Several private student loan collectors engaged in a years-long, $100 million fraud scheme against the federal government, according to a recent lawsuit. The collectors’ scheme was originally brought to the attention of the federal government by a whistleblower complaint.

Some of the large private student loan collection agencies named in the lawsuit allegedly posed as small businesses in order to win subcontracts, and others allegedly hired subcontractors that had lied about being legally considered small businesses.

According to the lawsuit, contractors were rewarded with incentives for contracting with small businesses, so the companies lied about the status of their contractors in order to claim these bonuses. This constituted fraud, the whistleblower argues.

Collectors are often incentivized to contract their work to small businesses, as they were in this case. But the Small Business Administration doesn’t usually spend its time confirming that a particular company is genuinely a small business. So some contractors allegedly schemed to win incentives to which they were completely unqualified, the whistleblower says.

“Through deceptive practices, these defendants have essentially consolidated a large portion of a $1 billion contract, taking away legally protected opportunities from legitimate small businesses who never really had a chance,” said the whistleblower’s attorney to Law360.

In 2018 alone, students took out nearly $91 billion in federal loans. More than $1 million student loan borrowers default on their loans each year, according to a report from the Center for American Progress.

“While these defendants are publicly saying they’re recovering money for the government, they’re secretly taking taxpayer money that they don’t deserve by misrepresenting who they are,” said the whistleblower’s counsel.

According to the fraud lawsuit, these student loan companies are making the ongoing student-loan crisis in the U.S. even worse.

“Taxpayer dollars, which are already tied up in defaulted student loans, are now also being paid to defendants in the form of bonuses and other incentive compensation based on their false representations,” said plaintiff’s counsel.

Almost a dozen private student loan contractors were named in the lawsuit, including Continental Service Group Inc. and Global Receivables Solutions Inc., along with subcontractors like Edgewater Consulting Group LLC and Protocol Financial Service LLC. The lawsuit was filed on March 8, 2019, in the U.S. District Court for the District of Columbia.

The False Claims Act

Under the False Claims Act, the government can hold companies and individuals responsible for committing a number of types of fraud, including Medicare fraud, student loan fraud, and more. Lawsuits under the False Claims Act can be filed by the government. Private parties known as whistleblowers can also file False Claims Act lawsuits on behalf of the government. There are provisions in place to protect whistleblowers who come forward with information about fraud.

Filing a Whistleblower Complaint

If you believe you have witnessed some type of fraud against the government, you may be able to file a whistleblower complaint under the False Claims Act, which may lead to substantial compensation. Indeed, those who act as whistleblowers in order to bring fraud against the government to light are typically awarded between 15 and 30 percent of any lawsuit or settlement payout. In some cases, this may mean that a whistleblower receives hundreds of thousands—or even millions—of dollars from a particularly large settlement.

The Whistleblower Lawsuit is Case No. 1:15-cv-00750-RC, in the U.S. District Court for the District of Columbia.

This article is not legal advice. It is presented
for informational purposes only.