A settlement has been reached in a whistleblower class action lawsuit brought against American Commercial Colleges Inc (ACC) who is accused of falsely certifying that it complied with certain eligibility requirements of the federal student aid programs.
According to the settlement, ACC will pay the United States $1 million, plus interest, over five years, and could be obligated to pay an additional $1.5 million under the terms of the agreement. The whistleblower will receive $170,000 of the $1 million fixed portion of the government’s recovery, and could possibly receive an additional $255,000 if ACC becomes obligated to pay the maximum $1.5 million contingent portion of the settlement.
The intial lawsuit was filed July 2010. The government alleged that hat ACC violated the False Claims Act when it orchestrated certain short-term private student loans that ACC repaid with federal Title IV funds to artificially inflate the amount of private funding ACC counted for purposes of the 90/10 Rule. The short-term loans at issue in this case were not sought or obtained by students on their own; rather, the United States contends ACC orchestrated the loans for the sole purpose of manipulating its 90/10 Rule calculations.To maintain eligibility to participate in federal student aid programs authorized by Title IV of the Higher Education Act of 1965, for-profit colleges such as ACC must obtain no more than ninety percent of their annual revenues from Title IV student aid programs. At least ten percent of their revenues must come from other sources, such as payments from students using their own funds or private loans independent of Title IV. Congress enacted this “90/10 Rule” based on the belief that quality schools should be able to attract at least a portion of their funding from private sources, and not rely solely upon the Federal Government.
