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THE UNITED STATES ATTORNEY'S OFFICE

SOUTHERN DISTRCIT OF NEW YORK

PRESS RELEASE


Manhattan U.S. Attorney Announces Settlement Of Claims That Princeton Review Fabricated Attendance Records For Thousands Of Hours Of Tutoring To Children That Was Paid For With Federal Funds

FOR IMMEDIATE RELEASE Thursday, December 20, 2012

Settlement Contains Admissions and Acceptance of Responsibility for Submitting False Claims for Payment, and an Agreement to Pay Up to $10 Million in Damages and Penalties to the United States

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 ("USED-OIG"), announced today that the United States has reached a settlement with EDUCATION HOLDINGS, INC., which prior to May 2012 was known as THE PRINCETON REVIEW, INC., for PRINCETON REVIEW's repeated submission of false claims for reimbursement in connection with a federally-funded program to provide tutoring services to children at underperforming schools in New York City. In May 2012, EDUCATION HOLDINGS sold the name and brand of THE PRINCETON REVIEW, INC., to an unaffiliated third party. In the settlement, EDUCATION HOLDINGS admitted, acknowledged, and accepted responsibility for engaging in fraudulent conduct while it was doing business as PRINCETON REVIEW, including falsifying student attendance records and submitting claims for reimbursement for tutoring services that it did not provide. EDUCATION HOLDINGS also agreed to pay up to $10 million to the United States in damages and penalties under the False Claims Act. The settlement was approved yesterday by U.S. District Judge Barbara S. Jones.

Manhattan U.S. Attorney Preet Bharara said: "Every dollar wrongly taken in this case was taken from a child who was entitled to help in achieving academic success and through that a better life. Sadly, the fraud here happened on a massive scale – through the repeated and systematic subversion of the goals of a federal program intended to provide essential tutoring services to children to give them a chance to succeed academically. While doing business as the Princeton Review, Education Holdings created a culture of fraud, incentivizing Directors to pressure Site Managers to report high attendance numbers, which the Site Managers did by fabricating student attendance records and billing the government for tutoring services they never provided. As a result, the company enriched itself while leaving the children behind. We are pleased that, with this settlement, Education Holdings has accepted responsibility for its conduct, and agreed to pay millions of dollars in damages and penalties."

USED-OIG Special Agent-in-Charge Brian M. Hickey said: "I am proud of the work of our team whose efforts led to these actions. The Supplemental Education Services program provides critical resources for deserving students who seek to improve their academic performance. It's not a slush fund for greedy individuals to use for their own purposes."

As alleged in the Complaint previously filed in Manhattan Federal Court in April 2012 and the Settlement Agreement:

From 2002 to 2010, when EDUCATION HOLDINGS was doing business as PRINCETON REVIEW, PRINCETON REVIEW participated in a federally-funded program pursuant to which it provided Supplemental Educational Services ("SES") – specifically, after-school tutoring – to students attending underperforming schools in New York City. As an SES provider, 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 from 2006 to 2010 (the "Covered Period").

At each of its tutoring classes, PRINCETON REVIEW was required to have students sign in and sign out on a standard attendance form. The company was also required to certify that its daily attendance records were accurate as a condition of getting paid. However, many of PRINCETON REVIEW's Site Managers – the employees who oversaw the day-to-day operations of its New York City SES program – routinely falsified entries on the attendance forms to make it appear that more students had attended tutoring classes than had in fact attended. These Site Managers were pressured by their supervisors – called Directors – to maintain high daily student attendance, including by being threatened with termination and pay cuts.

PRINCETON REVIEW's daily attendance forms from the Covered Period are replete with falsifications, such as instances where the students' own names were misspelled, and instances where students were signed in as present on days when their parents have confirmed that they were absent. Moreover, 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.

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 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, the invoices contained false information, and the NYC DOE was billed for thousands of hours of tutoring services that PRINCETON REVIEW never actually provided. As a result of these false invoices, the NYC DOE paid PRINCETON REVIEW millions of dollars in federal funds to which it was not entitled.

As part of the settlement, EDUCATION HOLDINGS has admitted, acknowledged, and accepted responsibility for the following conduct, all of which occurred during the Covered Period, when EDUCATION HOLDINGS was doing business as PRINCETON REVIEW:

  • that many of the individuals who were responsible for the day-to-day operations of Princeton Review's SES tutoring program ("Site Managers") routinely falsified entries on daily student attendance sheets, including by forging student signatures, to make it appear that more students had attended Princeton Review's SES tutoring classes than had actually attended;
  • that Site Managers were repeatedly told by their supervisors ("Directors") to meet daily quotas for student attendance, and were pressured by their Directors to meet such quotas and maintain high daily student attendance, with some being terminated or subjected to pay cuts for failing to maintain high daily student attendance;
  • that Directors were incentivized to pressure their Site Managers to report high attendance through a bonus program under which Directors received thousands of dollars in bonuses when the Site Managers they supervised reported average daily student attendance of 60% or more of total enrollees in the Site Managers' SES classes;
  • that Princeton Review's daily student attendance sheets from the Covered Period are replete with falsifications, and report that many more students had attended Princeton Review's SES tutoring classes than had actually attended;
  • that Princeton Review used the above-referenced falsified daily student attendance sheets to prepare invoices that it then submitted in connection with its SES tutoring program;
  • that each of these invoices falsely certified that the information on the invoice was true and accurate; and
  • that these invoices ultimately resulted in the payment to Princeton Review of millions of dollars in federal funds for thousands of hours of SES tutoring that Princeton Review never in fact provided.

Pursuant to the settlement, EDUCATION HOLDINGS will pay the United States: $200,000 within five business days of the settlement; $800,000 upon the sale of its sole remaining business asset; and up to $9 million more depending on the sale price of the remaining business asset. EDUCATION HOLDINGS has represented that these payments represent its ability to pay a monetary settlement to the Government in light of its current financial condition.

Under the settlement, EDUCATION HOLDINGS has certified that it is not currently providing SES tutoring anywhere in the United States, and that the individuals who engaged in the wrongful conduct are no longer employed by or associated with it. In addition, EDUCATION HOLDINGS has agreed to a voluntary exclusion from all federal procurement and non-procurement transactions for a period of three years.


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 USED-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.

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U.S. v. Eductation Holdings 1, Inc (Princeton Review) Settlement [PDF]


 
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Last Modified: 12/28/2012