Two former executives of the Los Angeles Film School have filed a whistleblower lawsuit accusing the school of creating thousands of fake jobs for its graduates in an effort to maintain its eligibility for federal funding.
The lawsuit, obtained Tuesday by TheWrap, was filed in June 2024 and unsealed this past May after the U.S. Department of Justice declined to get involved. In it, former admissions VP Ben Chaib and former career advancement VP Dave Phillips accuse LAFS of vast amounts of fraud to maintain their accreditation and of hiding evidence of that fraud from a 2017 audit by the U.S. Department of Education.
To qualify for federal student aid, higher education institutions must prove that at least 70% of its graduates are able to find work in their chosen field. According to the suit, LAFS receives $85 million in federal financial assistance annual, including $60 million in student loan funds.
The lawsuit claims that Phillips, along with other LAFS leaders, was told by owner James “Bill” Heavener just before the 2017 audit that full-time jobs for graduates of the school’s audio recording curriculm “do not exist,” and that if auditors found out about this “about a third of our business is going to disappear.”
As part of the alleged scam, Phillips and Chaib allege that Heavener and LAFS CEO Diana Dercyz-Kessler instructed school officials “to focus strictly on the appearance of compliance” with the 70% benchmark. To that end, they financed indie productions with the plan to use them to hire LAFS graduates for jobs that only lasted for a few days, just long enough that they could claim that their graduates had found gainful employment.
The suit also accuses LAFS of paying $1 million from 2010 to 2017 to various companies to hire graduates for two days, controlling how much the graduates would be paid. Plaintiffs claimed that LAFS hid these payments from the Department of Education during the 2017 audit along with an incentive payment program for the school’s sales team illegally tied to student enrollment.
LAFS did not respond to TheWrap’s requests for comment, but in a statement filed to the U.S. District Court in Los Angeles, attorneys for the school denied the claims, accusing the plaintiffs of attempting “to resuscitate time-barred and erroneous allegations, which were already thoroughly investigated and settled by the Department of Education” as part of an investigation that took place from 2017 to 2020.
In the statement, LAFS also says that Chaib and Phillips released their claims against the school as part of settlements reached in 2021 and 2023 respectively upon their departures from the school. LAFS accused the plaintiffs of filing the whistleblower suit “to extract additional money” through a finder’s fee that the government can pay to any private individuals who report fraud related to federal funds.
