Costa Mesa nursing school to get back $3 million in seized assets after fraud case is dismissed

The federal government agreed to return more than $3 million in assets seized from a Costa Mesa nursing school after the U.S. attorney’s office decided not to prosecute the college or its owners in connection with a fraud investigation, attorneys for the school said.

A case brought by federal authorities against Pacific College, a private for-profit nursing school, was dismissed Nov. 1. The assets were seized in October 2017 as part of an investigation into allegations of a financial aid fraud scheme.

“After a complete and comprehensive investigation that stretched for an entire year, Pacific College has been exonerated,” attorney Eliot Krieger, who represented one of Pacific College’s owners, said in a statement. “The allegations were always completely unfounded, as there was never any wrongdoing, and the college is gratified that the federal government now understands that.”

The U.S. attorney’s office did not comment.

In June, lawyers for Pacific College asked a federal judge to order authorities to return the seized funds. Officials said the school would have to close if the assets weren’t returned.

Pacific College, whose main campus is at 3160 Red Hill Ave. in Costa Mesa, opened in 1993. It has satellite locations in Commerce and Ontario and previously on the campus of Cal State Long Beach.

Authorities had alleged that Pacific College increased students’ tuition to eliminate refunds of financial aid funding to the students and enable the school to keep the money. Federal financial aid is awarded based on student applications, but the funds are disbursed directly to the school where a student is enrolled. Typically, a school applies the funds to the student’s account and any amount above the cost of tuition is given to the student to cover living expenses.

The government also alleged that “Pacific College, among other things, inflated grades, falsified attendance records and passed students through its nursing program in a manner that maintained a false standard of academic progress that kept students enrolled in the program and sustained the flow of incoming [federal student aid] funds,” according to the U.S. attorney’s office.

Pacific College received $22.9 million in financial aid funds from 2010 to 2017, according to court documents.

The college has not received money from the U.S. Department of Education since September 2017 because of the investigation, the defendants’ attorneys said.

Federal prosecutors said in court documents that the FBI, the Department of Education and the California Department of Consumer Affairs began investigating the college in late 2012.

Attorney James Spertus, who represents Pacific College President William Nelson and his wife, Ila, argued in a May 14 court filing that the FBI investigation did not begin in 2012 but started only after a Pacific College employee threatened to have his friends at the FBI shut down the college unless it paid him and gave him equity in the school. The college refused, Spertus wrote.

julia.sclafani@latimes.com