DOJ Settles Constantine Cannon Whistleblower Client's False Claims Act Allegations of Incentive Compensation Ban Violations

By the Constantine Cannon Whistleblower Team

Last Tuesday (February 24), the Department of Justice (DOJ) announced that Massachusetts-based Study Across the Pond (SATP) and its principal John Borhaug agreed to pay $1.3 million to settle allegations they violated the False Claims Act through improper recruiting practices of U.S. students for study abroad.[1]  Constantine Cannon — co-counseling with Whistleblower Partners and the Whistleblower Law Collaborative — represented the whistleblower who originated this action under the qui tam provisions of the False Claims Act.

What Is the Incentive Compensation Ban?

Constantine Cannon’s whistleblower client filed the original action in 2021 alleging SATP was violating the so-called Incentive Compensation Ban through its recruitment contracts with dozens of universities in the United Kingdom.  The Incentive Compensation Ban is designed to protect higher education students from predatory and deceptive recruiting practices that prioritize the financial interests of the recruiter over the educational needs of the student.

The Incentive Compensation Ban comes from Title IV of the Higher Education Act of 1965 and covers colleges and universities participating in federal student aid programs such as the Direct Loan Program.  It bars any commission, bonus, or other incentive payment to student recruiters tied to their success in securing student enrollments.  The whistleblower here alleged SATP and the U.K. universities it contracted with violated the ban through their agreement to pay SATP based on the number of students it successfully recruited.

How Did Study Across the Pond Allegedly Violate the Incentive Compensation Ban?

After investigating these charges for more than two years, DOJ intervened in the action in May 2024 and took over the prosecution of the case.  According to the Government, SATP violated the Incentive Compensation Ban through its recruitment of American students to study in the U.K.  SATP allegedly collaborated with at least 28 U.K. schools to violate the Ban while those schools were participating in the Direct Loan Program under which the federal Government loans money directly to students and parents.

The Government claimed these schools paid SATP a commission for its recruitment services that was a share of the tuition the recruited students paid, which often was funded from Direct Loan Program proceeds.  The Government further claimed SATP created sham records to hide these tuition-sharing arrangements from the Department of Education, ultimately causing the foreign schools to submit false claims to the Direct Loan Program.

Is the Incentive Compensation Ban a DOJ Priority?

In announcing the settlement, the Government stressed the importance of the Incentive Compensation Ban and its commitment to go after schools and recruiting companies that violate it.  DOJ Civil Chief Brett Shumate made this priority clear:

“American students deserve to make enrollment decisions free of the improper influence of third-party recruiters who pursue their own financial gain rather than the students’ best interests.  Today’s settlement demonstrates the Department’s commitment to holding accountable individuals and corporate entities who violate the Incentive Compensation Ban and to protect the integrity of the federal student aid programs like the Direct Loan Program.”

U.S. Attorney Leah Foley for the District of Massachusetts was equally forceful in this regard, noting how committed her office is “to ensuring American students are not taken advantage of for financial gain and protecting the integrity of federal student financial aid programs.”  Jason Williams, Department of Education Assistant Inspector General for Investigation Services was in complete accord: “We will continue to work together to ensure that Federal student aid funds are used as required by law.”

Despite the importance of the Incentive Compensation Ban, the Government has not brought many actions to enforce it because of the difficulty of proving a recruiter incentive structure that falls within the ban.  The SATP action is especially unique because it is the only reported case where the ban was enforced for recruiting practices for foreign study.

What Role Did The Whistleblower Play in Bringing This Matter Forward?

Constantine Cannon is especially proud of its client for bringing these issues forward and prompting a national conversation in the U.K. around student recruitment practices.  But for our client’s efforts, it is almost certain these practices would have continued indefinitely.

Constantine Cannon whistleblower partner Gordon Schnell, who represented the whistleblower in this matter, credited the whistleblower’s courage and perseverance in shining a light on these extremely difficult-to-detect practices.  “This is an individual who believed students were being harmed by these practices,” Schnell said, “and despite the risks of coming forward felt compelled to do something about it.”

Schnell also credited DOJ and his co-counsel — Poppy Alexander of Whistleblower Partners and Erica Blachman Hitchings of Whistleblower Law Collaborative — for the outstanding work they put into this case.  Schnell said “this was a team committed to the cause of enforcing this critical higher education tool.”

In a story it wrote last week on the settlement, Bloomberg quoted Schnell on the significance of this case and just how important this enforcement tool is in “protecting students from unsavory recruiting practices, protecting universities by ensuring they recruit only those students who are the best fit for their programs and studies, and protecting the public fisc from an increased risk of student loan defaults.”[2]

Under the False Claims Act, successful whistleblowers are entitled to a significant share of the Government’s recovery.  Constantine Cannon’s whistleblower-client here will receive an award of $240,500 (18.5%) from the proceeds of the Government’s recovery.

Constantine Cannon Has Substantial Experience Representing Whistleblowers Under the False Claims Act

If you would like to learn more about this case, Constantine Cannon’s other whistleblower successes, the False Claims Act, or what it means to be a whistleblower more broadly, please do not hesitate to contact us.  We will connect you with an experienced member of the Constantine Cannon whistleblower team for a free and confidential consultation.

Sources:

[1]  See https://www.justice.gov/opa/pr/international-student-recruiting-firm-and-co-founder-pay-13m-resolve-false-claims-act.

[2]  See https://news.bloomberglaw.com/federal-contracting/study-abroad-company-settles-education-department-aid-fraud-suit.

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