The False Claims Act

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Proprietary education dates back to the late nineteenth century where institutions focused on professional training in teaching, medicine, and law (Breneman, Pusser, & Turner, S., 2000). The 1972 Higher Education Reauthorization Act included for-profit institutions in federal financial aid programs and changed the vernacular of higher education to postsecondary education (2000). This piece of legislation along with new technologies along with increased demand for higher education and prompted a resurgence of for-profit institutions in the latter half of the twentieth century (2000). From these changes, a new era of postsecondary education was born According to Turner (2006), for-profit institutions are more responsive to the changes in…show more content…
For-profits can generate capital through public (e.g. federal finance aid) and private (e.g. stock offerings) means as well as engage in lobbying to produce a more favorable regulatory climate. These revenue streams have brought sizable profit margins and market share for propriety institutions (2007). However, these streams resulted in increased regulation and governmental oversight from accrediting agencies for federal financial aid and the Securities and Exchange Commission. Current Issues with For-Profit Institutions Over the past few years there has been an increase in False Claims Act lawsuits filed against major for-profit education companies for predatory enrollment strategies (Lederman, 2011). In 2009, the Apollo Group, the parent company of the University of Phoenix, settled a notable case for $78.5 million without having to admit guilt (Lederman, 2009). The case came from testimonies from former admissions counselors which alleged that the institution illegally paid its recruiters based on how many students they enrolled (2009). Cases have also been filed against the Corinthian Colleges Inc., parent company of Everest Colleges, as well as Education Management Corporation, parent company of Argosy and Arts Institutes. The False Claims Act allows a private person (i.e. “relator”) to bring a lawsuit on behalf of the United States, where the person has information that the named defendant has knowingly submitted or caused the
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