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Federal Ban on Higher Education Incentive Compensation for Student Recruiting: A $4.29M False Claims Act Settlement

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Title IV of the HEA (Higher Education Act) bans universities and colleges from paying incentives to employees, including recruiters, for securing enrollments. 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. The purpose of the ban is to prevent schools from creating a "boiler room" atmosphere, where overzealous recruiters "sell" students on their school, regardless of whether it is a good fit for the student. In June 2015, the U.S. Department of Education announced that it would enforce these rules more closely.

How the False Claims Act Applies to Incentive Compensation Fraud

The False Claims Act prohibits false claims seeking government funds. Higher education institutions rely in large part on government funds, primarily in the form of loans and grants students use to finance their education, those institutions, and to secure those funds, higher education institutions agree to comply with the terms of the Program Participation Agreement, including the incentive compensation ban.  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.

A $4.29M 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.

If you have information about improper incentive compensation that may fall under the False Claims Act, contact a whistleblower attorney for a free and confidential consultation.

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