Alleged scheme targets military students' free tuition assistance

Updated 2:30 p.m. ET

For those serving in the U.S. military, one benefit is free tuition assistance for college courses, but that money may have made them the target of scam artists.

On "CBS This Morning," Sharyl Attkisson shared her investigation into one alleged scheme.

The case is outlined in recently unsealed court documents. It claims a marketing company made huge profits to secretly funnel military students to an unaccredited college at a wildly inflated cost to taxpayers.

As a member of the Pennsylvania National Guard, Sgt. Barbara Banghart was excited to use her free military tuition assistance to continue her education. A recruiter on base signed her up for a medical billing course at Caldwell College, a private New Jersey school.

Banghart said, "He said that we would receive a free laptop. They would send us a gift card for Best Buy in the mail, and we could go pick out the laptop to take the course."

But she got suspicious when she was directed to a different college, Penn Foster, for the online course. She says the online reviews for Penn Foster were terrible.

Banghart recalled, "I said, 'What did I get myself into now?'"

The odd arrangement to enroll at one college, then be funneled to another was allegedly made by a marketing company Ed4Mil - as in Education for Military.

Adam Boyce was hired as an Ed4Mil recruiter and says it was easy to sign up soldiers with military tuition assistance.

Attkisson asked about the soldiers, "They're basically, I guess, told this is almost free to you?"

Boyce said, "This is your money. It's 'use it or lose it.'"

But he says he quickly discovered it was all a bait-and-switch scam. He said, "One day I walked into one of the employees' offices and saw them altering or doctoring a diploma."

According to allegations in court, Ed4Mil used Caldwell College - an accredited school - to get the military tuition. Caldwell kept 10 percent and gave the rest to Ed4Mil. Ed4Mil then paid the real cost of the course to Penn Foster, an unaccredited school not eligible for military tuition, and kept the rest.

Ed4Mil's military recruits, taking courses like jewelry making and dog training, had no idea they were paying as much as six times more than civilians for the very same class.

Gunsmithing at Penn Foster was normally $708. But the same Penn Foster course through Ed4Mil was $4,331.

Asked what kind of thoughts went through his mind when he discovered that, Boyce said, "I was disgusted that I was helping to recruit the students for so long."

Boyce quit and blew the whistle. He's suing Ed4Mil and Caldwell College on behalf of thousands of soldiers and taxpayers who provided millions in military tuition over the past four years.

Nobody at Ed4Mil answered the phone or returned CBS News' emails.

Penn Foster, which declined comment for our report, contacted us after it aired to say that it has severed its relationship with Ed4Mil. A spokesman for Penn Foster says the college "had no role in the alleged marking up of the content prices for sale to veterans." 

"Understandably, to the extent that the allegations are true, we are extremely disappointed," said a Penn Foster spokesman. While Penn Foster isn't accredited to accept military tuition assistance money, the spokesman says the college has various regional and national accreditations and its "programs are affiliated with DANTES [Defense Activity for Non-Traditional Education Support] which qualifies U.S. military personnel for tuition reimbursement."

Caldwell College would only say it "no longer has a relationship" with the education provider and "remains committed to providing high-quality educational opportunities."

Today, Banghart says the Penn Foster course was a big waste of money. She's now attending community college to become a social worker.

She said, "We're actually going out there and sacrificing, being away from our families and doing something good for the country, and then you have people coming in to sell us something that is false."

Attkisson added on "CBS This Morning," that nobody from the Pentagon would comment, but in recognition of widespread problems for years, new rules require all schools offering courses to active-duty military to sign a memo confirming that they follow certain procedures to protect soldiers and ensure taxpayers aren't ripped off.