Higher education suffers under FCA lawsuits

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 attorneys.