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Whistleblowers share $1.8 million in for-profit school FCA settlement

Five whistleblowers who alleged a chain of for-profit schools admitted unqualified students and created fake high school diplomas for them will split $1.8 million as part of a False Claims Act settlement.

Education Affiliates (EA), based in White Marsh, Maryland, agreed to pay $13 million to the United States to resolve allegations that it violated the False Claims Act, the DOJ said.

EA operates 50 campuses in the United States under various trade names — including All State Career, Fortis Institute, Fortis College, Tri-State Business Institute Inc., Technical Career Institute Inc., Capps College Inc., Driveco CDL Learning Center, Denver School of Nursing, and Saint Paul’s School of Nursing.

The schools operate Alabama, Florida, Maryland, Ohio, and Texas.

The settlement resolved five lawsuits filed under the whistleblower provisions of the False Claims Act. The FCA allows private citizens to sue on behalf of the United States and share in the recovery. 

The five whistleblowers are splitting about $1.8 million.   

The suits, which the DOJ took over, alleged that employees at EA’s All State Career campus in Baltimore “altered admissions test results so as to admit unqualified students, created false or fraudulent high school diplomas and falsified students’ federal aid applications.”

The suits also alleged that multiple EA schools referred prospective students to “diploma mills” to obtain invalid online high school diplomas.

Two All State Careers admission representatives, Barry Sugarman and Jesse Moore, and a test proctor, Jacqueline Caldwell, pleaded guilty in 2013 to conspiring to defraud a federal financial aid program for students.

Moore was sentenced to probation for four years and fined $2,000.

Sugarman received two years probation and a $5,000 fine, and Caldwell was sentenced to time served and three years of supervised release.

Last week’s settlement also resolved allegations related to EA schools in Birmingham, Alabama, Houston, and Cincinnati, including violations of the ban on incentive compensation for enrollment personnel, misrepresentations of graduation and job placement rates, alteration of attendance records, and enrollment of unqualified students, the DOJ said.

“Using fake high school diplomas is a particularly insidious abuse of the federal student aid system,” Kathleen Tighe of the U.S. Department of Education’s Office of Inspector General said. 

“Students received only a worthless piece of paper,” Tighe said.

The cases were United States ex rel. Roman v. All State Career, Inc. and Education Affiliates, Inc., Civil Case No. JKB-10-1730 (D.Md.); United States ex rel. Thomas v. Education Affiliates, Inc., Civil Case No. JKB-14-332 (D.Md.); United States ex rel. Andrews v. Education Affiliates, Inc., et al., Civil Case No. H-13-2366 (S.D. Tex.); United States ex rel. Atkins, et al. v. Fortis Institute and Education Affiliates, LLC, Civil Case No. CV-14-1107-S (N.D. Ala.); and United States ex rel. McArthur, Gruff & Associates LLC v. Education Affiliates, Inc., Civil Case No. 1:14-CV-977 (S.D. Oh.). 

The False Claims Act claims resolved by the settlement are allegations only, and there has been no determination of liability, the DOJ said.


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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