A federal court judge has criticised the Commonwealth's funding of private vocational education for allowing hundreds of millions of taxpayer dollars to flow out of public coffers with minimal oversight.
"It is hard to avoid, whoever put this scheme together did not think it through very much," Justice Nye Perram said in Sydney on Thursday.
Justice Perram is presiding over action taken by the Australian Competition and Consumer Commission to recoup $47 million of dollars of public VET FEE-HELP funding from Unique International College.
The ACCC alleges the college acted unconscionably in recruiting illiterate, disabled students from Aboriginal missions and remote areas by putting them in up to $25,000 debt through the inducement of a free laptop.
The outcome of the hearing could set an important precedent for the regulator. Unique is the first of several colleges being pursued by the ACCC to be taken to court as the regulator looks to reclaim more than $300 million in public funding.
On Thursday, the last day of the hearing, Justice Perram cited "architectural flaws" in the VET FEE-HELP system but added the $130 million earned by Unique between 2013 and 2015 was an "enormous number".
"The thing [the ACCC] has going for them is that 130 million number," he said. "That is an enormous number. It is a huge number for a small school on top of a shop in Granville."
On Thursday, invoices tendered to court revealed the Sydney college paid more than $100,000 taxpayer dollars to the family businesses of the sister-in-law and wife of the college's owner, Amarjit Singh.
The court was told that five rooms at a hotel business run by Mr Singh's sister-in-law, Mandeep Kang, named "Aussie Delicious Yum Food," were booked out for all of March by the college at the cost of $30,000. Another hotel business, Oz Skyline, run by his wife, Jasmeen Kaur, was booked out for two months for $60,000.
The court heard that at the Century Motor Inn in Finley, also owned by the Singh family, another five rooms were "booked out solid for months on end," resulting in a "truly remarkable" invoice for $100,000.
The college has defended the invoices and cited its regular audits as proof the payments were legitimate.
Acting on behalf of Mr Singh, David Pritchard SC said that Mr Singh "was in a position to make a profit and did so in the provision of proper services".
"Mr Singh is an honest and decent man," he said. "It's not a Ponzi scheme where you are given a huge amount of money and no one knows about it.
"[Unique] was always a low-cost education organisation, with the informal use of cash entirely orthodox even if the amount involved is very significant.
"We do not pretend to be the University of Sydney, the University of Melbourne or Oxford, and that is not the context by which we should be judged."
Justice Perram said the business "struck gold" with the government's opening up of the VET FEE-HELP scheme but he didn't believe it had set out that way when it began its operations.
Acting for the ACCC, Norman O'Bryan SC said that somewhere in the development of the business "there was a big transition in the modus operandi".
Mr O'Bryan argued that the commissions for recruiting disadvantaged students were being paid long after the college had advised the government it had terminated the practice.
Text messages tendered to court from the sister-in-law of the college's owner, Mandeep Kang, allegedly show instructions to enrol as many students as possible, according to the ACCC.
The court was told the marketers were instructed "to go everywhere you can and enrol everyone you can, my brother says".
"It was a huge rich vein of gold that they struck," said Mr O'Bryan.
"It didn't take long for [Mr Singh] to work that out. Within three months, he was projecting $183 million turnover."
In defence of Mr Singh, Mr Pritchard said the witnesses called before the hearing represented just 0.16 per cent of Unique's more than 3600 students and came from a diverse range of ethnic, educational and socio-economic backgrounds.
"Does that 0.16 per cent means that the Commonwealth gets back $100 million?" he asked Justice Perram.
He said the ACCC had attempted to make up for the failings in the architecture of the VET FEE-HELP system through the "use of unconscionability after the event".
"[It is] an optimistic application of Australian consumer law retrospectively to seek to impose a burden not stipulated during the relevant period," he said.
On Wednesday, the court heard that of the college's 3600 students, 3138 students never completed a single unit of any of the college's management or marketing courses. It also heard Mr Singh transferred $22 million from his business accounts to his family's account in a single day.
Mr O'Bryan said the college could control the college's enrolments if they were concerned about completion rates but chose not to.
"They could have stopped driving all those cars around NSW, Queensland and Victoria, signing people up."
Mr Pritchard said that the Commonwealth still owed the College $20 million in payments and that his client was not here "to make a quick buck".
"He would have expanded," he said
