The False Claims Act free essay sample

Proprietary education dates back to the late nineteenth century where institutions focused on professional training in teaching, medicine, and law (Breneman, Pusser, ump; 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 the external environment and are able to capitalize on new opportunities. The growth among for-profit institutions can be attributed to their ability for geographic variation and catering to the need of non-traditional students for increased educational access. The geographic variation references the inability of non-for-profit educational institutions to adjust to changes in state, regional, and local demand due to political and social forces. For-profits flexibility in their governance structure, sensitivity to market conditions, and the ability to generate investment capital through public and private means allow them to establish themselves in new and emerging markets regardless of career and location. Also, for-profit institutions are able to conceptualize the geographic boundaries of education that constrain traditional educational institutions. Therefore, for-profit hold a competitive advantage over non-profit institutions in attracting the expanding market of the aforementioned non-traditional students through flexible educational offerings (e.  G. time and duration of classes and programs) as well as convenient locations (e. g. online or accessible locations). According to Floyd (2007) argued that for-profit institutions are better at stimulating growth, promoting efficiency, and adapting to current market demands because of their well-defined bureaucracy. For-profits can generate capital through public (e. g. fe deral 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. Rnowingly submitted or caused the submission of false or fraudulent claims to the United States (Lederman, 2011; The United States Department of Justice, n. d. ). The fraudulent enrollment of students eligible for need-based aid who do not capacity for academic persistence and graduation is a false claim associated with for-profit higher education institutions. This predatory enrollment is commonly linked with incentive compensation for admissions counselors (2011). In 2010, the Government Accountability Office conducted undercover operations on the recruiting strategies and tactics of several for-profit institutions (Kutz, 2010). Their investigation uncovered pervasive deceptive recruiting practices which included offering incentive pay for enrollments, failure to disclose total tuition cost to students before committing; lying about the institution’s accreditation status; encouraging students to assume unneeded loans; promising high pay to graduates, failure to disclosure graduation rates, and offering tuition cost not equal to a full year of classes (2010). In response to consumer and political outcries, a group of for-profit institutions formed the Foundation for Educational Success which released a code of conduct entitled the Standards of Responsible Conduct and Transparency with the purpose of addressing major concerns (Fain, 2011; The Foundation For Educational Success, 2011). The issues that were primarily discussed were banning enrollment-based incentive pay and the disclosure to students of information about ‘transferability of credit and loan counseling’ (The Foundation For Educational Success, 2011). Institutions failing the annual review will lose their good standing (2011). Fain (2011) said that there were no public, economic, or organizational penalties associated with failure to comply other than removal from the Foundation’s protective website. Presently, the prominent for-profit educational groups have not signed the code of conduct and only 17 percent of for-profit institutions have agreed to the standards and their enforcement (2011).