Two former executives at the for-profit Los Angeles Film School have sued the school, its connected operation Full Sail University, and the schools’ main owner, Bill Heavener, alleging that the school has defrauded federal taxpayers for years via a scheme that certified fake job placements for graduates. 

The complaint, filed last year in U.S. district court in Los Angeles under the federal False Claims Act, was unsealed last week after the U.S. Justice Department did not join the suit by the mandated deadline. False Claims Act cases are brought by whistleblowers in the name of the United States, alleging that companies or people defrauded the government. If the Justice Department, after reviewing the claims, joins the case, the chances of success tend to be stronger, but plaintiffs who carry on without the government sometimes still win. (In the event of a court victory or settlement, the whistleblowers get 15-25 percent of the proceeds if the government intervenes, and 25-30 percent if the government doesn’t, with the rest of the money going to the government.)

David Phillips, LAFS’s former vice president of career development, and Ben Chaib, ex-vice president of admissions, allege that “the vast majority of LAFS graduates were not able to obtain entry level positions” in the motion picture industry. The complaint quotes internal document stating that “most [grads] report a yearly income of 0-$5,000 in their field of study.”

LAFS, located on Sunset Boulevard in Hollywood, offers two- and four-year degrees in film direction, cinematography, audio production, animation, and other fields. Tuition and fees for these programs range from $31,000 to $97,000, according to the school’s website. 

Phillips and Chaib also name as defendants Paul Kessler and Diana Derycz-Kessler, whom they say bought LAFS in 2001, two years after its founding, and sold 75 percent of the school to Heavener and his partners in 2003. 

LAFS’s accreditor, ACCSC, requires that schools place at least 70 percent of graduates in jobs in the field in order to remain eligible for federal student grants and loans. Phillips and Chaib claim that school executives believed that, at most, 20 percent of graduates would be able to find actual jobs in the field, so for others the school needed to “engineer the gigs.” They say the school paid a company called Ivar Music Group and others almost $1 million between 2010 and 2017 to hire its graduates for jobs that actually lasted just a few days but were certified to the accreditor as real placements.

Phillips and Chaib allege that LAFS also lied to the U.S. Department of Education during a 2017 audit to conceal the job placement fraud. 

They also allege that LAFS violated laws prohibiting schools from paying admissions representatives based on the number of students they sign up. They say the school “set strict monthly enrollment mandates guised as ‘retention rates'” and that representatives who exceeded these levels got promotions, higher salaries, and private offices. 

In a court filing, LAFS and Full Sail deny their former executives’ assertions and legal claims. The schools say that these allegations “were already thoroughly investigated” by the Department of Education from 2017 to 2020 and that the Department reached a settlement with LAFS in 2020. (Republic Report will look into this settlement, including via a Freedom of Information Act request with the Department of Education. We will update you if and when we get documents from a FOIA request, which we estimate will take a long time.)

LAFS also asserts that Phillips and Chaib already settled their claims with the school, including False Claims Act allegations. The school calls the new lawsuit “nothing more than a campaign to extract additional money from Defendants….” 

Data released by the Department of Education show that Los Angeles Film School had $101 million in revenue for 2023-24, the most recent reporting year, with $87 million of that total coming from taxpayer-financed student grants and loans.

Florida-based Full Sail University, another entertainment industry-focused school owned by Heavener and three partners, gets even more federal dollars — $342 million in 2023-24, out of $481 million in total revenue.

Full Sail, based in Winter Park, FL, has long been one of the most expensive for-profit schools. Full Sail programs, as well as LAFS programs, have flunked the Department of Education’s gainful employment rule — a measure of whether graduates of a college program earn enough money to be able to pay down their student loans. 

With for-profit colleges so dependent on federal policy and largesse, Heavener has been a regular donor to politicians. During the 2012 presidential campaign, Republican candidate Mitt Romney praised Full Sail as a model for higher education. It was subsequently revealed that not only was Heavener a major donor to Romney’s campaign but also Romney’s private equity company sold clients on investments in the company that owned Full Sail. 

The new whistleblower complaint alleges that the the two schools’ “entire online admissions and education enterprise, by far its most profitable business, are both operated from within the [Full Sail] campus, not on the LAFS campus,” that employees frequently transferred between the schools, and that their “accounting systems and financial management were closely interlinked.” But, the complaint alleges, “Heavener and the Kesslers went to great lengths to keep [the Department of Education] from learning how closely the institutions were linked.”

U.S. District Judge Stanley Blumenfeld, Jr. has set a schedule for discovery in the case and set a jury trial for next October.

LAFS is represented in the lawsuit by the law firm Cooley, which has a long history of defending for-profit colleges.

Despite the settlement of the Department of Education investigation in 2020, as described by LAFS in the court filing, the school’s accreditor, ACCSC, in 2023 renewed LAFS for the maximum period, five years. ACCSC, the largest accreditor of for-profit schools, has renewed accreditation for a number of controversial predatory colleges. ACCSC also accredits Full Sail and at one point placed that school on warning status, citing poor student outcomes, but later removed that status.

LAFS sued Phillips after he left the school in 2022. alleging that he invaded the privacy of Heavener and LAFS president Tammy Elliott by recording their conversations, according to Variety, which was the first outlet to report on the pending False Claims Act case. The lawsuit against Phillips was eventually dismissed.

Phillips is a former film and television industry agent, manager, and producer who joined LAFS in 2010. Chaib, who joined LAFS in 2009, previously worked in admissions roles at other controversial for-profit college chains: the University of Phoenix, Career Education Corp. (now called Perdoceo), Heald College (part of the now-demised Corinthian Colleges operation), and Kaplan University (now called Purdue University Global).