The U.S. Chamber of Commerce Institute for Legal Reform (ILR) recently revealed an increase in the False Claims Act (FCA) plaintiffs' bar lawsuits against for-profit colleges and universities.
While the intent of the FCA was to prevent Union Army
suppliers from profiteering, the Civil War-era law has become a profit-generating
tool for the plaintiffs' bar. Any organization that does business with the
federal government is at risk of fraud accusations.
The latest target of the plaintiffs' bar is higher
education. Any university that accepts a research grant from the federal
government may face an FCA lawsuit alleging that it made errors on the grant application
or improperly billed the government.
"While fighting fraud and combating misuse of federal
funds is an important and noble cause, the FCA is a blunt instrument and is far
from the best way to go about it," an ILR representative said.
Additionally, ILR pointed out that the plaintiffs' attorneys receive
approximately one-third of settlements in these cases. It questioned how this
benefits taxpayers and students. When the college or university wins the
FCR case, it has spent resources on fighting the case. Those monies would be
better spent on educating students.
While the FCR has only recovered $35 billion since 1987, the
estimated losses from fraud and improper payments is approximately $72 billion
per year. ILR called for reforms to the FCA that will make it a better tool to help
prevent fraud while preventing excessive rewards to whistleblowers and
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