(Source: Diane Smith Fort Worth Star-Telegram, Texas (MCT) — The U.S. government has intervened in a whistleblower lawsuit alleging that Texas-based American Commercial College Inc. received about $39.2 million in federal student aid by falsifying records and coercing students into applying for private loans.
The scheme was aimed at concealing the fact that the college receives nearly 100 percent of its revenue from federal aid, in violation of a law limiting for-profit colleges to 90 percent, the lawsuit states.
“Colleges and universities that receive federal funds must be honest with the government and follow the law,” Tony West, assistant attorney general of the Justice Department’s Civil Division, said in a news release.
The lawsuit is the latest of several targeting abuses by for-profit career colleges in Texas.
American Commercial College is a Lubbock-based chain with campuses in Abilene, Lubbock, Odessa, San Angelo and Wichita Falls, and in Shreveport, La.
The original lawsuit was filed by former ACC employees Shawn Clark and Anthony Delgado. Clark was director of the Odessa campus from Aug. 11, 2008, through March 30, 2010. Delgado was director of the Abilene campus from Aug. 18, 2002, through May 2, 2010.
Their complaint, under the federal False Claims Act, detailed that records were falsified and submitted to the government to get federal student aid dollars.
Nearly all American Commercial students receive federal financial aid in the form of Pell Grants and Stafford loans, totaling about $10.3 million a year, the lawsuit states. It contends that several campuses received more than 90 percent of their revenue from such federal aid, but the college misrepresented that to the government.
To make it appear that it had other sources of funding, the college allegedly told a number of students to apply for private loans between $5,000 to $10,000 from Texas Bank. “To secure students’ participation in this process, they are told that without their assistance the school would fail, and the students’ and their classmates’ money and time would be wasted,” the complaint states.
A Texas Bank executive approved and processed the loans knowing their unlawful purpose, the lawsuit alleges. The bank then provided the loan proceeds to the college; after the end of the fiscal year, the college repaid the loans, the suit states.
American Commercial officials didn’t comment on the federal action but stated in writing they are currently working to resolve issues with the Texas Workforce Commission, which licenses proprietary colleges in the state.
The state recently notified American Commercial that certificates of approval for the Abilene and Lubbock campuses will be revoked in December. A state investigation showed that those campuses had misreported job placement data for graduates of some programs, said Mark Lavergne, spokesman for the commission. Additionally, the state said it found evidence that critical information was falsified by school personnel, including eligibility for programs such as GEDs.
The college has an appeal pending. A hearing is expected to be held sometime this month.
“As we make our appeal, we will continue to provide full service to our students to help them achieve their education goals,” President Brent Sheets said in a statement. Julie Johnson, a Dallas attorney representing the whistleblowers in the case, could not be reached for comment.
Under the False Claims Act, individuals can file a suit on behalf of the federal government. If the government intervenes; it takes over the litigation, said Charles Miller, spokesman for the U.S. Department of Justice’s Civil Division.
If the United States proves that the defendant knowingly submitted false claims, it can recover up to three times the damages as well as penalties. The whistleblower can collect a 15 to 25 percent share of the government’s recovery.
Among previous cases involving career colleges in Texas, the state accused Westwood College, with a campus in Fort Worth, of potentially deceptive and fraudulent practices. Former students of Everest College, with campuses in Arlington and Fort Worth, also filed a lawsuit accusing the college of misrepresenting job placement rates. The state also sanctioned ATI Schools and Colleges, with a campus in North Richland Hills, for misreporting some graduate employment rates.
Diane Smith, 817-390-7675
©2012 the Fort Worth Star-Telegram
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