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Whistleblowers Receive$11 Million Settlement Against Marinello Schools of Beauty

From outward appearances, the 56 campuses of the Marinello Schools of Beauty were profitable and successful. However, the Department of Education believed that school administrators had engaged in an ongoing and systematic program of misrepresentation that enabled the school to collect millions of dollars in federal financial aid. The schools have now been shuttered and a portion of the $11 million settlement is poised to be distributed among six whistleblowing employees while the remainder is being returned to the government.

WhistleblowerMarinello School of Beauty was founded in 1905. The school eventually boasted 39 locations in California with others found in Nevada, Utah, Connecticut and elsewhere. Programs offered included cosmetology, barbering and hair design. However, recent students knew that trouble was brewing. A Connecticut graduate received multiple notices from the school telling her that she owed several thousand dollars. She told the school that her tuition was supposed to be covered by federal aid, but to no avail. The school refused to release her transcripts so she cannot get a cosmetology license.

Her story is like many others, but it was a group of six former employees who brought the allegations of misdeeds to the federal government. They alleged that the schools did not provide adequate training. Moreover, they claimed that the school knowingly requested federal student aid for enrollees who did not have a diploma. Some of these students were maneuvered into a high school diploma completion program that was not accredited. Other students did not receive all of the federal funds that they were entitled to. Marinello was further accused of inflating its enrollment numbers, graduation rates and the earning potential of graduates.

The Department of Education withdrew federal financial support of the schools at the end of 2015, and the schools shuttered for good in February of the following year. The government will only be able to recoup a small portion of the many millions of dollars that had been distributed to the schools in the last year or two alone, but this case remains a cautionary tale for other institutions that receive aid from the federal government.