Where the False Claims Act meets for-profit colleges: 4 hot areas for compliance

Where for-profit colleges are noncompliant, the DOJ has shown its willingness to enforce compliance through a robust tool—the False Claims Act

Administrators and employees of for-profit colleges need to be aware of a federal statute that may not immediately associate with these institutions: the False Claims Act (“FCA”).

Pressure has been building from the Department of Justice (“DOJ”) to prosecute civil FCA cases against for-profit colleges in a growing number of areas.

Four such example areas include the 90/10 Rule, job placement rates, incentive-based compensation to recruiters, and enrolling ineligible students. FCA actions in these areas have resulted in, and will likely result in additional, multi-million dollar settlements. These cases build on an enforcement trend that should be on the mind of every administrator and employee of a for-profit college. First, a primer on the FCA.

The False Claims Act

The FCA, 31 U.S.C. §§ 3729-3733, imposes civil liability on any person, including a corporation, who knowingly uses a “false record or statement to get a false or fraudulent claim paid or approved by the government,” and any person who “conspires to defraud the government by getting a false or fraudulent claim allowed or paid.” Allison Engine Co. v. United States ex rel. Sanders, 553 U.S. 662, 665 (2008). Violators of the FCA face treble damages and a civil penalty of $5,500 to $11,000 per occurrence.

The FCA’s qui tam provision, § 3730(b), allows a private person, known as a “relator” or “qui tam relator” to bring an action for a violation of § 3729 for herself and the United States government. A successful relator may receive a reward of up to 30 percent of the proceeds from a settlement or judgment against the alleged wrongdoer plus reimbursement for attorneys’ fees, costs, and expenses.

(Next page: Why federal intervention is crucial)