Recently, Corinthian College was slapped with a $30 million fine from the federal government for unlawfully inflating its graduation rates in order to lure students into taking out sizable student loans and thereafter failing to follow through with a quality, marketable education. The college was forced to close its doors in April of this year and filed for bankruptcy in May – citing nearly $500 million in liabilities.
Under the False Claims Act, colleges and universities accepting federal financial aid are required to adhere to strict protocols and regulations when enrolling, instructing, and graduating students. Over the past several years, there have been a number of high-profile lawsuits and government punishments doled out against for-profit colleges accused of exaggerating and skewing employment rates in order to entice students to enroll. Even more prestigious higher education programs (including several law schools) were accused of inflated post-graduate employment rates and starting salaries, only to provide a sub-par education to students who could not ultimately pass the state bar exam. Let’s examine the False Claims Act component of this troubled for-profit university’s plight.
Details of alleged education fraud involving Corinthian College
Corinthian College is responsible for managing about one dozen smaller colleges and institutions throughout California and Arizona. The colleges focused primarily on career-oriented instruction, including health care, business, computer technology, electronics, and HVAC.
Over the past several years, three separate False Claims Act lawsuits have emerged, naming Corinthian as responsible for enticing as many students as possible in order to maximize federal loan resources. In fact, whistleblowers alleged that while many students struggled to find jobs (after relying on Corinthian’s falsified employment rates), its CEO managed to take home a $3 million salary each year.
While these False Claims Act cases have yet to settle or reach conclusion, the Department of Education initiated its own investigation into the fraud, finding:
- Failure to disclose essential and material information relating to the calculation of graduation and employment rates;
- Failure to disclose that post-graduation employment rates included students on a deferred employment arrangement;
- Failure to disclose that some students classified as “gainfully employed” post-graduation already held those jobs prior to enrolling in the college;
- Corinthian paid kickbacks to temp agencies to hire its graduates for a certain period of time after graduation in order to “count” those graduates as gainfully employed;
- Corinthian “counted” students as employed even if those students pursued careers outside of their degree;
- Corinthian lied to medical assistant accreditors about job placement rates for students enrolled in the program;
- Placement rates overall were not supported by documentation.
On May 6, 2015, several U.S. Senators urged U.S. Attorney General Loretta Lynch to launch a deeper investigation into the executives involved in the downfall of Corinthian College, particularly targeting those earning seven-figure salaries while the school was floundering and students were facing displacement.
In a letter drafted by Sens. Richard Blumenthal and Chris Murphy, both D-Connecticut; Dick Durbin, D-Illinois; Al Franken, D-Minnesota; Ed Markey and Elizabeth Warren, both D-Massachusetts; and Jack Reed, D-Rhode Island:
Corinthian’s collapse over the past year has come at the cost of hundreds of millions in taxpayer dollars and at the expense of thousands of students who were enticed to enroll in — and to incur massive debt for — failing school programs….At the same time that Corinthian’s executives were enriching themselves on federal student loan dollars, with the CEO making an annual salary that exceeded $3 million, allegations of Corinthian’s misbehavior grew increasingly widespread. These included allegations that Corinthian officials falsified and manipulated data that were provided to students and to the federal government, among other deceits and misrepresentations.
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