ORU to pay $300K to settle claim it violated federal recruitment compensation ban

Evangelical institution says it fully complied with department rules and regulations

By Samuel Smith, Deputy Managing Editor Thursday, June 06, 2019

Oral Roberts University has agreed to pay over $300,000 in a legal settlement involving allegations that it violated a ban on incentive-based compensation for student recruiting. The evangelical institution maintains it did nothing wrong.

The U.S. Department of Justice announced Wednesday that the Oklahoma-based institution based in Tulsa will pay $303,502 to resolve allegations under the False Claims Act.

ORU was accused by a Maurice “Buddy” Shoe of violating Title IV of the Higher Education Act that prohibits institutions that receive student aid from compensating recruiters based on successes in securing student enrollment.

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The prohibition is meant to protect students from recruitment practices that serve the financial interest of recruiters instead of the personal needs of students.

Shoe accused ORU of violating this rule by paying incentive compensation for online student recruitment to a third-party company called Joined Inc., an entity to which Shoe was a co-owner.

The complaint was investigated by the U.S. Attorney’s Office for the District of South Carolina and the Justice Department’s Civil Division’s Commercial Litigation Branch.

Shoe will receive $45,000 because a provision in the law allows whistleblowers to receive a share of the settlement.

“The claims resolved by the settlement are allegations only, and there has been no determination of liability,” a press release from the Justice Department explains.

ORU argued in a statement that it did nothing wrong and that its relationship with Joined Inc. was legal due to a U.S. Department of Education safe harbor provision.

ORU contends that the Department of Education “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.”

The school contends that ORU’s agreement with Joined fulfilled the Education Department’s requirements for the bundled services safe harbor provision since Joined performed a number of tasks for the school.

Those tasks include marketing, advertising to groups of potential students, conducting market research, performing student success and retention services, assisting with business development and providing general counseling services to students.

“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,” a statement from the institution reads.  

“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.”

The ORU statement stresses that “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,” the statement assures.

ORU, which has an enrollment of about 4,000 students, asserts that 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,” the school assures.

The school stresses that it even provided “full advance disclosure” to its accreditor about the bundle services agreement with Joined.

ORU states that it was unknown at the time it hired Joined that North Greenville University in South Carolina had a minority ownership interest in Joined. Shoe argued that the affiliation between Joined and NGU rendered the bundled services safe harbor provision inapplicable in ORU’s case.

But ORU contends that NGU’s ownership stake in Joined did not make the agreement between Joined and ORU ineligible for the safe harbor.

“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,” the ORU statement reads. “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.”

ORU also stresses that Joined never received incentive compensation from ORU. The school claims it only paid Joined for the actual costs incurred by 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,” ORU argued.

ORU terminated its agreement with Joined after Shoe disclosed that NGU’s ownership interest in Joined could be seen as a violation.

Shoe has also settled similar claims with NGU, which began a contractual relationship with Joined in 2014 and ended in 2015. In February 2019, NGU agreed to pay $2.5 million to resolve Shoe’s allegations that the school violated the incentive compensation ban.

Joined has since dissolved.