Citations
- 359 F. Supp. 3d 1088
Full opinion text
ANALYSIS
The court first addresses the Colleges' motion to dismiss the Government's Amended Complaint and the related motion to take judicial notice. The court then turns to the Colleges' motion to dismiss the relators' Forth Amended Complaint. Finally, the court addresses the issue of whether the relators may maintain a separate action after the Government chose to intervene.
I. MOTION TO DISMISS THE GOVERNMENT'S AMENDED COMPLAINT
A. The Government's Amended Complaint in Intervention
Stevens-Henager must comply with the ICB, which provides that schools will not provide "any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any persons or entities engaged in any student recruiting or admission activities or in making decisions regarding the award of student financial assistance." (Government's Am. Compl. ¶ 27 (quoting 20 U.S.C. § 1094(a)(20) ).)
In 2002, the regulations that accompany the ICB were amended to add certain "safe harbor[s]." (Id. ¶¶ 30-31.) One of the safe harbors-Safe Harbor E-allows schools to pay "[c]ompensation that is based upon students successfully completing their educations programs, or one academic year of their education programs, whichever is shorter." (Id. ¶ 30 (quoting 34 C.F.R. § 668.14(b)(22)(ii)(E) ).)
1) The Admissions Consultant Bonus Plan
Stevens-Henager distributed manuals to its admissions consultants. (Id. ¶ 69.) Each manual provides examples of how an admissions consultant can receive bonuses by enrolling students. (Id. ) Stevens-Henager also issued various directives to its admissions consultants in the form of "Procedure Directives" and "Information Letters." (Id. ¶ 70.) Mr. Barney, the former sole shareholder and chairman of Stevens-Henager, issued versions of "Procedure Directive 85R" in 2000, 2003, 2004, and 2007. (Id. ¶ 71.)
The 2007 Procedure Directive 85R details the Admissions Consultant Bonus Plan. (See id. ¶ 72.) When a student completes 36 credits, the admissions consultant who enrolled that student receives a "Completion Certificate." (Id. ¶ 74.) The value assigned to a Completion Certificate depends on two factors: (1) the average number of starts (i.e. , enrollments) that the admissions consultant achieved during the last three modules, and (2) the admissions consultant's "Interview Conversion Rate." (Id. ¶ 75.) Each module is about one month long and consists of about three or four credit hours. (Id. ¶ 90.)
The 2007 Procedure Directive 85R contains a chart for determining the value of Completion Certificates. (Id. ¶ 75.) The first row in the column is "Packaged Starts." (Id. ¶ 79.) Packaged Starts refers to the average number of starts that an admissions consultant achieved per module during the last three modules. (See id. ¶ 72.) The lowest value in the Packaged Starts column is five. (Id. ¶ 79.) The top row of the chart lists ascending Interview Conversion Rates, or "Intconversion%" for short. (Id. ¶ 76.) The lowest value in the Intconversion% row is 33 percent. (Id. ¶ 77.) Notes to the chart explain that "Intconversion%" is calculated by "[t]otal[ing] the last three modules' starts and interviews and dividing the total number of starts by the total number of interviews." (Id. ¶ 76.) So if an admissions consultant interviewed ten students and five enrolled, the "Intconversion%" would be 50 percent. (See id. )
ADMISSION CONSULTANT POTENTIAL COMPENSATION Intconversion% - Quality of Service of Honored Guests Packaged >33% >35% >40% >45% >50% Starts 5 $100 $300 $400 $500 $600 6 $100 $300 $400 $500 $600 7 $100 $300 $400 $500 $600 8 $100 $300 $400 $500 $600 9 $100 $300 $400 $500 $600 10 $100 $300 $400 $500 $600 Total @ 10 $1,000 $3,000 $4,000 $5,000 $6,000 11 $100 $300 $400 $500 $600 12 $100 $300 $400 $500 $600 13 $100 $300 $400 $500 $600 14 $100 $300 $400 $500 $600 15 $100 $300 $400 $500 $600 Total @ 15 $1,500 $4,500 $6,000 $7,500 $9,000 16 $100 $300 $400 $500 $600 17 $100 $300 $400 $500 $600 18 $100 $300 $400 $500 $600 19 $100 $300 $400 $500 $600 20 $100 $300 $400 $500 $600 Total @ 20 $2,000 $6,000 $8,000 $10,000 $12,000
According to the chart, before an admissions consultant's Completion Certificates were worth anything, the admissions consultant had to (1) "start," or enroll, at least five students per module, and (2) enroll at least one out of every three students interviewed. If an admissions consultant failed to meet either requirement, the admissions consultant's Completion Certificates were worthless because he or she would be ineligible to receive a bonus.
Under the 2007 Procedure Directive 85R, an admissions consultant who enrolled four students, all of whom completed their studies, received no bonus. But an admissions consultant who achieved a 33 percent Conversion Rate and enrolled five students-three of whom completed their studies-would receive a $ 1,500 bonus ($ 500 per Completion Certificate). And an admissions consultant who achieved a 40 percent Conversion Rate and enrolled ten students-two of whom completed their studies-would receive an $ 8,000 bonus ($ 4,000 per Completion Certificate).
Hypothetical Starts Completions Conversion Bonus Admissions Rate Consultant A 4 4 33% $0 B 5 3 33% $1,500 C 10 2 40% $8,000
Ms. Brooks and Ms. Wride worked at Stevens-Henager between 2009 and 2011, and both were aware of the Admissions Consultant Bonus Plan. (Id. ¶¶ 13-14.) Ms. Brooks and Ms. Wride attended conferences in Las Vegas where they learned that Stevens-Henager employed the Admissions Consultant Bonus Plan at all of its campuses. (Id. ¶ 84.) Stevens-Henager paid bonuses based on the Admissions Consultant Bonus Plan until at least 2011. (Id. ¶ 89.)
2) The Program Participation Agreements
To participate in Title IV programs, Stevens-Henager entered into PPAs with the Department of Education. (Id. ¶ 25 (citing 20 U.S.C. § 1094(a) ; 34 C.F.R. § 668.14 ).) Each PPA provides:
By entering into this [PPA], the Institution agrees that:
...
(22) It will not provide, nor contract with any entity that provides, any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any persons or entities engaged in any student recruiting or admission activities or in making decisions regarding the awarding of student financial assistance ....
(Id. ¶ 28 (citing 34 C.F.R. § 668.14(b)(22) ).)
Vicky Dewsnup, as the President of Stevens-Henager, executed two PPAs on the school's behalf, one on April 19, 2007 and another on January 21, 2010. (Id. ¶¶ 57-58.) In both PPAs, Stevens-Henager promised to comply with the ICB. (Id. ¶ 114.) But Stevens-Henager allegedly knew that these promises were false because it was paying and planned to continue paying admissions consultant bonuses based on their success in securing enrollments. (Id. ) According to the Government, Stevens-Henager's promises to comply with the ICB were material to the Department of Education's decision to allow Stevens-Henager to receive Title IV funds. (Id. )
3) The G5 Certifications
A student applies for financial aid by completing a free application. (Id. ¶ 40.) A school uses the information in the application to create a financial-aid package for the student. (Id. ¶ 43.) The student can accept all or part of the package. (Id. ¶ 44.) If the student accepts a Pell Grant, a Direct Loan, or both, the student's school creates an electronic origination record. (Id. ¶ 45.) The school then submits the record to the Department of Education using a computerized database called the Common Origination and Disbursement System. (Id. )
If the information supplied by the school is consistent with the Department of Education's information, the Department of Education makes funds available for the school to draw down from a computerized system known as G5. (Id. ¶ 46.) Before drawing down funds, a school certifies that "the funds are being expended within three business days of receipt for the purpose and condition of the agreement." (Id. ¶ 47.) The parties refer to this as the G5 certification.
Stevens-Henager submitted numerous claims for Title IV funds under its 2007 and 2010 PPAs. (Id. ¶ 61.) These claims were made in the G5 system and were accompanied by the representation that the funds would be "expended within three business days of receipt for the purpose and condition of the agreement." (Id. ¶ 64.) According to the Government, the "agreement" referenced in the G5 certification is the school's PPA. (Id. ) And, according to the Government, "Stevens-Henager failed to disclose that it was violating the [ICB]" when it requested funds in the G5 system. (Id. ¶ 65.) Because Stevens-Henager was "knowingly violating the [ICB], [it] was not an eligible institution, thus rendering the institution (and its students) ineligible for Title IV funds." (Id. )
B. The Motion to Take Judicial Notice
Stevens-Henager and CEHE (collectively, Stevens-Henager) ask the court to take judicial notice of five Government documents: (1) the "Hansen Memo," (2) the "Mitchell Memo," (3) the Government Accountability Office, GAO-10-370R, Higher Education: Information on Incentive Compensation Violations Substantiated by the U.S. Department of Education (First GAO Report), (4) the United States Government Accountability Office Report to the Congressional Committees: Stronger Federal Oversight Needed to Enforce Ban on Incentive Payments to School Recruiters (Second GAO Report), and (5) an Office of Inspector General Audit Report (OIG Report).
1) The Hansen Memo
The Hansen Memo is dated October 30, 2002. It was written by William D. Hansen, the former Deputy Secretary of Education, and addressed to Terri Shaw, the former Chief Operating Officer for Federal Student Aid. It provides, in relevant part:
The purpose of the memorandum is to provide direction with regard to the Department's response to violations of [the ICB] ....
The [ICB] was designed to reduce the financial inventive for an institution to enroll students by misrepresenting the quality of the institution, or the ability of students to benefit from its educational programs. The Department has in the past measured the damages resulting from a violation as the total amount of student aid provided to each improperly recruited student. After further analysis, I have concluded that the preferable approach is to view a violation of the [ICB] as not resulting in monetary loss to the Department. Improper recruiting does not render a recruited student ineligible to receive student aid funds for attendance at the institution on whose behalf the recruiting is conducted. Accordingly, the Department should treat a violation of the law as a compliance matter for which remedial or punitive sanctions should be considered.
In some instances, violations of the [ICB], either themselves or in combination with other program violations, may constitute a basis for limitation, suspension, or termination action. However, much more commonly, the appropriate sanction to consider will be the imposition of a fine.
(footnote omitted).
2) The Mitchell Memo
The Mitchell Memo is dated June 2, 2015. It was written by Ted Mitchell, the former Undersecretary to the Secretary of Education, and addressed to James Runcie, the former Chief Operating Office of Federal Student Aid. It provides, in relevant part:
Until 2002, long after the enactment of the [ICB], the Department measured damages resulting from a violation of the prohibition as the total amount of student aid provided to improperly recruited students. In 2002, however, the Department's Deputy Secretary issued [the Hansen Memo] that changed the Department's approach for measuring damages in the context of establishing administrative liabilities, to view a violation of [the ICB] as not resulting in monetary loss to the Department. The [Hansen Memo] rested on the view that the Department purportedly suffers no loss when an institution receives Title IV funds by violating the promises and representations it made as a condition of participation in the Title IV programs.
To the contrary, the Department, in fact, incurs monetary loss upon a violation of [the ICB], and the appropriate response is to recover that loss, as provided for in the Department's original policy. When acting as the Department's fiduciary, an institution may receive funds only in accord with the representations it makes in order to become eligible for those funds. When an institution makes an incentive payment based upon the number of students enrolled, the institution breaches those representations. It thus violates a condition of its Title IV program eligibility and is not entitled to receive those Title IV funds. In this situation, an institution is liable to the Department for the cost of the funds it received.
Put simply, the Mitchell Memo repealed the Hansen Memo. But between October 30, 2002 and June 2, 2015, the Department of Education's position was that ICB violations do not result in monetary loss and do not render students ineligible to receive Title IV funds.
3) The Remaining Reports
In addition to the Hansen Memo and the Mitchell Memo, Stevens-Henager asks the court to take notice of three reports: (1) the First GAO Report, (2) the Second GAO Report, and (3) the OIG Report.
In the First GAO Report, the GAO analyzed the Department of Education's program-review and audit-report data related to the ICB for January 1998 through December 2009. The GAO found that during that period the Department of Education reported that 32 schools violated the ICB. In addition to these 32 schools, the Department of Education entered into settlement agreements with 22 other schools.
In the Second GAO Report, the GAO provided "additional information" on the Department of Education's oversight of the ICB between January 1998 and December 2009. The relevant findings are as follows:
• Between 1998 and 2008, [the Department of Education] resolved most incentive compensation cases by requiring corrective actions or reaching settlement agreements, and did not limit, suspend, or terminate any school's access to federal student aid.
• [The Department of Education] changed its enforcement policy in 2002, which resulted in an increased burden on [the Department of Education] to prove a violation and lessened associated financial penalties (fines and settlement payments). As a result, it became more difficult for [the Department of Education] to prove a school violated the [ICB] and schools ultimately paid smaller penalties.
• [Department of Education] officials shared with [the GAO] internal guidance that is used to determine fines and settlement payments for incentive compensation cases. Internal guidance for imposing fines and settlement payments establishes caps on total penalty amounts, although related regulations do not have such caps. [Department of Education] officials have stated that the agency has not always used the guidance to determine fines and settlement payments.
• [The Department of Education's] varying approaches for determining fines and settlement payments could lead to inconsistent treatment of schools without adequate justification for the differential treatment. For example, some schools were fined for [ICB] violations, while others were not. In one case, [the Department of Education] withdrew an initiated school fine of over $ 2 million dollars, and case documentation did not reveal the reason for the fine withdrawal.
In the OIG Report, the OIG reiterated the findings from the First and Second GAO Reports, made findings as to Department of Education's enforcement of the ICB, and proposed recommendations that would facilitate enforcement of the ICB.
4) Judicial Notice: Federal Rule of Evidence 201
A court may take judicial notice of a fact that is not subject to reasonable dispute because the fact "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." FED. R. EVID. 201(b). This rule allows courts to "take judicial notice of ... facts which are a matter of public record." Tal v. Hogan , 453 F.3d 1244, 1264 n.24 (10th Cir. 2006) (citation omitted). If a party requests that a court take judicial notice of a fact and supplies the court with the necessary information to do so, the court must take judicial notice of the fact. FED. R. EVID. 201(c).
Here, the court must take judicial notice as to the contents of the five documents provided by Stevens-Henager because their contents can be accurately and readily determined from sources whose accuracy cannot be questioned. See FED. R. EVID. 201(b) ; Tal , 453 F.3d at 1264 n.24. Indeed, no party disputes the authenticity and accuracy of the documents, and the documents are a matter of public record. Instead, the parties' dispute centers on what the court should do once it has taken notice as to the contents of the documents.
Stevens-Henager contends that the court can use the documents to take judicial notice of the fact that the Department of Education "did not enforce the ICB by seeking the return of Title IV funds or by terminating or limiting participation in Title IV programs." The Second GAO Report provides: "Between 1998 and 2008, [the Department of Education] resolved most incentive compensation cases by requiring corrective actions or reaching settlement agreements, and did not limit, suspend, or terminate any school's access to federal student aid." The Government has not argued that the accuracy of this finding can be questioned, so the court takes judicial notice of it.
But the Government argues that the court must not use this fact to infer that the Department of Education did not attach importance to a school's representations about the ICB, and the court agrees that it would be improper to use this fact to draw inferences against the Government at this stage. See Sutton v. Utah State Sch. for Deaf & Blind , 173 F.3d 1226, 1236 (10th Cir. 1999) ("The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiff's complaint alone is legally sufficient to state a claim for which relief may be granted." (citation omitted) ); United States v. Corinthian Colleges , 655 F.3d 984, 999 (9th Cir. 2011) ("Nonetheless, we may not, on the basis of these reports, draw inferences or take notice of facts that might reasonably be disputed.").
In sum, the court takes judicial notice of the fact that "[b]etween 1998 and 2008, [the Department of Education] resolved most incentive compensation cases by requiring corrective actions or reaching settlement agreements, and did not limit, suspend, or terminate any school's access to federal student aid." But it would nevertheless be improper for the court to use this fact to draw inferences against the Government or the relators at this stage of the proceedings, which is, in reality, what Stevens-Henager asks the court to do. Indeed, Stevens-Henager asks the court to use the judicially noticed fact to conclude that the Department of Education did not attach importance to a school's promise to comply with the ICB. This the court cannot do.
C. The Motion to Dismiss
Stevens-Henager moves to dismiss the Government's amended complaint on the grounds that it fails to state a claim upon which relief can be granted. But, as noted above, Stevens-Henager did not address the Government's claims for payment by mistake and unjust enrichment, so the motion is better characterized as a motion to dismiss the Government's claims that arise under the False Claims Act. Moreover, Stevens-Henager's motion focuses almost entirely on only one of the Government's two theories of liability, the theory based on Stevens-Henager's G5 certifications.
Stevens-Henager raises, in essence, three arguments. First, Stevens-Henager argues that the Government fails to allege that Stevens-Henager's requests for payment in the G5 system constitute false claims. Second, Stevens-Henager argues that the Government fails to allege that Stevens-Henager knew that its requests for payment made in the G5 system were false. Third, Stevens-Henager argues that the Government has not alleged sufficient facts to establish that ICB noncompliance was material to the Department of Education's payment decisions.
1) Motion Standard
A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." FED. R. CIV. P. 8(a)(2). This standard "does not require 'detailed factual allegations,' but it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). Where the allegations are merely "labels and conclusions" or a "formulaic recitation of the elements of a cause of action," the plaintiff's claim will not survive a motion to dismiss. Twombly , 550 U.S. at 555, 127 S.Ct. 1955. To survive, the plaintiff's allegations "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.' " Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 ). Plausibility, in this context, means that the allegations allow "the court to draw [a] reasonable inference that the defendant is liable for the alleged misconduct." Id. Allegations that are merely consistent with a defendant's liability do not give rise to a plausible claim. Id.
A plaintiff alleging violations of the False Claims Act must also satisfy the heightened pleading standard of Rule 9(b) of the Federal Rules of Civil Procedure. U.S. ex rel. Sikkenga v. Regence Bluecross Blueshield of Utah , 472 F.3d 702, 726 (10th Cir. 2006). Rule 9(b) provides that a plaintiff must "state with particularity the circumstances constituting fraud." To satisfy this standard, a plaintiff must allege the " 'who, what, when, where, and how' of the alleged fraud." Id. at 726-27 (citation omitted). Put another way, the plaintiff must "set forth the time, place, and contents of the false representation, the identity of the party making the false statements and the consequences thereof." Id. at 727 (citation omitted). "Underlying schemes and other wrongful activities that result in the submission of fraudulent claims are included in the 'circumstances constituting fraud and mistake' that must be pled with particularity under Rule 9(b)." Id. (citation omitted). Moreover, "[a] relator must provide details that identify particular false claims for payment that were submitted to the government." Id. (citation omitted).
2) The False Claims Act: Section 3729
"[A]ny person who knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval ... is liable to the United States Government for a civil penalty ... plus 3 times the amount of damages which the Government sustains because of the act of that person." 31 U.S.C. § 3729(a)(1). The term "knowingly" means "that a person, with respect to information (i) has actual knowledge of the information; (ii) acts in deliberate ignorance of the truth or falsity of the information; or (iii) acts in reckless disregard to the truth or falsity of the information." § 3729(b)(1). The term "claim" means, among other things, "any request or demand ... for money or property ... that is presented to an officer, employee, or agent of the United States." § 3729(b)(2). Thus, to state a claim under the False Claims Act, a plaintiff must allege three things: (1) the defendant submitted a claim for payment to the Government, (2) the claim was false, and (3) the defendant knew the claim was false. § 3729(a)(1)(A) ; United States ex rel. Brooks v. Stevens-Henager College , 305 F.Supp.3d 1279, 1293 (D. Utah 2018).
3) The G5 Certifications
The Government contends that it has sufficiently alleged that Stevens-Henager's requests for payment in the G5 system are false claims because they were accompanied by G5 certifications that were half-truths that misled the Department of Education into believing that Stevens-Henager was an eligible institution. According to the Government, a G5 certification impliedly certifies that the student for whom the funds are requested is eligible to receive Title IV funds. And, as the Government's argument goes, a student is eligible to receive Title IV funds only if he or she is enrolled at an eligible institution. And Stevens-Henager, according to the Government, was not an eligible institution because it violated the ICB. But this theory fails for at least two reasons.
First , the Government's allegations are inconsistent with Title IV's regulatory framework. There is a distinction between an institution's designation as an eligible institution under Part 600 and its certification to participate in Title IV programs under Part 668. The regulations "recognize [a] distinction between determinations that institutions meet the definition of an eligible institution, and matters relating to the assessment of administrative and financial capability, typically referred to as the certification process." Institutional Eligibility Under the Higher Education Act of 1965, as Amended; Student Assistance General Provisions, 55 Fed. Reg. 32,180 (Aug. 7, 1990) (to be codified at 34 C.F.R. pts. 600 and 668).
An institution must qualify as an eligible institution before it can be certified to participate in Title IV programs. "The Secretary certifies an institution to participate in the title IV, HEA programs if the institution qualifies as an eligible institution under 34 CFR Part 600 [and] meets the standards of [Part 688, subpart B, which includes the PPA requirement]."
34 C.F.R. § 668.13(a). An institution becomes certified when it enters into a PPA with the Department of Education. Indeed, the PPA "conditions the initial and continued participation of an eligible institution in any Title IV programs" on compliance with various legal requirements. § 668.14(a)(1) (emphasis added). The "initial and continuing participation" language does not mean that a school becomes ineligible to participate in Title IV programs simply because it violates the ICB.
The applicable regulations explain the possible consequences for failing to comply with a PPA:
Noncompliance with these standards by an institution already participating in any Title IV, HEA program ... may subject the institution ... to proceedings under subpart G of this part. These proceedings may lead to any of the following actions:
(1) An emergency action.
(2) The imposition of a fine.
(3) The limitation, suspension, or termination of the participation of the institution in a Title IV HEA, program.
§ 668.11(b) (emphasis added). Notably, an institution may continue to participate in Title IV programs despite noncompliance with its PPA unless the Secretary of Education commences proceedings that result in the "termination of the participation of the institution in a Title IV HEA, program." § 668.11(b)(3). Moreover, the regulations make clear that "[a]n institution's participation in a Title IV, HEA program ends on the date that ... [t]he institution's participation is terminated under the proceedings in subpart G [of Part 668]; [or] ... [t]he institution's [PPA] is terminated or expires under § 668.14...." § 668.26(a)(3), (5) (emphasis added). That is, an institution can participate in Title IV programs unless and until its PPA is terminated or expires.
The Government argues that Stevens-Henager "was not an eligible institution because it violated a core requirement in its PPA-the ICB-and that violation made the institution (and thus its students) ineligible for Title IV funds." But there is no regulation that provides for an automatic loss of eligibility when an institution violates "a core requirement of its PPA." The Government simply ignores the applicable regulations in an attempt to suit its legal theory.
In short, the Government fails to allege that students at Stevens-Henager were ineligible to receive Title IV funds. The Government does not allege that the Secretary of Education terminated Stevens-Henager's PPA or its participation in Title IV programs. Put simply, the Government's allegation that Stevens-Henager was ineligible to participate in Title IV because it violated the ICB is an unsupported legal conclusion that is belied by the applicable regulations. Consequently, the Government's claims fail to the extent they are based on a theory that Stevens-Henager's students were ineligible to receive Title IV funds because the school was not an eligible institution.
Second , even if the Government had alleged that Stevens-Henager was not an eligible institution (it did not), the Government has failed to allege that Stevens-Henager knowingly misrepresented that it was an eligible institution when it submitted G5 certifications. The Government alleges that Stevens-Henager knowingly violated the ICB. (Am. Compl. ¶ 97.) But "a violation of a regulatory provision, in the absence of a knowingly false or misleading representation , does not amount to fraud." United States ex rel. Trim v. McKean , 31 F.Supp.2d 1308, 1315 (W.D. Okla. 1998) (emphasis added). "Violating a regulation is not synonymous with filing a false claim." United States ex rel. Grenadyor v. Ukrainian Village Pharmacy, Inc. , 772 F.3d 1102, 1107 (7th Cir. 2014).
The Government argues in its brief that it has alleged that Stevens-Henager knew that it was ineligible to receive Title IV funds because of ICB violations, rendering its requests for Title IV funds false or fraudulent. To support this, however, the Government cites a paragraph of its complaint that provides that Stevens-Henager was not an eligible institution because it "knowingly violat[ed] the [ICB]." (Am. Compl. ¶ 65.) That is not enough. The Government needed to allege that Stevens-Henager knew that it was ineligible to receive Title IV funds, and thus knew that its requests for payment were false or fraudulent.
The Government notes that knowledge may be alleged generally. True, "[k]nowledge ... may be alleged generally." FED. R. CIV. P. 9(b). But the Government has not even attempted to allege that Stevens-Henager knew that it was ineligible to receive Title IV funds because of ICB violations. Put simply, the Government misses the point. Perhaps the Government could have alleged generally that Stevens-Henager knew that it was ineligible to receive Title IV funds based on ICB violations. But it did not. Because the Government has failed to allege that Stevens-Henager knew that it was ineligible to receive Title IV funds because of ICB violations, the Government has not plausibly alleged that Stevens-Henager knew that its requests for Title IV funds were false.
Stevens-Henager also argues that the Government's claims based on G5 certifications fail because the Government has not pled "facts supporting materiality." The court, however, need not address this argument because the Government has failed to allege that Stevens-Henager's requests for payment in the G5 system were either expressly or impliedly false, and even if they were, the Government has not alleged that Stevens-Henager knew that the requests for payment were false.
For the reasons stated above, the court dismisses the Government's claims under the False Claims Act to the extent that they are based upon its G5 certification theory of liability. Because there is a fundamental legal impediment to the G5 certification theory, amendment of the complaint would be futile. Bylin v. Billings , 568 F.3d 1224, 1229 (10th Cir. 2009) ("Refusing leave to amend is generally only justified upon a showing of undue delay, undue prejudice to the opposing party, bad faith or dilatory motive, failure to cure deficiencies by amendments previously allowed, or futility of amendment." (citation omitted) ). Therefore, dismissal is with prejudice.
4) Promissory Fraud: The PPAs
The court previously determined that the Government had stated a claim under the False Claims Act based on a theory of promissory fraud. Stevens-Henager suggests that the court should reconsider this ruling and hold that ICB noncompliance is not material to the Department of Education's payment decisions. But Stevens-Henager misunderstands the court's prior holding and the promissory-fraud theory of liability.
Unlike the terms "claim" and "knowingly," which are defined in the False Claims Act, "false" and "fraudulent" are defined only by judicial interpretation and construction. United States ex rel. Polukoff v. St. Mark's Hosp. , 895 F.3d 730, 740 (10th Cir. 2018). Congress has explained that the terms "false" and "fraudulent" should be construed broadly:
[E]ach and every claim submitted under a contract, loan guarantee, or other agreement which was originally obtained by means of false statements or other corrupt or fraudulent conduct, or in violation of any statute or applicable regulation, constitutes a false claim.
S. Rep. No. 99-345, at 9 (1986), reprinted in 1986 U.S.C.C.A.N. 5266, 5274 (emphasis added) (citing United States ex rel. Marcus v. Hess , 317 U.S. 537, 63 S.Ct. 379, 87 L.Ed. 443 (1943) ).
Consistent with this, courts have recognized that False Claims Act liability can attach to each and every claim submitted under a PPA that was obtained through fraudulent statements. United States ex rel. Miller v. Weston Educ., Inc. , 840 F.3d 494, 503-05 (8th Cir. 2016) ; United States ex rel. Hendow v. Univ. of Phoenix , 461 F.3d 1166, 1173 (9th Cir. 2006) ; United States ex rel. Main v. Oakland City Univ. , 426 F.3d 914, 916-17 (7th Cir. 2005). Put simply, an initial falsehood "can taint subsequent claims for payment, even if those claims are for legitimate goods or services." Joan H. Krause, Reflections on Certification, Interpretation, and the Quest for Fraud that "Counts" Under the False Claims Act , 2017 U. Ill. L. Rev. 1811, 1817 (2017) ; see also Hendow , 461 F.3d at 1173 ("[S]ubsequent claims are false because of an original fraud (whether a certification or otherwise).").
As the court previously explained, to state claim under the False Claims Act based on promissory fraud, the Government must allege: "(1) Stevens-Henager made false statements in its PPAs; (2) Stevens-Henager knew that its statements were false; (3) the statements were material to Department of Education's decision to execute the PPAs ; and (4) Stevens-Henager made claims for payment under the fraudulently induced PPAs." Brooks , 305 F.Supp.3d at 1299-300 (emphasis added).
The court went to great lengths to explain to the parties the proper focus for materiality when liability is based on a theory of promissory fraud:
[T]he Government's claims are based on promissory fraud, unlike the claim in Escobar , which was based on implied certification. The Supreme Court, in Escobar , discussed materiality as it relates to claims for reimbursement that are allegedly false because they impliedly certify compliance with underlying regulations. Here, the Government alleges that claims were false based on promissory fraud: Stevens-Henager falsely certified that it would comply with the ICB in its 2007 and 2010 PPAs. In other words, the "fraud" was not a failure to disclose noncompliance with a regulation, as was the case in Escobar , but rather an affirmative misrepresentation: a false promise to comply with the ICB. Because the Government alleges promissory fraud, the court "examines the false statements that induced the government to enter the [PPAs ]." Thus, the court must determine whether the Government has alleged sufficient facts to plausibly establish that Stevens-Henager's allegedly false promises to comply with the ICB in its PPAs were material to the Department of Education's decision to execute the PPAs.
Id. at 1301-02 (citation omitted). After explaining the relevant inquiry, the court held that "the Government ha[d] alleged sufficient facts to plausibly establish that the Department of Education attached importance to Stevens-Henager's promises to comply with the ICB." Id. at 1302.
Stevens-Henager suggests that this was error "because the same materiality requirements apply to all [False Claims Act] claims." True, the materiality standard does not change: "a false statement is material under the False Claims Act 'if either (1) a reasonable person would likely attach importance to it or (2) the defendant knew or should have known that the government would attach importance to it.' " Id. at 1300 (citation omitted). But, as the court made clear, the standard applies to the false statement that forms the basis of liability, which, for the Government's claims based on promissory fraud, is the statement that induced the Department of Education to enter into PPAs with Stevens-Henager.
Because Stevens-Henager has not addressed whether its allegedly false promises in its PPAs were material to the Department of Education's decision to enter into the PPAs, the court declines to revisit its prior holding. Accordingly, the Government may proceed on a theory that Stevens-Henager submitted false claims for payment based on a theory of promissory fraud.
II. MOTION TO DISMISS THE RELATORS' FOURTH AMENDED COMPLAINT
The relators allege three claims for relief based upon three distinct theories of liability. First, the relators allege that the Colleges are liable under 31 U.S.C. § 3729(a)(1)(B) and its predecessor because they fraudulently induced the Department of Education to enter into various PPAs, thereby rendering their subsequent requests for Title IV funds "false or fraudulent." Second, the relators allege that the Colleges are liable under § 3729(a)(1)(A) and its predecessor because their requests for Title IV funds were rendered false by virtue of their G5 certifications. Third, the relators allege that the Colleges are liable under § 3729(a)(1)(B) and its predecessor because they made false statements in their Required Management Assertions (RMAs).
A. The G5 Certifications
The relators, like the Government, allege that the Colleges are liable under the False Claims Act because of their G5 certifications. (Fourth Am. Compl. ¶¶ 387-91.) This claim, however, fails for the same reason that the Government's G5 certification claim fails. The relators, like the Government, have failed to allege that the Colleges were ineligible to receive Title IV funds, and even if the relators had, they have not alleged that the Colleges knew that they were ineligible to receive Title IV funds. The court, therefore, dismisses the relators' second claim for relief with prejudice.
B. The Required Management Assertions
The Colleges submitted RMAs that expressly certified compliance with the legal requirements that they allegedly violated. (Id. ¶ 235.) The RMAs were required as part of the Colleges' annual audit process. (Id. ¶ 236.) Indeed, the first step of the audit process is for a school's management to provide RMAs to the school's auditor. (Id. ¶ 238.)
According to the relators, the Colleges are liable under the False Claims Act because assertions in their RMAs were false. (Id. ¶ 394.) In the relators' own words, the Colleges "are liable for ... violations of 31 U.S.C. § 3729(a)(1)(B) and its predecessor statute for falsely and expressly certifying compliance with each of the Legal Requirements in the[ir] RMAs." (Id. ¶ 392.) But this claim for relief fails.
Section 3729(a)(1)(B) imposes liability on any person who "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim." A claim for relief under § 3729(a)(1)(B) has three elements: (1) the defendant makes a false statement, (2) the defendant knows that the statement is false, and (3) the false statement is material to a false claim for payment. § 3729(a)(1)(B) ; Brooks , 305 F.Supp.3d at 1293-94. " Section 3729(a)(1)(B) is 'designed to prevent those who make false records or statements ... to get claims paid or approved from escaping liability solely on the ground that they did not themselves present a claim for payment or approval.' " Brooks , 305 F.Supp.3d at 1294 (quoting Pencheng Si v. Laogai Research Found. , 71 F.Supp.3d 73, 87 (D.D.C. 2014) ). "In other words, the primary purpose of § 3729(a)(1)(B) is to remove any defense that the defendant did not personally submit, or cause to be submitted, a false claim." Id. Indeed, many violations of § 3729(a)(1)(B) may also be considered violations of § 3729(a)(1)(A), which imposes liability on persons who "knowingly present[ ], or cause[ ] to be presented, a false or fraudulent claim for payment or approval." Id.
The court has already explained the problems with relators' theory of liability based on the RMAs. Brooks , 305 F.Supp.3d at 1314. To be clear, the RMAs are not "claims"-that is, they are not requests for payment. See § 3729(b)(2) ; Brooks , 305 F.Supp.3d at 1296 n.6 (pointing out that PPAs are not "claims," as that term is used in the statute). The RMAs are nothing more than a set of statements, or assertions. And the False Claims Act does not impose liability on persons who "knowingly make[ ] ... a false record or statement." Cf. § 3729(a)(1)(B). Instead, the false record or statement must be material to a "false or fraudulent claim." § 3729(a)(1)(B). In essence, the relators attempt to impose liability on false statements alone, reading the "false or fraudulent claim" requirement out of § 3729(a)(1)(B). Consequently, the relators' third claim for relief must be dismissed with prejudice because it is not based on a valid legal theory.
Indeed, the court is confused as to the purpose of the relators' third claim for relief. The purpose of § 3729(a)(1)(B) is to remove any defense that the defendant did not submit the false claim. Brooks , 305 F.Supp.3d at 1294. But in this case the Colleges are alleged to have submitted (or at least caused to be submitted) each and every claim for payment. And the relators themselves allege, albeit in a conclusory fashion, that "the RMAs did influence the payment of false claims ." (Fourth Am. Compl. ¶ 395 (emphasis added).) That is, the relators allege that the Colleges' claims for payment, which the Colleges submitted , are false claims. If those claims are false, which they must be for the relators to prevail under § 3729(a)(1)(B), then the relators should have proceeded under § 3729(a)(1)(A). In other words, if the Colleges' claims for payment were false, there is no need to show that they also made false statements in their RMAs. See § 3729(a)(1)(A) (imposing liability on anyone who submits a false claim for payment).
The court, therefore, dismisses with prejudice the relators' third claim for relief based upon the RMAs.
C. The PPAs
The Colleges entered into a number of PPAs with the Department of Education. (See Fourth Am. Compl. ¶ 208.) When a school enters into a PPA, it agrees that, among other things:
(4) It will establish and maintain such administrative and fiscal procedures and records as may be necessary to ensure proper and efficient administration of funds received from the Secretary or from students under the Title IV, HEA programs
....
(16) For a proprietary institution, the institution will derive at least 10 percent of its revenues for each fiscal year from sources other than Title IV, HEA program funds
....
(22) It will not provide, nor contract with any entity that provides, any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments or financial aid to any person or entities engaged in any student recruiting or admission activities or in making decisions regarding the awarding of student financial assistance ....
(23) It will meet the requirements established pursuant to Part H of Title IV of the HEA by ... nationally recognized accrediting agencies; [and]
(24) It will comply with the refund provisions established in 34 CFR Part 668.22.
(Id. ¶ 212.)
1) The 90/10 Rule
A proprietary school, when it executes a PPA, agrees that it "will derive at least 10 percent of its revenues for each fiscal year from sources other than Title IV [programs]." (Id. ) This is the so-called 90/10 Rule. 20 U.S.C. § 1094(a)(24). The relators allege that the Colleges took various steps "to inflate their revenue from non-governmental sources for 90/10 Rule purposes." (Id. ¶ 196.) But the relators have not alleged that the Colleges made false statements in their PPAs concerning the 90/10 Rule. (See id. ¶¶ 215-24.) Accordingly, the relators have not sufficiently alleged that any of the Colleges' claims for payment were "false or fraudulent" because they made false statements in their PPAs concerning the 90/10 Rule. (See id. ) Thus, the court dismisses the relators' first claim to the extent that it rests upon the 90/10 Rule.
2) The ICB
As explained above, schools, in their PPAs agree to not pay employees "commission[s], bonus[es], or other incentive payment[s] based directly or indirectly on [their] success in securing enrollments." (Id. ¶ 212.) The relators have plausibly alleged that the Colleges compensated employees based on their success in enrolling students beginning in 2003 and ending in July 2011. (Id. ¶¶ 34-120.) Specifically, the Colleges uniformly paid bonuses on versions of Procedure Directive 85R during this timeframe. (Id. ¶¶ 42-65.) Each version of Procedure Directive 85R detailed bonuses that admissions consultants could earn based "on [their] success in securing enrollments." (Id. )
In July 2011, the Colleges "repealed their then-existing [Admissions Consultant] Bonus Plan and FP Bonus Plan." (Id. ¶ 120.) But according to the relators, the Colleges began violating the ICB again in "approximately April 2014." (Id. ¶ 121.) Specifically, the Colleges implemented an Online Admissions Consultant Bonus Plan under which online admissions consultants earned a base salary of $ 38,000 but could earn up to $ 60,000 if they started, or enrolled, an average of six students per module. (Id. ¶ 122.) In short, the relators have plausibly alleged that the Colleges compensated online admissions consultants based on their success in enrolling students beginning around April 2014. (See id. ¶¶ 120-27.)
The relators have plausibly alleged that the Colleges knowingly misrepresented their intent to comply with the ICB in the following PPAs: Stevens-Henager's April 2007 PPA; Stevens-Henager's January 2010 PPA; College America Denver's June 2007 PPA; College America Denver's February 2010 PPA; College America Arizona's June 2008 PPA; College America Arizona's November 2011 PPA; and California College's August 2008 PPA. (See id. ¶¶ 215-24.) When the Colleges executed these PPAs, they were paying and continued to pay bonuses based on employees' successes in enrolling students. (See id. ¶¶ 42-65.) This plausibly establishes that the Colleges knowingly misrepresented their intent to comply with the ICB when they executed the various PPAs identified above.
The relators, however, have failed to allege that CEHE knowingly misrepresented its intent to comply with the ICB in its 2013 PPA. (Id. ¶¶ 217, 220). When CEHE executed this PPA, the Colleges had "repealed their then-existing [Admissions Consultant] Bonus Plan and FP Bonus Plan." (Id. ¶ 120.) Indeed, "[admissions consultants] could earn no new bonuses after July 2011" but "they continued to be paid under the old program until approximately early 2012 ." (Id. ¶ 82 (emphasis added); see also id. ¶ 110.)
So, taking the relators' allegations as true, the Colleges were not violating the ICB when CEHE executed its PPAs in January 2013. (See id. ¶¶ 82, 120.) And the Colleges did not begin to violate the ICB because of the Online Admissions Consultant Bonus Plan until "approximately April 2014," over a year after CEHE executed its January 2013 PPAs. (See id. ¶ 121.) Consequently, unlike the PPAs executed between 2007 and 2011, the relators have not plausibly alleged that CEHE knowingly misrepresented its intent to comply with the ICB in its January 2013 PPA.
In sum, the relators have plausibly alleged that the Colleges knowingly misrepresented their intent to comply with the ICB in the PPAs executed between 2007 and 2011. But the relators have not plausibly alleged that CEHE knowingly misrepresented its intent to comply with the ICB
in its January 2013 PPA. The court dismisses the relators' first cause of action to the extent that it is based upon this PPA.
3) Refund Requirement
Schools that participate in Title IV programs must keep accurate records related to administration of Title IV funds, including records relating to student attendance and grades. (Id. ¶ 156.) Regulations specify that all schools must keep accurate records at all times, including records relating to a student's eligibility to receive Title IV funding and any refunds that the school must remit to the Department of Education based on a student's ineligibility to receive Title IV funds. (Id. ¶ 157 (citing 34 C.F.R. § 668.24(c)(iii)-(iv) ).)
If a student enrolls at a school but fails to attend class, the school must refund any Title IV funds received for that student to the Department of Education. (Id. ¶ 158 (citing 20 U.S.C. § 1091b ; 34 C.F.R. § 668.21(a), (c) ).) Similarly, if a student attends some classes but then stops attending classes, the school must calculate the amount of unearned Title IV funds and refund that amount to the Department of Education. (Id. ¶ 159 (citing 20 U.S.C. § 1091b ; 34 C.F.R. § 668.22(a)(1), (4) ; § 668.33(b), (g)(i) ).)
A school uses its attendance records to determine a student's withdrawal date, which, in turn, determines how much money the school must refund to the Department of Education. (Id. ¶ 160 (citing 34 C.F.R. § 668.22(a)(2)(i)(A), (b) ).) Because a student's withdrawal date is determined based on attendance records, schools must accurately record and report student attendance. (Id. ¶ 161.) But because schools retain more money if a student's withdrawal date is "postponed," schools have a financial incentive to misreport students' withdrawal dates. (Id. )
As noted above, when a school executes a PPA, it agrees to "comply with the refund provisions established in 34 CFR Part 668.22." (Id. ¶ 212.) The relators allege that three of the Colleges made false statements concerning the refund requirement in certain PPAs:
• Stevens-Henager falsely stated that it would comply with the refund requirement in its January 2010 PPA. (Id. ¶ 216.)
• CollegeAmerica Denver falsely stated that it would comply with the refund requirement in its February 2010 PPA. (Id. ¶¶ 219.)
• CEHE-on behalf of CollegeAmerica Denver and California College-falsely stated that it would comply with the refund requirement in its January 2013 PPA. (Id. ¶ 220, 224.)
i. Stevens-Henager: January 2010 PPA
The relators have alleged five "[r]epresentative examples" of Stevens-Henager falsifying attendance records. (Id. ¶ 168.) First, in "November 2009 and December 2009," an instructor reported that a student had perfect attendance for an externship before the student completed the externship. (Id. ) The relators do not allege whether the student did not end up with perfect attendance. Second, in July 2010, an instructor reported that a student had perfect attendance when the student missed a number of classes because she was pregnant and gave birth. (Id. ) Third, in June 2010, an instructor gave a student an 84 percent attendance report even though the student missed about half of the classes. (Id. ) Fourth, in August 2010, an investigation found that an instructor was "marking students present ... when they are not in class." (Id. ) The relators do not allege what action, if any, Stevens-Henager took when it discovered this. Fifth, in 2013 and 2014, several online admissions consultants called students and encouraged them to login to the online learning program because their attendance was determined based on whether they logged in. (Id. )
These examples, four of which occurred between November 2009 and August 2010, plausibly establish that Stevens-Henager knew that it would not comply with the refund requirement when it executed its January 2010 PPA. See Miller , 840 F.3d at 498-99 (identifying potential violations of the refund requirement that occurred "before and after the signing of the PPA").
ii. CollegeAmerica Denver: February 2010 PPA
For CollegeAmerica Denver, the relators allege that "Joshua Allen, who was a faculty member and an Associate Dean ... explained that when he worked for [CollegeAmerica Denver], he attended 'Last Day Attended' meetings in which [the deans] reached out to students who weren't showing up and encouraged them to log on to their student account so [CollegeAmerica Denver] wouldn't have to count them as dropped." (Fourth Am. Compl. ¶ 168 (internal quotation marks omitted).) According to Mr. Allen, "it was his most important duty to encourage students to appear to be attending classes by logging into their accounts because [CollegeAmerica Denver] 'needed the students to have attendance so [it] wouldn't have to drop them." (Id. (internal quotation marks omitted).) Mr. Allen worked at CollegeAmerica Denver "from November 2009 to October 2013." (Id. ) This allegation does not plausibly establish that CollegeAmerica Denver falsely certified that it intended to comply with the refund requirement in the February 2010 PPA. At most, the allegation suggests that it was possible but not plausible that CollegeAmerica Denver falsely certified that it would comply with the refund requirement in its February 2010 PPA. Indeed, the allegation does not even establish that CollegeAmerica Denver improperly withheld Title IV funds from the Department of Education. Consequently, the relators have failed to allege that CollegeAmerica Denver falsely certified that it would comply with the refund requirement in its February 2010 PPA. The court, therefore, dismisses the first cause of action against CollegeAmerica Denver to the extent that it is based upon the February 2010 PPA.
iii. CEHE: January 2013 PPA
The relators allege that CEHE, acting on behalf of CollegeAmerica Denver and California College, falsely certified that it intended to comply with the refund requirement. (Id. ¶¶ 220, 224.) For California College, the relators allege one representative example of "instructors falsifying attendance records." (Id. ¶ 168.) Specifically, in "approximately 2013," an adjunct professor taught a "hybrid class" (i.e. , a class that is partially online and partially in class). (Id. ) The Associate Dean of Medical Specialties allegedly told the adjunct professor "to deal with students that failed to attend [the class] by 'at least getting them to sign in on their computers to keep their attendance active.' " (Id. ) The relators do not allege whether the professor actually followed this advice. And, most importantly, the relators do not allege that any professor at California College engaged in such conduct. For CollegeAmerica Denver, the relators again point to Mr. Allen's statements about the importance of encouraging students to log on to their accounts so that they would not be "dropped." (Id. )
These allegations do not plausibly establish that CEHE knowingly misrepresented its intent to comply with the refund requirement. Indeed, the allegations do not establish that CEHE improperly withheld Title IV funds from the Department of Education. That is, the relators have failed to identify any students whose attendance records were falsified, resulting in an underpayment of Title IV funds. Consequently, these allegations do not plausibly establish that CEHE knowingly misrepresented its intent to comply with the refund requirement when it signed its January 2013 PPA, and the court dismisses the first cause of action against CEHE to the extent that it is based upon this PPA.
4) Accreditation Requirement
To be eligible to participate in Title IV programs, all schools must "meet the requirements established by ... accrediting agencies or associations." (Id. ¶ 128 (quoting 20 U.S.C. § 1094(a)(21).) Indeed, when schools execute PPAs, they agree that they will "meet the requirements established pursuant to Part H of Title IV of the HEA by ... nationally recognized accrediting agencies." (Id. ¶ 212.) The Colleges accrediting agency is the Accrediting Commission of Career Schools and Colleges (ACCSC). (Id. ¶ 130.)
The relators allege that three schools made false statements concerning the accreditation requirement in certain PPAs:
• Stevens-Henager falsely stated it would comply with the accreditation requirement in its January 2010 PPA. (Id. ¶ 216.)
• CollegeAmerica Denver falsely stated that it would comply with the accreditation requirement in its February 2010 PPA. (Id. ¶ 219.)
• CEHE-on behalf of Stevens-Henager, CollegeAmerica Denver, and California College-falsely stated that it would comply with the accreditation requirement in its January 2013 PPA. (Id. ¶¶ 217, 220, 224.)
i. Stevens-Henager: January 2010 PPA
In the summer of 2010, Ms. Wride became the executive assistant to the Dean of Education at Stevens-Henager's Orem campus. (Id. ¶ 133.) She was asked to investigate each faculty member's qualifications to ensure that they met the minimum accrediting standards for the ACCSC. (Id. )
According to the relators, Ms. Wride "discovered that many faculty members ... did not have the required minimum qualifications, as established by the ACCSC, to teach the courses that [Stevens-Henager] allowed them to teach." (Id. ¶ 134.) The relators provide two examples. (See id. ¶¶ 135-39.) First, Ms. Wride discovered that one professor "did not have the minimum number of years of related practical work experience that the ACCSC required him to have ... to teach certain courses ...." (Id. ¶ 135.) This professor, according to Ms. Wride, had "misrepresented the nature of his prior work experience." (Id. ¶ 137.) Second, Ms. Wride discovered that another professor "did not have sufficient education and related practical work experience to meet the ACCSC accreditation standards for faculty members." (Id. ¶ 139.) Specifically, the professor "had never practiced as a chiropractor and had no related practical work experience ...." (Id. )
Ms. Wride eventually raised these issues with the Dean of Education at Stevens-Henager's Orem campus. (Id. ¶ 140.) The Dean told Ms. Wride that he previously brought similar problems to the attention of "upper management" and that he was "nearly terminated for exposing the problems." (Id. ) Ms. Wride eventually reported the problems to the Colleges' CEO and COO. (Id. ¶ 144.) Despite this, Stevens-Henager continued to submit the same faculty personnel reports to the ACCSC for accreditation. (Id. ¶ 146.)
When the ACCSC conducted an audit of Stevens-Henager's Orem campus, Ms. Wride was told to "take the day off" to make sure that she had no contact with the auditors. (Id. ¶ 149.) Ms. Wride was also dropped from Stevens-Henager's respiratory-therapy program, the program in which she was enrolled, as retaliation for raising concerns with faculty personnel reports. (Id. ¶ 150.) When Ms. Wride complained, she was reinstated and Stevens-Henager agreed to waive her tuition and fees if she "just [left] things alone." (Id. ¶ 151.)
While the relators allegations suggest that Stevens-Henager knowingly violated accreditation requirements beginning in "summer 2010," the allegations do not establish that Stevens-Henager knowingly made false statements regarding its intent to comply with accrediting standards in January 2010, months before Ms. Wride first raised concerns over faculty qualifications. Notably, the relators have alleged only violations that occurred after Stevens-Henager entered into the relevant PPA. See Main , 426 F.3d at 917 ("Tripping up on a regulatory complexity does not entail a knowingly false represen