The United States Department of Justice (DOJ) announced last week that American Commercial Colleges Inc. has agreed to pay the United States up to $2.5 million to settle claims that it had falsified loan revenue reports in order to be eligible for federal funding.

According to the release, which you can read in its entirety here, American Commercial College Inc. is a for-profit educational institution operating in Texas that sought funding through Title IV of the Higher Education Act of 1965. In order to be funded under that program, an institution must adhere to what is referred to as the “90/10 Rule”. This rule, established by congress, requires that an institution receive no more than 90 percent of its revenue from government aid under the expectation that any competitive, private institution should be able to earn at least a portion of its income from mean other than the government.

To maintain the appearance of adherence with the 90/10 Rule, American Commercial College Inc. falsified student loan information to inflate its private student loan income, according to the report. The college created loans, often without students even aware the loans had been created, and then paid the loans off using funding obtained under Title IV of the Higher Education Act of 1965.

The lawsuit that this settlement resolves was brought to the government’s attention due to the efforts of two former American Commercial College directors, Shawn Clark and Juan Delgado, through the qui tam provisions of the Federal False Claims Act. This act protects whistleblowers and allows for those with knowledge of fraud against the government to bring forth a claim and potentially share in the recovery.

“The vigorous enforcement of the Federal False Claim Act continues to be a strong reminder to businesses of all types that defrauding the government has serious consequences,” said Christopher Paulos, an attorney with the Levin, Papantonio Law Firm.

Clark and Delgado will receive $170,000 and could potentially receive another $255,000 if American Commercial College is required to pay the maximum $2.5 Million of the settlement.

“As whistleblowers are often the targets of retaliation, the ability for whistleblowers to share in the recovery acts as a reward for their bravery and integrity… it also encourages others with knowledge of fraud against the government to step forward and do the right thing,” Mr. Paulos added.

Joshua is a writer and researcher with Ring of Fire.

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