EDUCATION COMPANY TO PAY $13 MILLION RESOLVING ALLEGED FALSE CLAIM SUBMISSIONS FOR STUDENT AID

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, June 24, 2015

For-Profit Education Company to Pay $13 Million to Resolve Several Cases Alleging Submission of False Claims for Federal Student Aid

Settlement Resolves Allegations and Administrative Claims Involving Schools in Five States

Education Affiliates (EA), a for-profit education company based in White Marsh, Maryland, has agreed to pay $13 million to the United States to resolve allegations that it violated the False Claims Act by submitting false claims to the Department of Education for federal student aid for students enrolled in its programs.  EA operates 50 campuses in the United States under various trade names, including All State Career, Fortis Institute, Fortis College, Tri-State Business Institute Inc., Technical Career Institute Inc., Capps College Inc., Driveco CDL Learning Center, Denver School of Nursing and Saint Paul’s School of Nursing, which provide post-secondary education training programs in several professions in the states of Alabama, Florida, Maryland, Ohio and Texas.

“Today’s settlement is an excellent example of cooperation among multiple offices of the federal government to achieve a result that protects federal student aid funding and the interests of individual students,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Schools have an obligation to live up to their commitment to the government and their students when they accept federal student aid funds.”

The government alleged that employees at EA’s All State Career campus in Baltimore altered admissions test results so as to admit unqualified students, created false or fraudulent high school diplomas and falsified students’ federal aid applications, and that multiple EA schools referred prospective students to “diploma mills” to obtain invalid online high school diplomas.  These allegations also led to criminal convictions of two All State Careers admission representatives, Barry Sugarman and Jesse Moore, and a test proctor, Jacqueline Caldwell.

“Students who apply for federal financial aid to attend trade and professional schools are required to show that they have the necessary skills to complete the educational program and work in the field,” said U.S. Attorney Rod J. Rosenstein of the District of Maryland.  “This settlement resolves the government's allegations that Education Affiliates defrauded the government by changing students' test scores and enrolling students with invalid diploma mill high school ‘diplomas’ ordered online.”

“The various cases that were settled here include numerous allegations of predatory conduct that victimized students and bilked taxpayers,” said Under Secretary Ted Mitchell of the U.S. Department of Education.  “In particular, the settlement provides for repayment of $1.9 million in liabilities ordered by Secretary of Education Arne Duncan that resulted from EA awarding federal financial aid to students at its Fortis-Miami campus based on invalid high school credentials issued by a diploma mill.  Secretary Duncan made clear that such abusive behavior would not be tolerated, and we will continue to work with the Justice Department and other federal agencies to ensure that postsecondary institutions face consequences when they violate the law.”

The settlement agreement also resolves allegations related to EA schools in Birmingham, Alabama, Houston and Cincinnati, including violations of the ban on incentive compensation for enrollment personnel, misrepresentations of graduation and job placement rates, alteration of attendance records and enrollment of unqualified students.

“Using fake high school diplomas is a particularly insidious abuse of the federal student aid system,” said Inspector General Kathleen Tighe of the U.S. Department of Education’s Office of Inspector General (OIG).  “Students received only a worthless piece of paper.”  Tighe commended the efforts of OIG staff and Department of Justice attorneys, whose outstanding investigative work led to this significant settlement.

The settlement resolves five lawsuits filed under the whistleblower provisions of the False Claims Act, which permit private citizens to sue on behalf of the United States and share in the recovery.  As part of this resolution, the five whistleblowers will receive payments totaling approximately $1.8 million.  

The settlements were the result of a coordinated effort by the U.S. Attorneys’ Offices of the District of Maryland, the Southern District of Texas, the Northern District of Alabama, Southern District of Ohio and the Middle District of Tennessee, as well as the Civil Division’s Commercial Litigation Branch, and the Department of Education and its OIG.