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Justice News

Department of Justice
U.S. Attorney’s Office
District of South Carolina

FOR IMMEDIATE RELEASE
Wednesday, February 17, 2016

Court Awards Judgment Against Cosmetology School in Aiken for Federal Education Grant and Loadn Fraud

Contact Person: Robert Sneed (803) 929-3000

Columbia, South Carolina – The United States District Court of South Carolina awarded a $9,283,123.00 default judgment against Lacy School of Cosmetology and Earnest “Jay” Lacy, for presenting false claims to the U.S. Department of Education for federal student loans and grants, the United States Attorney for the District of South Carolina William Nettles announced today.

 
This is a default judgment which the Court granted after the Defendants failed to answer the Complaint or the entry of default.  This civil default judgment is based on a lawsuit originally filed under the qui tam, or whistleblower, provision of the False Claims Act, which allows private persons with knowledge of false claims to bring civil actions on behalf of the government and to share in any recovery.  The whistleblower in this case was represented by the Richard A. Harpootlian Law Firm, of Columbia.  The lawsuit was filed in the District of South Carolina, Case Number 1:13-cv-00218.
 
Jay Lacy was the President and CEO of the Lacy School of Cosmetology, which before it closed, had four offices in South Carolina:  Aiken (main campus), Lexington, Goose Creek, and Charleston.  The United States Department of Education approved the school to participate in federal student aid programs.  Through its investigation the government learned that the school misappropriated funds by knowingly failing to comply with numerous federal program regulatory requirements, making unauthorized disbursements of federal student aid funds, failing to refund student credit balances, and concealing its actions by submitting false statements of compliance. 
 
The total award of $9,283,123 is based on damages and statutory penalties. The Court held that the government’s actual damages were $2,185,041, which is based on Pell Grants ($2,078,448) and federally backed student loans ($106,593). The False Claims Act requires these damages to be “trebled” (tripled) for a total amount of $6,555,123. Additionally, the False Claims Act imposes a statutory civil penalty ranging from $5,500 to $11,000 per violation; under the minimum civil penalties imposed here, the total civil penalty was $2,728,000.
 
“This use of the False Claims Act shows we are on the leading edge of qui tam litigation across the country,” said U.S. Attorney Nettles.  “Through this type of litigation we continue our efforts to stop fraud and protect federal funds.”
 
The case was the result of a coordinated effort among Assistant United States Attorneys Rob Sneed and Fran Trapp of the United States Attorney’s Office for the District of South Carolina and agents for the U.S. Department of Education. 
 
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Updated February 17, 2016