5/5/2014 4:01:00 AM,
Philip A. Janquart
BOISE, Idaho (CN) - A college with campuses in Idaho and Utah paid recruiters based on how many students they enrolled and lied to the U.S. Department of Education about it to qualify for federal student aid programs, two former employees claim in court.
The United States of America, ex rel. Katie Brooks and Nannette Wride, sued Stevens-Henager College, a Utah corporation that runs the colleges in the two states, and The Center for Excellence in Higher Education, an Indiana corporation dba Stevens-Henager College.
Both Brooks and Wride worked for college as admissions consultants, during which time they say they "became aware of Stevens-Henager's incentive compensation practices for admissions employees."
Based in Ogden, Utah, Stevens-Henager focuses on "career-oriented programs," offering degrees in healthcare, business, technology and graphic arts.
According to its website, the college is "a private, nonprofit college," though it is described as a "for-profit" operation in the federal lawsuit.
Idaho's U.S. Attorney and the U.S. Department of Justice sued Stevens-Henager on behalf of the Department of Education, in the complaint in intervention under the False Claims Act and common law for unjust enrichment and payment by mistake.
The plaintiffs claim that from 2007 to 2011 the college violated Title IV of the Higher Education Act's Incentive Compensation Ban, which bars for-profit colleges from paying recruiters based on the number of students they enroll.
For-profit colleges are permitted to get as much as 90 percent of their revenue from Title IV funds, the complaint states. It claims that "Stevens-Henager presented, made, and/or used numerous false claims and statements in order to obtain and maintain eligibility to participate in Title IV programs," to the tune of "millions of dollars."
It claims that at Stevens-Henager, "a recruiter could double his or her income by recruiting a large number of students, so long as a few graduated. Conversely, the reward per student completion was reduced or entirely withheld if the consultant had not enrolled a sufficiently high number of students.
"With this lucrative incentive compensation program and constant performance reminders to its recruiters, Stevens-Henager directly or indirectly encouraged its recruiters to enroll anyone who was willing to apply for federal funds regardless of the students' likelihood of success or ability to benefit from Stevens-Henager's educational programs," the complaint states. "Stevens-Henager wrongfully procured funding for its own benefit and abused the Title IV program's purposes. Further, this irresponsible recruitment saddles unqualified students with large debts that are difficult or impossible to repay, leading to defaults that ultimately cost the government millions of dollars."
Stevens-Henager made "false statements" to the Department of Education about its recruiting practices and used safe harbors of the Higher Education Act to feign compliance, while operating in violation of the law, according to the complaint.
"The Department of Education observed that while many schools had adopted compensation practices that complied with the regulatory safe harbors 'on paper,' in practice, those same schools had used compensation practices that directly violated the Incentive Compensation Ban and failed to comply with both the letter and spirit of the safe harbor provisions," the complaint states.
In June 2010, the Department of Education proposed eliminating the safe harbors, noting that "the elimination of the safe harbors was necessary" and that "the Department's experience demonstrates that unscrupulous actors routinely rely upon these safe harbors to circumvent the intent of Section 487(a)(20) of the HEA [Higher Education Act]."
The safe harbors were eliminated in October 2011, the Department of Education having concluded that "rather than serving to effectuate the goals intended by Congress ... the safe harbors have served to obstruct those objectives," according to the complaint.
The plaintiffs seek treble damages, civil penalties and costs.
Lead counsel is U.S. Attorney Wendy Olson in Boise.