Leading vocational college Phoenix Institute has been accused of false, misleading and unconscionable conduct and should pay back $106 million to the Commonwealth, according to the Australian Competition and Consumer Commission.
The ACCC launched legal action in the Federal Court on Monday alleging the college, under the direction of chief executive and former policeman Ivan Brown and chief operating officer Harry Kochhar, tricked disadvantaged people into signing up for multiple courses and incurring large debts to the Commonwealth.
The alleged victims included those with intellectual disabilities, and people on Aboriginal communities. Sales people authorised by Phoenix signed them up to multiple online diploma courses which cost $18,000 each, even though some did not have access to the internet.
Also on Monday, the Australian Skills Quality Authority announced that it was cancelling Phoenix Institute's registration as a training organisation, meaning it is now ineligible for further government funding.
ACCC chairman Rod Sims said Phoenix was one of the bigger targets for its investigation into nine or 10 vocational colleges.
"Think about this: it's a company that has got revenue from the Commonwealth of over $100 million between January and October this year; companies with that much revenue are sizeable companies and there are not many of them in Australia - think BHP, the banks and so on. It's a lot of money."
Despite all the taxpayer funds, however, the rate of people actually starting the courses was "extremely low", he said.
"The Commonwealth is paying for something they are simply not getting."
Phoenix College is owned by listed Australian company, Australian Careers Network, whose chairman is retired Sydney-based lawyer Steve Williams, who is also the chairman of Sydney Church of England Grammar (Shore). Former Victorian Liberal higher education minister Peter Hall is on its "Quality Oversight Committee", and sources say he has been active in lobbying the state government on the company's behalf.
Through another brand name CTI, it is also a major sponsor of the Richmond Tigers Football team and Melbourne Victory soccer club.
The company has been in trading halt since early October, which was recently extended to December 15 as Mr Brown insists it can clear its name. Mr Brown has said he is "comfortable" with the way his college has behaved, saying its own records would vindicate it.
In a statement, ACN said some of the statements in the ACCC release were "unfounded and appear to be made in the absence of information".
The ACCC says in a statement to the court that Phoenix sold courses to a retired Aboriginal woman living in public housing in Gray, Northern Territory.
"She was induced by an agent representing Phoenix into enrolling in a course based on representations that the course was free, and that she would receive a free laptop if she enrolled," the affidavit says.
"In fact, without her knowledge, she was enrolled by Phoenix into two courses, incurring a debt to the Commonwealth of $20,0000."
Another witness was a woman living on the disability support pension living in public housing in Euroa, Victoria, who was also told the course was free, and she would get a free laptop.
"Despite being informed she had a disability, the agent encouraged the witness to sign the forms and enrol in a course."
Fairfax Media wrote about the very similar case of Jacinda Eastham in September.
The third case is an unemployed Aboriginal man living in Aboriginal housing in Moree, NSW, who was paid $100 to introduce the agent to other Aboriginal people in the community.
The ACCC says the college processed enrolment forms without calling the "students" or checking on their literacy or numeracy.
Phoenix received $106 million, according to the claim, through the Commonwealth government's VET FEE-HELP scheme - in which students incur a HECS-style debt whenever they do a course. But according to the ACCC, the online diploma courses offered by Phoenix, were not real.
About 4300 people were signed to Early Childhood and Community Services courses for which work placements were a compulsory part of the course, while Phoenix knew that no work placements were available.
"Phoenix enrolled students in courses for its own financial gain, knowing that few if any of them would actually commence the course, or take steps to withdraw from the course before incurring the debt," the claim says.
"Phoenix would therefore receive VET FEE HELP payments for each student without, in most cases having to provide any teaching services."
But Phoenix responded in a statement that the ACCC had no way of judging how many people had started their courses because that information was "unavailable outside of Phoenix management".
Of the three victims, it says the first two were never enrolled and the company was "unable to identify" the third student.
It said it had tape recorded student interviews that showed students were aware of their debts and that the laptops given out were only for loan.
Last year, the vocational education system cost the Commonwealth $1.3 billion in subsidies, but due to conduct of the industry, the subsidy rose so fast in 2015 that it is likely to hit $4 billion.