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Higher Education Incentive Compensation Fraud

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The U.S. government invests in colleges, students and universities by contributing to university endowments, offering scholarships, providing grants, and guaranteeing student loans. Since taxpayer dollars are used to support colleges and universities, the government imposes strict rules to prevent fraud in higher education. For example, the Higher Education Act (HEA) prohibits universities from paying incentive compensation to recruiters or employees based on the number of students they are able to recruit.

The Higher Education Act

Title IV of the HEA bans universities and colleges from paying incentives to employees, including recruiters or admissions employees, for securing enrollments. Also known as the "incentive prohibition ban," the prohibition seeks to prevent schools from adopting discourage abusive, high-pressure recruiting tactics creating that can attract students to universities that are not a good fit for them.

To obtain federal funding, colleges and universities must enter into a Program Participation Agreement with the U.S. Department of Education (USDOE), promising, among other things, to comply with the incentive compensation ban. The ban prohibits any form of incentive compensation, including bonuses, promotions and pay raises based on success in recruiting students to the school.

When those schools do not comply with the incentive compensation ban, they violate the Program Participation Agreement, and render their requests for government funding false. Those schools are thus subject to liability under the False Claims Act.

The University Whistleblower

College and university fraud can be difficult to uncover because of the sheer number of students attending those institutions. Often, internal university employees are in a unique position to uncover and report fraud.

The False Claims Act allows those individuals, or anyone else with knowledge of fraud, to sue on behalf of the government. In recognition of the contribution of those whistleblowers, the False Claims Act provides them with a reward -- a portion of what the government recovers as a result of the whistleblower's case.

A False Claims Act Settlement Represented by Goldberg Kohn

In July 2016, the Allen School of Health Sciences and school COO Christopher Wargo agreed to pay $4.29 million to resolve allegations that they violated the incentive compensation ban and breached the school's Program Participation Agreement.

Those allegations were brought to the attention of the government by a Goldberg Kohn client with the courage to come forward, report the school's practices, and file a lawsuit. The government joined the lawsuit, alleging, among other things, that the school established benchmarks for student enrollments, and informed employees that they would qualify for promotions and higher wages if they met or exceeded those benchmarks.

The whistleblower attorneys at Goldberg Kohn are committed to fighting fraud against the government and protecting the rights of whistleblowers. Please contact us online if you would like to learn more about fraud within the education industry or would like to schedule a free, confidential appointment with one of our nationally-recognized whistleblower attorneys.

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