For-profit university asks 10th Circuit to flunk student aid fraud whistleblower case

DENVER (CN) — A for-profit university on Tuesday asked a 10th Circuit Court of Appeals panel to dismiss a whistleblower suit brought by a former faculty member, arguing most of the accusations of fraud against it were in the press and public knowledge before the lawsuit was filed.

“You have a congressional direction here that these cases shall be dismissed,” argued Michael Raupp, on behalf of Colorado Technical University. “The Supreme Court and this court have determined these cases have a threshold to reach the courts.”

A former faculty member of Colorado Technical University formed Fiorisce LLC to veil her identity and file a qui tam False Claims Act suit on Feb. 25, 2021, to expose the for-profit university’s fraudulent billing scheme of reporting to the federal government more credit hours than students actually received.

The False Claims Act allows anyone to sue on behalf of the government to expose fraud against the government.

By employing Intellipath, an adaptive learning software, the university allowed students to easily skip content they already knew to complete classes faster. But the university then submitted the full course credits on financial aid applications. Because the program failed to offer supplemental material or to replace the missed lessons, students were actually getting fewer credit hours than reported.

U.S. Circuit Judge Scott Mattheson, a Barack Obama appointee, lobbed several questions against Raupp, beginning with the court’s jurisdiction to hear the case, since the university’s argument could be pursued at summary judgment.

“The record may be developed, so I don’t think I see this analogy to prong two of qualified immunity,” Matheson said. “We don’t take interlocutory appeals for review.”

Raupp, who practices with Hursch Blackwell, countered that the bar to proceeding rendered a lower court’s dismissal of the case in January 2024 a final appealable order.

Claiming the scheme was known and criticized in the press, the university had then similarly asked a lower court to toss the case under the law’s public disclosure bar.

On Jan. 4, 2024, the lower court dismissed claims against parent company Perdoceo Education Corporation and subsidiary American Intercontinental University but maintained the claims against Colorado Technical University. The Colorado school appealed, comparing the public disclosure bar to qualified immunity to argue that the denial represents a final appealable order.

“You say this advances government efficiency, but how does it do that, unless you’re right?" Matheson asked.

Raupp said the public disclosure bar was created to kick out lawsuits before the heavy lifting occurred.

“The lion’s share of expenses is in the discovery phase,” Raupp said. “Government efficiency is articulated by nipping this lawsuit in the bud.”

While arguing the claims of fraud are well-known, the university also denied the merit of the claims in its appeal brief.

The court had far fewer questions for Whistleblower Partners attorney Max Voldman, who repeated the suggestion that his opponent make their argument at summary judgment.

“It’s not like Congress said ‘if there’s a newspaper article, we’re not interested in getting more information.’ That has never been the case,” Voldman said on behalf of Fiorisce.

As an example, Voldman pointed to the wealth of press coverage on health industry fraud and the abundance of similar False Claims Act suits. Obama-appointed U.S. Circuit Judge Carolyn McHugh, however, wanted to home in on the specific articles written about Colorado Tech.

“There were quite a few public articles and opinion pieces calling attention to the fact that these universities were teaching classes that were very easy, pushing students through, and just collecting tuition, was that enough to put the government on notice of a claim about fraudulent student loans?” McHugh asked.

Voldman distinguished between media reports and the specific scheme raised by his client.

“It’s not that the government had to infer there was a fraud, nothing in the public disclosures was sustainably the same as the disclosures made in our case,” Voldman said. “The Telepath press releases touting the fact that you could skip courses, it doesn’t raise the concerns of fraud.”

Voldman also stood by his client’s decision to mask her identity in a limited liability company out of fear that disclosing the fraud would cause her to be blacklisted from continuing to work in the industry.

Obama-appointed U.S. Circuit Judge Gregory Phillips rounded out the panel. The court did not indicate when or how it would decide the case.

Follow @bright_lamp