8th Circuit Revives Education FCA Suit Over Fake Grades

By: Bryan Koenig | Law 360  |  April 30, 2015

The Eighth Circuit on Wednesday revived two whistleblowers’ $32.8 million False Claims Act lawsuit alleging a for-profit college altered student records to avoid reimbursing federal aid, overturning a district court dismissal that had found regulations do not explicitly establish grading policies.

Because it is unclear whether Heritage College accepted federal dollars with the explicit intention to manipulate records and thus keep more money than it was entitled to, Circuit Judge Duane Benton said on behalf of a unanimous three-member panel, the dispute mandates a trial. The panel overturned a district court’s ruling of summary judgment that found false record-keeping statements were not material to claims of improperly sought financial reimbursement from the U.S. Department of Education.

A pair of former Heritage College employees, Chickoiyah Yehnee Miller and Cathy Lynn Sillman, alleged the school, owned by Weston Educational Inc., violated the program participation agreement it signed with the Department of Education in order to bilk the federal government.

“Because there is a dispute of material fact about how Heritage understood its obligations and whether it intended to comply with the PPA, the district court erred in granting summary judgment,” Judge Benton said.

The PPA was necessary for Heritage to take part in federal student aid programs under Title IV of the Higher Education Act of 1965, Benton said.

Participation under Title IV requires a commitment to accurate record-keeping, something Miller and Sillman said Heritage went out of its way not to do. According to the ruling, they alleged the school instructed staff to change failing grades to passing ones and mark students present who never showed up to class, all in an effort to ensure the grade and attendance thresholds that would guarantee maximum reimbursement from the Department of Education. Money must be returned if students do not complete at least 60 percent of a program and obtain a 70 percent GPA.

Records “determine eligibility (and thus disbursements) and refunds,” Judge Benton said. “While not every grade or day of attendance impacts funding, the DOE cannot determine whether funds were properly administered if records are inaccurate.”

According to the ruling, about 97 percent of Heritage’s student receive Title IV aid, which amounts to some 90 percent of all tuition paid to the school. Heritage was reimbursed $32.8 million from the Department of Education between 2009 and 2012, Benton said. “Heritage could not have executed the PPA without stating it would maintain adequate records,” Benton said. “And without the PPA, Heritage could not have received any Title IV funds. This forms a ‘causal link’ between the promise and the government’s disbursement of funds.”

Despite sending the fraud claims back to Missouri federal court, the panel maintained the district judge’s decision tossing allegations from Miller and Sillman that they were retaliated against for reporting alleged misconduct. The district court properly found that the relators never adequately showed any retaliation, Benton said.

Miller and Sillman attorney Gene Graham Jr. of White Graham Buckley & Carr LLC noted that this is the first time the Eighth Circuit has ruled on pleading standards for FCA claims against proprietary schools. The Seventh and  Ninth circuits have come to similar conclusions, he said.

Graham argued that the Department of Education so far has shown little interest in pursuing such cases. “The government has got to get a handle on these proprietary schools,” he told Law360.

An attorney for Weston did not respond to a request for comment.

Circuit Judges Lavenski R. Smith, Bobby E. Shepherd and Duane Benton sat on the panel for the Eighth Circuit. Weston is represented by Matthew Thomas Geiger of Geiger Prell LLC and Steven M. Gombos and Gerald M. Ritzert of  Ritzert & Leyton PC. The relators are represented by Matthew V. Bartle and David L. Marcus of Bartle & Marcus LLC, Gene P. Graham, Jr. and Bryan White of White Graham Buckley & Carr LLC and Nathan F. Garrett and Whitney P. Strack of Graves Garrett LLC. The case is Miller et al v. Weston Educational, Inc., case number  14-1760 in the U.S. Court of Appeals for the Eighth Circuit.

Adapted from PDF – download original here.