False Claims Act Case Revived Against ITT

     CHICAGO (CN) - The 7th Circuit revived claims that ITT Technical Institute let students submit false information to increase their federal aid packages.
     Debra Leveski worked at ITT's Troy, Mich., campus for over 10 years. Beginning in 1996, Leveski worked as an inside recruitment representative, responsible for contacting potential clients and persuading them to enroll. She was promoted to the position of financial aid administrator in 2002.
     A year after Leveski left ITT in 2006 as part of a settlement agreement over a sexual harassment complaint she filed, attorney Timothy Matusheski, who calls himself the "Mississippi Whistle Blower," helped her file a False Claims Act case against the for-profit college.
     Leveski claims that ITT Tech evaluated its recruitment officers based solely on their "numbers" - the amount of students they successfully encouraged to apply, enroll and start. Other evaluation criteria, which included professional development, appearance and "being a team player," were allegedly a sham.
     Evaluation in the Financial Aid Office operated similarly. Although Financial Aid Administrators were salaried, pay raises were determined based on the number of students successfully "packaged" and the amount of federal award money secured, Leveski claimed.
     "The only things that mattered to ITT were the numbers," according to the complaint.
     Leveski also claimed that ITT employees, including her supervisor, allowed students to falsify their income on the Federal Application for Student Financial Aid and other government forms.
     Under the Higher Education Act (HEA), universities are prohibited from "providing [employees] any commission, bonus, or other incentive payment based directly or indirectly on success in securing enrollments or financial aid." Educational institutions must certify compliance with HEA in order to receive federal grants.
     The Department of Justice declined to intervene in the case in November 2008, and U.S. District Judge William Lawrence denied two motions to dismiss before the case was reassigned.
     U.S. District Judge Tanya Pratt granted ITT's third dismissal request after finding that Leveski's allegations had already been publicly disclosed in a similar action United States ex rel. Graves v. ITT Educational Services.
     "Leveski, according to the district judge, was 'worlds apart from the type of genuine whistleblower contemplated by the FCA,' leading the judge to conclude that both 'the existence of nearly on-point cases reaching identical results [and] the attorney-driven nature of this lawsuit' demanded the dismissal of Leveski's suit for lack of subject-matter jurisdiction," the 7th Circuit summarized.
     Pratt ordered Leveski's lawyers to pay sanctions, noting that "other courts have dismissed nearly identical qui tam suits where plaintiff's attorney clearly recruited the relators to serve as makeshift and manufactured whistle blowers wielding generic and cookie cutter complaints."
     But, in a unanimous 51-page opinion, a three-judge panel of the 7th Circuit reinstated Leveski's claims.
     "To be sure, Leveski's case looks similar to the Graves case at first blush," Judge John Tinder wrote for the panel. "The relators in both cases are former employees of ITT - and even held the same job title. The relators in both cases also allege that ITT violated the incentive compensation provision of the HEA. But this is where the similarities between the two cases end."
     Unlike Graves, which alleged that ITT "had minimum enrollment quotas" and fired recruiters who failed to meet them "the scheme alleged by Leveski ... involves a much more sophisticated - and more difficult to detect - violation of the Department of Education requirements," according to the ruling.
     The conduct alleged by Leveski also took place over a different time period than Graves - 2001 to 2006 instead of 1991 to 1999 - and involved the financial aid office as well as the recruitment office, the court found.
     "Indeed, Leveski's allegations against ITT are only similar to the Graves allegations when viewed at the highest level of generality," Tinder wrote.
     And although "serious questions have been publicly raised about whether some for-profit educational institutions have violated the incentive compensation provisions of the HEA," the appeals court found that Leveski's claims rest on new information, based on her personal experiences.
     "Because the most compelling evidence against ITT could have only come from Leveski herself, we are not troubled by Leveski's admission that she had not contemplated filing suit until Matusheski contacted her," Tinder wrote. "Attorneys are allowed to advise potential future clients of both the contents of the law and their rights under the law; it is upon that basis that attorneys are permitted to advertise their services."
     The 7th Circuit also vacated the ordered sanctions that had saddled
     Motley Rice LLP, Plews Shadley Racher & Braun LLP, and Timothy Matusheski with almost $400,000 in fines.