In today’s case, the False Claims Act is cited against for-profit, Idaho-based Stevens-Henager College, as the Department of Justice has opted to intervene in a whistleblower case filed last year by two former admissions employees for the school. If successful, the Department of Justice is seeking triple damages, litigation, and court costs, as well as a whistleblower reward of up to 25 percent of the total recovery.
The case hinges on allegations that the school offered recruiters bonuses and other incentives for enrolling as many students as possible, regardless of whether the students were a good match for the university or even met published admission criteria. This sort of compensation system is expressly banned by the Higher Education Act and, as a result, amounts to a violation of the False Claims Act as well.
U.S. ex rel. Brooks v. Stevens-Henager College, Inc., et al. Details
The case against Stevens-Henager began several years ago when whistleblowers Katie Brooks and Nannette Wride served as Admissions Consultants for the school – and began noticing possible unlawful activity perpetrated by owner Carl Barney. According to the complaint, the defendants (which include a long list of colleges and universities affiliated with Stevens-Henager) offered Admissions Consultants bonus payments based on the number of students each was able to have “start” at the college.
More specifically, the Complaint against the schools alleges that recruiters were encouraged to enroll any student who was willing to apply for federal student aid without regard to that student’s likelihood of success or “ability to benefit from Stevens-Henager’s educational programs.” The allegations against Stevens-Henager reveal a “boiler room” style recruitment strategy akin to aggressive corporate sales tactics. The college, which receives up to 85 percent of its funding each year through Title IV federal aid, directed Admissions Consultants to “enroll every person they possibly can [and] no salary increases occur unless Admissions enrolls more students.”
The Complaint details the Admissions Consultant Compensation scheme employed by Stevens-Henager. Consultants were rewarded with bonuses between $100 and $600 per student based on the student’s ultimate interaction with the university. Consultants became eligible for a bonus upon, among other requirements, convincing at least “one out of every three potential students he or she met with to enroll in the school.” A Consultant who was able to convince at least 50 percent of students who signed up for an interview to enroll in the school (known as an “interview-to-start” rate), as well as enroll at least 20 students who would continue through at least 36 credit hours, would be eligible for a bonus up to $12,000.
Federal Law Violations
This recruitment style and accompanying bonus/compensation package runs afoul of the Higher Education Act, which provides funding and financial aid for students wishing to enroll in college. According to the language of the HEA, universities
“[w]ill not provide any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any persons or entities engaged in any student recruiting or admission activities or in making decisions regarding the award of student financial assistance.”
By engaging in violations of the HEA and submitting falsified records of student eligibility, Stevens-Henager effectively exposed itself to liability under the False Claims Act, as well.
In addition to the basic violation of federal law, the DOJ also took aim at the school for “irresponsibly” saddling unqualified students with excessive student debts that will be difficult or nearly impossible to repay. This practice in and of itself may ultimately cost the government millions of dollars in student loan default.
Contact a Whistleblower Attorney Today
If you are employed or are part of a federally-funded college or university engaging in similar recruitment tactics, you may be able to file a False Claims Act lawsuit against the school. In these cases, the FCA works to preserve student aid money for those who are truly eligible and helps keep costs low by avoiding inevitable loan defaults by students who are unable to complete the programs.