| NEW YORK
NEW YORK Dec 20 Education Holdings 1 Inc
, the former owner of the Princeton Review
test-preparation business, agreed to pay up to $10 million to
settle allegations it made false claims for tutoring services it
did not provide.
The settlement, disclosed in court papers in federal court
in New York, would conclude a civil lawsuit brought by the U.S.
Justice Department under the False Claims Act.
As part of the settlement, Education Holdings admitted to
engaging in fraudulent conduct, the Justice Department 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," Preet Bharara, the U.S. Attorney
for Manhattan, said in a statement.
The settlement was approved Wednesday by U.S. District Judge
A spokeswoman for Education Holdings declined comment.
The Justice Department announced the lawsuit in May, two
months after the company agreed to sell its test-prep unit to
private-equity firm Charlesbank Capital Partners LLC for $33
million. As part of the deal, the company changed its name from
Princeton Review Inc to Education Holdings 1 Inc.
From 2002 to 2010, Princeton Review Inc participated in a
program providing after-school tutoring to students in
underperforming schools in New York City, paid based on the
number of students it tutored.
But the Justice Department said that from 2006 to 2010, when
the city paid the company a total of $38 million, the Princeton
Review's student attendance and invoices were "routinely
Some student signatures were forgeries, and at other times
students were marked as present when their parents said they
were not, the lawsuit said.
The lawsuit was filed in 2009 by a whistleblower who worked
at the Princeton Review from 2006 to 2008 as an aide and later a
site manager and sued on behalf of the federal government and
New York State. The lawsuit was unsealed in May as the Justice
Department moved to intervene in the case and file its own
Under the False Claims Act, whistleblowers can file lawsuits
under seal on behalf of the government. Whistleblowers, or
relators as they're called under the law, can typically receive
15 percent to 25 percent of any sum the government recovers.
The settlement papers refer to the whistleblower as Dana
Smith, who will earn 20 percent of anything the government
"This was a case where Princeton Review used a program for
disadvantaged children to line its own pockets," said Timothy
McInnis, a lawyer for Smith. "Our client, the whistleblower,
tried to resolve this internally, and when she raised issues,
she was terminated."
Under the settlement, Education Holdings will pay the United
States $200,000 in five business days and $800,000 following the
sale of its one remaining business asset, the Justice Department
said. It will pay another $9 million depending on the price
garnered in that sale, the department said.
The case is U.S. v. The Princeton Review, Inc, U.S. District
Court for the Southern District of New York, No. 09-6876.