LA Film School Lawsuit: Whistleblower Claims and 2020 Settlement

The Los Angeles Film School lawsuit is a federal whistleblower case accusing the for-profit Hollywood school and its sister institution Full Sail University of manufacturing thousands of fake jobs for graduates so it could meet accreditation requirements and keep collecting tens of millions of dollars in federal student aid each year. Two former long-serving executives filed the case in June 2024 under the False Claims Act. It was unsealed in 2025, and a jury trial is scheduled for October 19, 2026.¹²

What the Whistleblowers Allege

To stay accredited and eligible for federal student aid, the Los Angeles Film School had to show that at least 70 percent of its graduates found work in their field. The complaint says the school’s own internal estimates put the real rate closer to 20 percent, with most graduates reporting annual earnings of $0 to $5,000 in their trained field.¹

According to the lawsuit, LAFS executives closed that gap by “engineering the gigs” for roughly half of all graduates. Between 2010 and 2017, the school allegedly spent nearly $1 million paying outside entities, including a company called Ivar Music Group, to hire graduates for temporary positions that typically lasted only two days. School executives allegedly controlled which graduates were placed, when they worked, and how much they were paid.³¹

Students, the complaint says, were told these placements were “in-house production opportunities” or “post-graduate apprenticeships,” which obscured the fact that the school itself was bankrolling the positions. Those manufactured jobs were then counted as genuine employment for accreditation purposes, allowing the school to keep receiving federal funding.³

The First Amended Complaint, filed in October 2025, named additional vehicles the plaintiffs say were used in the scheme, including Wizard World Entertainment, LLC and production companies called Jellyworks Films and First Chance Films. Paul Kessler, a co-owner of the school, was a major investor in and president of Wizard World, according to the filing.⁴

Who Filed It, and Why It Was Hidden Until 2025

The plaintiffs are Dave Phillips, the school’s former vice president of career development, and Ben Chaib, its former vice president of admissions. Both worked at LAFS for roughly 12 years before leaving.¹

They filed the case as a qui tam action under the federal False Claims Act, which lets private citizens sue on the government’s behalf when they have evidence of fraud involving federal money. Qui tam complaints are initially sealed to give federal investigators time to review the evidence, which is why the public did not learn of the case for more than a year. In May 2025, the U.S. Department of Justice told the court it would not intervene at that time, and the complaint was unsealed. The DOJ’s decision is not a judgment on the merits; it means Phillips and Chaib are proceeding on their own. If the suit recovers federal funds, they could be entitled to 25 to 30 percent of what the government collects.⁵³

Other Claims in the Complaint

The lawsuit also alleges an illegal incentive compensation system that tied admissions staff pay, promotions, and job security to enrollment numbers. Federal law prohibits schools receiving Title IV student aid from compensating employees based on how many students they recruit. According to the complaint, representatives who met enrollment quotas received privileges, while those who missed them were placed on performance improvement plans and eventually fired.⁴

When the Department of Education audited the school in 2017, the complaint alleges that executives lied to auditors, denied the existence of the incentive compensation system, and failed to disclose the school’s financial relationships with the vendors supplying temporary graduate jobs. The amended complaint says CEO Bill Heavener and then-president Diana Derycz-Kessler pressured Phillips to hide the operational ties between LAFS and Full Sail during the audit. It quotes Heavener as telling leadership that “full-time jobs don’t exist for these people” and instructing the school to “focus strictly on the appearance of compliance.”¹⁶

The Money and the Students Involved

According to the complaint, LAFS receives roughly $85 million a year in federal assistance, including about $60 million in federal student loans and $19 million in veterans’ education benefits. Because the lawsuit also names Full Sail, which receives about $377 million a year in federal funding, the total federal dollars implicated across both institutions exceeds $460 million annually.¹³

For students, a bachelor’s degree program in film production at LAFS carries total tuition and fees of roughly $87,000 for domestic students, and the median federal student debt for graduates is about $25,250.⁷⁸ About 82 percent of students receive some form of financial aid, and 74 percent receive federal Pell Grants.⁹

Who Owns the School

LAFS is organized as Los Angeles Film Schools, LLC. Bill Heavener, who also owns and controls Full Sail University in Winter Park, Florida, serves as co-chair of the board and CEO of both institutions. Diana Derycz-Kessler and Paul Kessler are longtime co-owners; Derycz-Kessler ran LAFS as president and CEO for 16 years before stepping down abruptly in 2017 while the school was under a Department of Education investigation. Both Kesslers are named as defendants in the current case.⁴

The complaint describes the two schools as so tightly interlinked that LAFS’s accounting, payroll, and paychecks are issued from Full Sail’s offices in Florida, with executives regularly transferred between campuses. The plaintiffs say the same fraudulent schemes operated at both.⁴

The 2020 Settlement the School Points To

This is not the first time LAFS’s job placement practices have drawn federal scrutiny. A Department of Education audit, with findings issued in 2018, identified several violations: the school had failed to accurately track students’ academic progress, improperly recorded dropout dates (which allowed it to keep receiving aid for students who had already left), and permitted students to use federal loan money to pay a $75 application fee.¹⁰

In October 2020, LAFS settled the audit for a combined $999,286, roughly $705,000 for the audit findings and a $294,000 fine tied to its job placement data. As part of the agreement, the school committed that it “will not pay industry practitioners or other third parties to directly or indirectly provide or arrange for jobs or gigs” used to substantiate employment rates. The school admitted no wrongdoing. The settlement did not waive potential future civil fraud claims and did not absolve potential criminal violations.¹⁰

What the School Says

Attorneys for LAFS have denied the allegations and called the lawsuit an attempt “to resuscitate time-barred and erroneous allegations, which were already thoroughly investigated and settled by the Department of Education.” The defense argues the matters raised by the whistleblowers were addressed during the 2017–2020 audit process.³

The school has also characterized the case as a “campaign to extract additional money,” noting that both Phillips and Chaib previously received settlements when their tenures ended.⁵ Full Sail has separately pointed out that neither whistleblower was ever employed by Full Sail, only by LAFS.⁶

Where the Case Stands

The case, formally styled United States of America, ex rel. Phillips and Chaib v. Los Angeles Film School, LLC, et al. (Case No. 2:24-cv-05214), is assigned to Judge Stanley Blumenfeld Jr. in the Central District of California.²

After the unsealing, LAFS signaled it would move to dismiss, but the court rejected a defense request to delay the scheduling conference, noting the case had been pending for over a year and needed to proceed “without any unnecessary delay.” The court ordered the plaintiffs to file their First Amended Complaint by October 14, 2025, which they did, and gave the defendants until November 14, 2025, to respond. Discovery is set to close on May 29, 2026, with a settlement conference deadline of July 24, 2026, and a jury trial scheduled to begin October 19, 2026.²

The school continues to operate. Its accreditation with the Accrediting Commission of Career Schools and Colleges remains active, and no pending actions such as probation or show-cause orders appear in the commission’s most recent public notices.¹¹ Enrollment has slipped, however, with the school reporting about 5,472 students for the 2024–2025 academic year, down from a peak of roughly 5,833 the prior year, and about 78 percent of students enrolled exclusively in online programs.¹²

1
Variety. Los Angeles Film School Accused of Fake Jobs and Student Aid Fraud
2
CourtListener. United States of America v. Los Angeles Film School, LLC
3
Los Angeles Times. LA Film School Sued for Alleged Accreditation Scheme, Fake Graduate Jobs
4
Thompson Coburn (hosting court filing). US Ex Rel. Phillips v. Los Angeles Film School, First Amended Complaint
5
The Guardian. Los Angeles Film School Lawsuit Unsealed
6
Orlando Sentinel. Whistleblowers Allege Full Sail University Hoodwinked Students With Fake Jobs
7
LAFS. Fees and Tuition
8
College Factual. Los Angeles Film School Financial Aid
9
Niche. The Los Angeles Film School Scholarships and Financial Aid
10
Variety. Los Angeles Film School Audit and Settlement
11
ACCSC. ACCSC Public Notice
12
College Tuition Compare. Los Angeles Film School Student Population