Consumer Fraud

Whistleblowers expose fraud in private Texas college group

osha whistle Whistleblowers expose fraud in private Texas college groupAmerican Commercial Colleges Inc. (ACC) has agreed to pay the United States up to $2.5 million plus interest to resolve allegations brought by two whistleblowers under the False Claims Act (FCA) that the school falsely reported it complied with certain eligibility requirements of federal student aid programs. The scheme allowed the for-profit private school to collect taxpayer money to which it was not entitled.

Title IV of the Higher Education Act of 1965 mandates that in order to participate in federal student aid programs, for-profit colleges such as ACC must not obtain more than 90 percent of their annual revenues from federal student aid programs. At least 10 percent of their annual revenues must come from other sources, such as students paying with their own funds or private loans.

The “90/10 Rule” was enacted by Congress with the belief that quality schools should be able to attract a portion of their funding from private sources and not have to rely solely upon the U.S. government for all of their funding.

According to the U.S. Justice Department, the settlement resolves allegations that ACC repaid certain short-term private student loans using federal Title IV funds, which would to artificially inflate the amount of funding the school reported for 90/10-rule purposes.

“American taxpayers have a right to expect federal student aid to be used as intended by Congress —  to help students obtain a quality education from an eligible institution,” said Stuart F. Delery, Acting Assistant Attorney General for the Department of Justice’s Civil Division.  “The Department of Justice is committed to making sure that for-profit colleges play by the rules and that Title IV funds are used as intended.”

The settlement resolves allegations brought by Shawn Clark and Juan Delgado, former directors of ACC campuses in Odessa and Abilene, under the qui tam “whistleblower” provisions of the False Claims Act, which enable private citizens who witness fraud to take legal action on behalf of the federal government and share in any recovery that may result, usually about 25 percent.

“Misuse of taxpayers’ dollars cannot be tolerated – not only for the sake of taxpayers, but especially in the case of innocent individuals who seek to improve their lives through a quality education,” said U.S. Attorney for the Northern District of Texas Sarah R. Saldaña.


U.S. Department of Justice