The federal government has many loan guarantee programs, which provide insurance for loans in the areas of education, housing, and small business. If the loan is not repaid and it is determined that fraudulent misrepresentation was made to obtain the loan guarantees, then there might be a sufficient basis for a False Claims Act lawsuit.
A cosmetology school and its owners paid $2 million to settle a qui tam case alleging that the vocational school had falsely reported that it met all statutory and regulatory requirements to participate in the Guaranteed Student Loan and Pell Grant programs. According to the lawsuit, the school used falsified time cards, attendance records, and academic records to make it appear as though students were attending classes and maintaining satisfactory progress, all in order to fraudulently qualify for the federal financial assistance.
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