor, Jacqueline Caldwell, were criminally convicted due to allegations arising from the education fraud whistleblower case. The employees were working at the for-profit education company’s All State Career campus in Baltimore, Maryland. The DOJ also alleged that Education Affiliates referred prospective students to “diploma mills” in order to obtain fraudulent online high school degrees.

The complaint further alleged that Education Affiliates misrepresented employment data, falsified attendance records, and violated the legal ban on paying employees for boosting enrollment. The Department of Education administers Title IV of the Higher Education Act of 1965, the federal government's financial aid program for students. To participate in Title IV and as a precondition to payment, education providers must enter into a Program Participation Agreement with the Dept. of Ed., which is a "panoply of statutory, regulatory, and contractual requirements." See United States ex rel. Hendow v. Univ. of Phoenix, 461 F.3d 1166, 1168 (9th Cir.2006) (case about University of Phoenix allegedly incentivizing employees to sign up new students). To be eligible for federally-backed student loan funds, a school is required to establish, publish and apply reasonable standards for measuring whether an otherwise eligible student is maintaining satisfactory academic progress in his or her educational program.

At The Cochran Firm, D.C., our team of whistleblower attorneys represent individuals who blow the whistleblower on companies defrauding federal funds. Whistleblowers may be entitled to significant compensation for saving taxpayers from fraud, waste, and abuse of federal funds. If you are aware of an individual, company, or other entity committing financial fraud upon a government program, please call The Cochran Firm, D.C. at 202-682-5800. Because strict time deadlines apply, we recommend contacting us at your earliest convenience.


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