ORU to pay over $300,000 for allegedly paying recruiters for student enrollment
TULSA, Okla. – An Oklahoma university has found itself in hot water amid allegations that it paid recruiters for student enrollment, according to documents from the US Department of Justice.
Officials say Oral Roberts University will pay $303,502 to resolve allegations under the False Claims Act.
According to the allegations, ORU hired Joined Inc. to recruit students to the university between 2014 and 2016. ORU then compensated Joined with a share of the tuition that ORU received from the enrollment of the recruited students.
“The integrity of our system of higher education is founded on allowing students to make enrollment decisions based on their own educational interests,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “We will not allow these important decisions to be compromised by educational institutions offering recruiters financial incentives to enroll students.”
Under Title IV of the Higher Education Act, institutions that receive federal student aid are prohibited from compensating student recruiters based on the recruiters’ success. Officials say the incentive compensation ban protects students against admissions and recruitment practices that serve the financial interest of the recruiter rather than the educational needs of the student.
“Our higher education system should prioritize the educational interests of students, not the financial interests of schools and recruiters,” said U.S. Attorney Sherri A. Lydon for the District of South Carolina. “The U.S. Attorney’s Office will fight to protect against misuse of federal taxpayer dollars intended to serve students’ educational needs.”
Officials with Oral Roberts University say the allegations in the complaint are “without factual or legal merit,” adding that “ORU’s conduct and performance was in full compliance with the regulations and guidance issued by the United States Department of Education.”
The university released the following statement on its website regarding the settlement and the case:
“Oral Roberts University (ORU) announces that it has reached a resolution with the United States Department of Justice (USDOJ) regarding a complaint filed by Maurice “Buddy” Shoe (Shoe) which alleges that ORU paid incentive compensation for recruitment of online students. The allegations in Shoe’s complaint are without factual or legal merit. At all times, ORU’s conduct and performance was in full compliance with the regulations and guidance issued by the United States Department of Education (USDE).
A variety of factors, including the anticipated costs of protracted litigation and the undue distraction from ORU’s pursuit of its mission, led ORU to the conclusion that resolution at this time is in ORU’s best interest. In addition to denying the allegations of the complaint, ORU assures its students, faculty, staff, alumni, stakeholders, and the public that at no time did it submit a “false claim” to the government nor misuse federal taxpayer funds. It is undisputed that every cent of the money that is the subject of Shoe’s complaint was handled and directed exactly the way the government and the students intended – all of the money was disbursed to the students to pay for their educational costs. ORU provided all of the students the high-quality educational services for which ORU has achieved global acclaim.
Shoe’s complaint wrongly accuses ORU of violating the USDE’s “incentive compensation ban” through a contract with a third party, Joined, Inc. (Joined), to market ORU to potential students and perform a variety of bundled services. The incentive compensation ban prohibits institutions of higher education from providing incentive payments to a person or entity engaged in student recruiting activities. However, a safe harbor provision in the USDE’s guidance explicitly allows an educational institution to make payments to an unaffiliated third party based upon net tuition revenue for performing student recruitment in conjunction with other bundled services.
ORU’s agreement with Joined fulfilled the USDE’s stated requirements for the bundled services safe harbor provision. Joined performed a myriad of bundled services for ORU, including marketing and broad dissemination of information for ORU; advertising ORU to groups of potential students; conducting market research; performing student success and retention services; providing general counseling services to students; and assisting ORU with business development.
In a further effort to assure compliance and transparency, ORU provided full advance disclosure to its accreditor of not only its bundled services agreement with Joined, but also its detailed business plans setting forth the potential sharing of net tuition revenue.
Unknown to ORU when it contracted with Joined, North Greenville University (NGU) allegedly had an undisclosed minority ownership interest in Joined. Shoe’s complaint wrongly asserts that this concealed affiliation between NGU and Joined renders the bundled services safe harbor inapplicable. The USDE’s stated purpose of the bundled services safe harbor provision is that the university providing the educational services and the third-party contractor must be unaffiliated with each other. ORU and Joined were always unaffiliated and separate entities. ORU and Joined shared no common officers, directors, or trustees; they shared no governance; and neither had or exercised control over the other entity. NGU’s ownership interest in Joined is immaterial to the legitimacy of the agreement between ORU and Joined. ORU understands that the bundled services safe harbor has never been enforced or interpreted by the USDE in the manner set forth in Shoe’s complaint.
Importantly, ORU never paid, and Joined never received, incentive compensation. ORU only reimbursed Joined a portion of the actual costs it incurred in performing the agreement. Even if Joined’s performance under the agreement rose to the level triggering the payment of net tuition, these payments would have been entirely permissible under the bundled services exception to the incentive compensation ban. During the course of its review of this matter, ORU discovered that a significant amount of the reimbursement payments it made to Joined were for expenses that were not in fact paid by Joined to its vendors or employees. (“Waiting for a paycheck: 58 employees of Joined Inc. are owed $439,000,” The Orange County Register, April 8, 2016)
After Shoe finally disclosed that NGU’s alleged ownership interest in Joined could be viewed as a violation of the USDE rules, ORU immediately moved to terminate its agreement with Joined. The subject of multiple lawsuits across the country, ORU understands that Joined ultimately ceased operations and dissolved.
ORU fully cooperated with the USDOJ and the USDE’s Office of Inspector General in their investigation into the contractual relationships of Joined. ORU provided extensive documentation, e-mails, affidavits from former employees of Joined, and other evidentiary materials, all of which exonerate ORU of any alleged wrongdoing. The USDOJ partially intervened in Shoe’s lawsuit for the purpose of resolving the allegations against ORU.
As part of this resolution, ORU has paid $303,502 to the federal government. This resolution stands in stark contrast to the USDOJ’s February 2019 announcement that NGU agreed to pay $2.5 million to resolve Shoe’s allegations of violation of the USDE incentive compensation ban. This resolution concludes a dispute between the parties regarding the scope and application of the incentive compensation ban and the guidance issued by the USDE.
ORU remains focused on building Holy Spirit-empowered leaders through whole person education to impact the world.”