ACE Submits Amicus Brief in False Claims Act Case
Nov. 10, 2005
The American Council on Education (ACE) joined in the submission of a
friend-of-the-court brief Nov. 10 urging that the full U.S. Court of
Appeals for the Seventh Circuit consider an appeal in the case of
United States ex rel. Jeffrey E. Main v. Oakland City University,
the outcome of which could potentially open colleges and universities to
countless lawsuits involving their participation in federal student aid
programs.
The case involves the claim of Jeffrey Main—a former recruiter
for Oakland City University (OCU), a private, non-profit, four-year
liberal arts institution in Indiana—that he was compensated in
part on the number of students he enrolled, an action prohibited by the
Title IV of the Higher Education Act (HEA). The Justice Department took
up the claim as a qui tam action. Qui tam is a provision
of the federal False Claims Act, which allows private citizens to file a
lawsuit in the name of the U.S. government charging fraud by government
contractors and others who receive or use government funds, and share in
any money recovered.
On March 15, 2005, an Indiana District Court decided against Main's
case under the False Claims Act. However, on Oct. 20 of this year, a
three-judge panel of the Seventh Circuit Court of Appeals in Cincinnati
overruled the district court and found in favor of Main.
Main has charged that OCU violated the False Claims Act in signing
the HEA Program Participation Agreement (PPA)—which all
institutions must sign to apply for the right to distribute federal
financial aid—and then offering employees incentive-based
compensation.
In signing the PPA, an institution pledges to follow a large number
of federal regulations. However, the three-judge panel's ruling would
greatly increase the potential of legal liability by allowing that any
institution accused of breaking one of these rules could also be accused
of making a false claim against the government and perhaps lose all of
its federal funding.
Also at issue is a portion of the ruling that deals with guidance
documents, or "Dear Colleague" letters, issued on a regular basis by the
U.S. Department of Education. The panel said that OCU should not have
relied on a 2002 memorandum written by William Hansen, then
undersecretary of education, in which he played down the significance of
violations of the rule against incentive compensation. While the memo
reaffirmed the prohibition of payments such as those under examination
in this case, it went on to say that colleges violating the provision
would face little in the way of penalties beyond repaying the
government.
"The fact that the three-judge panel dismissed the legal significance
of this memo is worrisome from a procedural perspective," said Sheldon
E. Steinbach, ACE vice president and general counsel. "It is simply
impossible for colleges and universities to examine and validate every
guidance received from federal agencies before deciding on matters of
university procedure."
Read the motion to file the amicus brief and the brief itself.
| oakland city university false claims act case federal financial aid department of education amicus brief american council on education ace |
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