What happens when capitalism meets the public system?
United States Department of Justice Press Release
Tuesday May 1, 2012
Preet Bharara, the United States Attorney for the Southern District of New York, and Brian M. Hickey, the Special Agent-in-Charge of the Northeastern Region of the United States Department of Education’s Office of Inspector General (“ED-OIG”), announced today that the United States has filed a civil fraud lawsuit against The Princeton Review, Inc., a leading provider of educational products and services, and ANA AZOCAR, a former employee at the company, for PRINCETON REVIEW’s repeated submission of false claims for reimbursement in connection with a federally-funded program to provide tutoring services to underprivileged children in New York City. As a result, PRINCETON REVIEW received millions of dollars in federal funds for tutoring services that it did not provide. The lawsuit seeks treble damages and civil penalties under the False Claims Act for the fraudulent reimbursement claims submitted by PRINCETON REVIEW.
Manhattan U.S. Attorney Preet Bharara said: “The Princeton Review and its employees were supposed to tutor needy students, not cheat a federal program. As alleged, the company and certain of its employees forged student signatures, falsified sign-in sheets, and provided false certifications in order to deceitfully profit from a well-meaning program. As today’s suit demonstrates, this type of fraud will not be tolerated.”
ED-OIG Special Agent-in-Charge Brian M. Hickey said: “The Supplemental Education Services program provides critical resources for deserving students who seek to improve their academic performance. Today’s actions allege that Princeton Review billed and retained SES payments for students it did not tutor. That is unacceptable. Tracking down those who would cheat this important program is a priority of our office.”
As alleged in the Complaint filed today in Manhattan Federal Court:
From 2002 to 2010, PRINCETON REVIEW participated in a federally-funded program pursuant to which it provided Supplemental Educational Services (“SES”) – specifically, after-school tutoring – to underprivileged students attending underperforming schools in New York City. Under the program, PRINCETON REVIEW was paid a fixed amount of money per hour for each student it tutored by the New York City Department of Education (“NYC DOE”), with funds provided to New York State by the federal Government. The allegations in the Complaint relate exclusively to PRINCETON REVIEW’s provision of SES tutoring in New York City from 2006 to 2010. PRINCETON REVIEW exited the SES business in 2010.
At each of its tutoring classes, PRINCETON REVIEW had students sign in and out on an attendance form. The company was required to keep a daily attendance record as a condition of getting paid. However, many of PRINCETON REVIEW’s Site Managers — employees who oversaw the day-to-day operations of its New York City SES program — routinely falsified entries on the daily student attendance forms to make it appear as though more students had attended tutoring classes than had in fact attended. AZOCAR and other supervisors (called “Directors”) used threats of termination and pay cuts to pressure Site Managers to maintain high daily student attendance. AZOCAR also instructed and/or encouraged some Site Managers to falsify entries on the attendance forms, including by signing in for absent students.
From 2006 to 2010, PRINCETON REVIEW’s daily student attendance forms and invoices were replete with falsifications such as:
Entries were changed to indicate that students were present after the students were initially marked as absent. In some of these instances, the students’ signatures were obvious forgeries because the students’ own names were misspelled. On one attendance form, a student named Dontae was signed in as “Donate.”
Students were signed in as present on days when their parents later confirmed they were absent. For example, one student was in Mexico on a family vacation on four days when the student’s purported signature appears on daily student attendance forms. Another student was signed in as present on three days when in fact a note from the student’s doctor shows that the student was home from school recuperating from surgery.
PRINCETON REVIEW was paid for tutoring students on days when records from the NYC DOE show that the students were absent from school or school was closed. For example, PRINCETON REVIEW billed the NYC DOE for tutoring 74 students at MS 399 in the Bronx on New Year’s Day in 2008, when there were no SES classes due to the holiday.
Furthermore, PRINCETON REVIEW maintained an incentive compensation system that encouraged the falsification of attendance records. Specifically, the company paid Directors substantial bonuses if the Site Managers they supervised consistently reported high daily student attendance. For example, PRINCETON REVIEW paid AZOCAR bonuses of $9,600 and $6,600 in 2008 and 2009, respectively, because the Site Managers she supervised consistently reported high daily student attendance.
For each invoice that PRINCETON REVIEW submitted to the NYC DOE for its purported tutoring, PRINCETON REVIEW certified that the information on the invoice was “true and accurate.” Despite these certifications, most, if not all, of the monthly invoices contained false information, and the invoices billed the NYC DOE for thousands of hours of tutoring services that PRINCETON REVIEW never actually provided. As a result of these false monthly invoices, the NYC DOE paid PRINCETON REVIEW millions of dollars in federal funds for tutoring services that it never in fact provided.
The Complaint further alleges that PRINCETON REVIEW management had previously been made aware of similar misconduct in the company’s New York City SES program, but failed to take adequate corrective action. Specifically, in 2006, the Special Commissioner of Investigation for the New York City School District investigated whether PRINCETON REVIEW had overbilled the NYC DOE for SES tutoring during the 2005-2006 academic year (the academic year immediately preceding the years at issue in this suit). Although the company hired an outside law firm to conduct an internal investigation and implemented certain compliance measures, the company failed to implement adequate corrective action, as evidenced by the fact that the company’s compliance officers routinely approved attendance forms with clear signs of fraud. Moreover, in 2008, a PRINCETON REVIEW manager was told that AZOCAR had instructed a Site Manager to forge student signatures, but the manager failed to investigate the matter adequately and allowed AZOCAR to keep her job. As a result of PRINCETON REVIEW’s failure to deter or detect fraud, the fraud continued.
* * *
By filing its Complaint, the Government joined a private whistleblower lawsuit that had previously been filed against PRINCETON REVIEW under the False Claims Act.
Mr. Bharara thanked the ED-OIG for their extraordinary assistance in this case.
The case is being handled by Assistant U.S. Attorney Christopher B. Harwood from the Office’s Civil Frauds Unit.
The Civil Frauds Unit works in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.