August 21, 2013 – New York Attorney General Eric T. Schneiderman, in a press release issued Monday, announced that Career Education Corporation, a for-profit education company, has agreed to pay $10.5 Million to resolve an investigation regarding inflated graduate employment statistics. Career Education Corporation operates more than 90 college campuses worldwide, including seven career-focused schools in New York, according to the release. The Attorney General’s investigation was based upon allegations that high-level employees at the school used several schemes to improperly inflate the job placement rates for graduates from the schools. The misconduct described in the press release included counting as “employed” graduates that had worked one day at health fairs, some of which were held at the request of CEC, and mischaracterizing graduates’ jobs to improperly count such students as employed “in the field” for which the student studied. Career Education Corporation originally admitted to issuing inaccurate graduate employment data in a 2011 SEC Filing.
“Students pay thousands of dollars to for-profit colleges because they rightly believe education is the ticket to success in their careers. That’s why it’s so unfortunate that this company exploited students’ aspirations and published misleading information,” said Attorney General Schneiderman. “Students deserve – and the law requires – accurate data when schools publish it for prospective students.”
The misleading employment data was not only published on the schools’ websites, but was also included in advertising designed to encourage prospective students to enroll. Graduate employment data is also reported to the U.S. Department of Education, as well as state and private accrediting agencies. So, while this settlement is significant from a consumer protection standpoint – $9.25 million of settlement will go toward restitution to students – the allegations are also similar to the increasingly-common False Claims Act whistleblower actions that have sought recovery of government funding paid to for-profit colleges and universities. And since False Claims Act cases often remain sealed for years after they are filed, it would not be surprising to see additional federal or state enforcement actions announced following the settlement.
The False Claims Act is a federal law allows an individual with information about government fraud to file a claim on behalf of the government and receive 15-30% of the government’s recovery. Whistleblower claims under the False Claims Act, also known as Qui Tam actions, involve unique procedures and cannot be filed without an attorney according to federal law.