Princeton Review Is Accused of Civil Fraud in U.S. Lawsuit

Princeton Review Inc. was sued for civil fraud by the U.S., which said the test-preparation provider repeatedly submitted false claims for reimbursement for tutoring services.

The Justice Department filed the lawsuit today in Manhattan federal court, claiming that Framingham, Massachusetts-based Princeton Review received tens of millions of dollars in federal funds for tutoring services to New York City school children that it didn’t provide.

“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,” U.S. Attorney Preet Bharara said in a statement.

The lawsuit seeks triple damages and civil penalties. The scheme is alleged to have run from 2006 to 2010. It allegedly occured in the company’s former Supplemental Educational Services division, which closed in 2010, Princeton Review said.

“No former SES employees or executives are with the company today, and current management -- most of whom joined the company after the division was shuttered -- had no involvement or role in the affairs of SES,” Princeton Review said in a statement.

Princeton Review rose 1.5 percent to about 2.6 cents in over-the-counter trading. The shares have declined 94 percent in the past year.

Tutoring Services

Princeton Review began participating in 2002 in a federally funded program to provide after-school tutoring to disadvantaged children in underperforming schools, according to the complaint. The company was paid a fixed hourly amount for each student it tutored.

According to the complaint, many of the company’s site managers routinely falsified entries on daily student attendance forms to make it appear as if more students were present for classes than actually attended.

Supervisors, including one sued by the U.S., pressured site managers to falsify numbers, according to the complaint. One student was in Mexico on a family vacation when the student’s purported signature was written onto attendance forms, the complaint said.

Barbara Morgan, a spokeswoman for the New York City Department of Education, didn’t immediately return a call seeking comment on the complaint.

The case is U.S. v. Princeton Review, 12-cv-6876, U.S. District Court, Southern District of New York (Manhattan).

Before it's here, it's on the Bloomberg Terminal. LEARN MORE