North Greenville University will pay $2.5 million to settle a False Claims Act lawsuit that said the school paid a company called Joined Inc. to recruit students for enrollment and compensated the company based on the number of students recruited.
Federal documents for the lawsuit that were unsealed by a judge on Feb. 6 show it was brought about as a whistleblower claim by Maurice Shoe, co-owner of Joined Inc.
According to the court documents, the private university owned 33 percent of Joined Inc. and was in charge of its board of directors.
The lawsuit said North Greenville had a covert agreement with Joined where the school would pay the company 50 percent of the gross tuition of each student the company recruited to the school.
Federal law prohibits higher education institutions that receive federal student aid from incentive-based compensation for student recruitment and enrollment. According to the suit, about 95 percent of North Greenville’s students receive Title IV federal aid money.
The lawsuit also said the university marketed Joined’s employees as North Greenville employees, complete with business cards, offices, titles, and North Greenville email addresses.
The court document said the university did this to boost enrollment and line the pockets of Keli Sewell, vice president of enrollment management at the university, and James Epting, former president of the university.
“Offering unlawful financial incentives for recruiting undermines the integrity of our higher education system,” Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division said in a statement. “Prospective students are entitled to make enrollment decisions without the improper influence of recruiting companies who pursue their own financial gain at the expense of the students’ best interests.”
A statement from North Greenville said the university started working with Joined in January 2014 but by 2015, interim President Randall Pannell and the university’s board dissolved the relationship with the company before being notified about the False Claims Act investigation.
The university said Joined was not effective in recruiting students before it filed for bankruptcy and closed operations.
The university did not admit any wrongdoing or liability of any federal violations in its settlement.
“NGU and its current legal team have cooperated fully with the authorities in this investigation, which stemmed from operational decisions that occurred in 2014. Since 2015, the university has had no involvement with Joined, so these issues have not applied to the university’s operations since that time,” North Greenville President Gene C. Fant Jr. said in the statement.
The company, which is now defunct, was the subject of an investigation from the United States Department of Labor’s Wage and Hour Division for failing to pay $439,000 in wages to 58 employees.
A statement from April 5, 2016, from the Department of Labor said the company must pay the $439,000 in back wages.
“The company blamed clients who failed to pay for services rendered and a slowdown in company business,” the statement said.
One month after the Department of Labor findings, Shoe filed the whistleblower claim against North Greenville University, which was settled on Feb. 11.
As part of the False Claims Act, the parties suing on behalf of the government can receive a share of the settlement.
A statement from the Department of Justice said Shoe will receive $375,000 of the $2.5 million settlement.
In the statement, U.S. Attorney Sherri A. Lydon for the District of South Carolina said the settlement would send a message to higher education institutions to put the educational interests of students first.
“It should serve as a warning to institutions that would attempt to maximize enrollments to line their own pockets, disregarding the best interests of students in the process,” Lydon said in the statement. “Through False Claims Act cases like this one, the U.S. Attorney’s Office will continue to help protect federal taxpayer dollars from waste, fraud, and abuse.”
Attorney Reuben Guttman with Guttman, Buschner & Brooks PLLC, who represented Shoe in the lawsuit, said the settlement brings renewed focus to higher education institutions that pull in federal dollars.
“This is an area that clearly needs to be regulated,” Guttman said. “And the question is whether these classes they’re offering are truly beneficial, substantive endeavors, or whether they’re moneymakers, and we’re in an era, unfortunately, where education is big business.”
Guttman couldn’t comment on whether there are False Claims Act suits against any of Joined’s other clients, which include Oral Roberts University and San Diego Christian College.