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Eighth Circuit Reinstates FCA Case Over Changed College Grades, Attendance Records

Can changing grades and attendance records be actionable under the False Claims Act (FCA)? According to the Eighth Circuit, the answer is yes. Specifically, in United States ex rel. Miller v. Weston Educational, Inc., two former employees of Heritage College alleged that Heritage violated the FCA by falsely promising to keep accurate student records. The district court granted summary judgment for Heritage, but the employees appealed. The U.S. Court of Appeals for the Eighth Circuit reversed, allowing the case to proceed to trial.

Like many colleges and universities, Heritage gets a significant portion of its revenue through Title IV funding. As part of that process, Heritage signed a Program Participation Agreement (PPA) with the U.S. Department of Education. In order to be eligible for Title IV funding, the students are required to make “satisfactory academic progress” (SAP), which is measured by the student’s GPA. If a student does not maintain the requisite grades, the student is no longer eligible for Title IV funding, and in all likelihood, probably cannot afford to continue to go to school. Heritage is also required to refund money to the government if a student withdraws from school. Determining whether a refund is required is measured by the last date of attendance. Thus, there is no doubt that record-keeping on grades and attendance matters to schools.

In this case, the former employees claimed that Heritage altered grade and attendance records to keep students enrolled, which ensured that Heritage would receive the maximum amount of Title IV funds and would not have to refund any money.

The lower court determined that Heritage had not promised to keep perfect records, and that the falsified records did not cause improper disbursements or retention of Title IV funds. Because of this, the records were not material to the government’s funding decisions. The Eighth Circuit disagreed, finding that there was enough evidence to allow these issues to be submitted to a jury.

The Court found that there was a dispute of material fact about how Heritage understood its obligations and whether it intended to comply with the PPA. First, the Court found that the government expressly conditioned Heritage’s participation in Title IV on compliance with the record-keeping requirement, so it was therefore material to the government’s decision to enter into the PPA with Heritage. Second, the Court reiterated that actual harm to the government was not an element of materiality.

Finding that there is sufficient evidence to warrant a trial and being found to have violated the FCA are two very different things. Yet, this case should serve as a warning for all participants in Title IV, especially considering that the FCA carries a potential for treble damages, attorney’s fees, and disbarment from participation in federal programs. Such results would be a death knell for many schools. Schools need to carefully review their policies, training and compliance functions as they pertain to record-keeping obligations under Title IV. It is key that schools maintain sufficient internal controls with multiple signoffs to change grades or attendance. In addition, the school’s compliance team must be able to use the school’s student records system to review grade and attendance changes when they are made.

FCA liability can result from a school’s failure to maintain the integrity of its academic records, and in particular SAP and attendance. The timing of the alleged noncompliant conduct relative to when the school signed the PPA does not appear to matter. The Court’s opinion makes clear that a pattern of noncompliant conduct, even occurring after the school signs its PPA, can demonstrate the school did not intend to maintain accurate records when it earlier signed its PPA.

© Copyright 2020 Armstrong Teasdale LLP. All rights reserved National Law Review, Volume VI, Number 310

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Henry Baskerville, Litigator, Trial Attorney, White Collar Criminal, Higher Education, Armstrong Teasdale Law Firm
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Henry Baskerville, of counsel to the Litigation practice group, is an experienced trial attorney who focuses on white collar criminal, complex commercial cases, and higher education. 

In the white collar area, Henry handles both the defense at trial and appeal of bank, mail, securities and tax fraud matters, as well as public corruption charges. 

As part of his practice, Henry conducts internal investigations of entities and institutions concerned about potential violations of the law or those that are already facing government probes. When a wrongdoing is detected, Henry...

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Bill Ojile, Litigator, Armstrong Teasdale Law Firm

Bill Ojile, a member of the Litigation practice group, has over 25 years of experience advising, counseling and litigating on behalf of companies, often in highly regulated environments, helping them to resolve difficult legal and policy issues. 

He has managed significant disputes both as in-house and outside counsel. These disputes have required Bill to oversee large teams of people managing legal, administrative, public relations and legislative issues, as well as formulating strategic direction, often simultaneously. For example, as General Counsel of Westwood College he managed multiple class action lawsuits, two wide-ranging Attorney General investigations (one of which settled, the other of which went to litigation), a Department of Education CID, a probation order from the College’s accrediting body, multiple state regulatory proceedings and hearings before the Senate HELP Committee, all of which were initiated in a 30 month time period and most of which overlapped. These matters required Bill to meet regularly with state and federal elected officials, state and federal administrative agencies and representatives of accrediting bodies. 

 

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Daniel K. O'Toole, Litigation Attorney, Armstrong Teasdale Law Firm
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Dan O’Toole, a respected leader and trial strategist, heads Armstrong Teasdale’s Litigation practice group and is a key member of the firm’s executive and management committees.

In his practice, Dan defends employers against a broad range of complaints and threats of legal action involving workplace situations. Because of his background and achievements in employment and labor law, Dan has been recognized repeatedly by Chambers USA, The Best Lawyers in America, Super Lawyers and for the last several years was included as one of the “Top 50”...

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