Nelnet, other student aid lenders pay $57.5 million to settle whistleblower suit

by Ben Vernia | November 17th, 2010

Three months after student aid lender Nelnet disclosed to the investing public that it had agreed in principle to pay $55 million to settle False Claims Act allegations, the Department of Justice announced on November 17 that the company and three others have paid a total of $57.5 million to settle the allegations that they inflated their entitlement to subsidies, as alleged by a former Department of Education employee in a qui tam suit. According to the Department’s press release:

The settlements resolve allegations brought in a whistleblower action filed in the Eastern District of Virginia under the False Claims Act, which permits private citizens to bring lawsuits alleging violations of the Act on behalf of the United States and to share in any recovery. The whistleblower suit was filed by Dr. Jonathan Oberg, a former employee of the Department of Education, who alleged that several lenders participating in the federal student financial aid programs created billing systems that allowed them to receive improperly inflated interest rate subsidies from the Department of Education. The United States did not intervene in this action, which was litigated by the whistleblower, but it provided assistance at many stages of the case, including during the settlement process.

Nelnet Inc. and Nelnet Educational Loan Funding Inc. have paid $47 million to the United States. Southwest Student Services Corp. has paid $5 million. Brazos Higher Education Authority and Brazos Higher Education Service Corp. have paid $4 million. Panhandle Plains Higher Education Authority and Panhandle Plains Management and Servicing Corp. have paid $1.75 million. Dr. Oberg will receive a total of $16.65 million from these settlements.

The 29% relator’s share is explained by the fact that the government declined to intervene in the case in August, 2009. (In cases in which the government intervenes or settles prior to intervention, the maximum relator’s share is 25%.)

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