Prosecutors allege that Study Across the Pond LLC has “knowingly caused” UK schools to submit false claims to the Department of Education for federal student aid.
They say that the company, and its principal, John Borhaug, have demanded the schools to enter into arrangements that violated the federal ban on incentive-based compensation.
“Third-party recruiters who demand illegal financial incentives for recruiting students to institutions of higher learning, no matter where those institutions are located, undermine the integrity of our system of higher education,” said principal deputy assistant attorney general Brian M. Boynton, head of the Justice Department’s Civil Division.
“Prospective students are entitled to make their enrolment decisions without the improper influence of recruiters who pursue their own financial gain at the expense of students’ best interests.”
Title IV of the Higher Education Act stipulates an Incentive Compensation Ban whereby any institution of higher education that receives federal student aid cannot compensate student recruiters with a commission, bonus or other incentives based on securing student enrolments, the department added.
The ban “protects students against aggressive recruitment practices that serve the financial interest of the recruiter rather than the educational needs of the student”.
Industry stakeholders had feared that proposals around third-party guidance put forward by the Department of Education early last year would have dire consequences for the sector.
However an update to the Third-Party Servicer clarified that study abroad programs, recruitment of international students not eligible for Title IV aid, among other activities, were not included.
Authorities say that Study Across the Pond “knowingly collaborated” with at least 28 schools in the UK to violate the ban on incentive compensation, while the schools were participating in a federal student aid program.
Clients include University of Brighton, Cardiff University, University of Liverpool, University of York among others.
Since at least 2015, the company has recruited American students the schools and demanded commission for its services, prosecutors say.
The commission was a share of the money the schools claimed from a federal financial aid program, specifically the Federal Direct Loan Program, for the benefit of American students, the Justice department said.
“Today’s complaint alleges the company used illegal incentives to influence American students to attend foreign schools”
It also claimed that the company and its head, Borhaug, “created sham records to hide these arrangements”, and ultimately meant the schools submitted false claims to the Department of Education.
“Today’s complaint alleges that Study Across the Pond and John Borhaug used illegal incentives to influence American students to attend foreign schools,” said acting US attorney Joshua S. Levy for the District of Massachusetts.
“With today’s action, my office demonstrates its commitment to upholding the ban on incentive compensation, rooting out undue financial influence in student recruitment and protecting the integrity of federal student financial aid programs.”
Special Agent in Charge Terry Harris of the Department of Education Office of Inspector General’s Eastern Regional Office added that the announcement is an example of a commitment to the mission of protecting public education funds for eligible students.
“The Office of Inspector General will continue to work with our law enforcement partners and pursue allegations of violations of the False Claims Act in carrying out our important public service,” Harris said.
