The False Claims Act makes it a crime to defraud or conspire to commit fraud against the government through a federal program. This includes any kind of federal grant, including the $150 billion in federally-backed student loans the government disperses each year. The False Claims Act encourages and rewards whistleblowers to come forward with information about fraud, waste, or abuse of federal education grants and loans.
Colleges and universities who give payments to recruiters to enrolling students could be in violation of The False Claims Act. Colleges and recruiters who encourage students to falsify information on federal student loan applications may also violate The False Claims Act. By enrolling new students who need federally-backed student loans to pay college tuition, colleges can access billions of dollars in revenue.
A recent investigation by Sen. Tom Harkin (D-Iowa), chairman of the U.S. Senate Committee on Health, Education, Labor and Pensions, concluded that for-profit colleges are spending almost a quarter of their revenues on marketing to potential students. The investigation revealed that more often than not, students attending for-profit colleges will leave their schools with no degree and thousands of dollars in crippling debt. Furthermore, these types of predatory marketing and recruitment schemes cost the American taxpayer billions of dollars every year. Approximately 80% of revenues for these for-profit colleges come from federal student loans.
Universities receive millions of dollars every year from the federal government for research, grants, and other programs. When schools receive these funds, they are bound by strict rules on how the money is spent and the recordkeeping that must be maintained. If institutions and researchers misuse or fail to maintain proper recordkeeping procedures, they may be in violation of The False Claims Act.
Persons with inside knowledge of fraud, waste, and abuse of federal grants can help the government and taxpayers recover money squandered by filing a qui tam lawsuit against perpetrators of fraud. Qui tam lawsuits are civil lawsuits initiated by private citizens on behalf of the government. Whistleblowers must retain an attorney to file a False Claims Act lawsuit. Citizens who successfully prosecute qui tam lawsuits against those who perpetrated the fraud can receive up to 30% of the money recovered for the federal government as a reward for their efforts.