The United States Law Week

Student Loan Lender Holds Onto Win in False Claims Trial

Jan. 8, 2019, 9:18 PM

The Pennsylvania Higher Education Assistance Agency beat back an appeal of a jury verdict in its favor in a suit alleging it defrauded the U.S. Department of Education, violating the False Claims Act.

The district court didn’t err in excluding evidence of a performance audit of the agency, showing excessive spending, as irrelevant, the U.S. Court of Appeals for the Fourth Circuit said Jan. 8.

Dr. Jon Oberg sued over a Department of Education subsidy program meant to encourage the issuance of low-interest federal loans by offering special allowance payments to certain lenders.

Oberg alleged that between 2002 and 2006, PHEAA submitted false claims for subsidies by improperly transferring loans from non-tax-exempt bonds into tax-exempt bonds. In doing so, PHEAA converted lower-interest loans into loans that guaranteed a favorable 9.5 percent return, resulting in millions of dollars in additional revenue for PHEAA, he alleged.

The jury in the U.S. District Court for the Eastern District of Virginia returned a unanimous verdict for PHEAA in 2017.

The appeals court rejected Oberg’s challenges based on the district court’s failure to give proposed jury instructions.

Zuckerman Law represented Oberg.

Kirkland & Ellis, LLP and Stevens & Lee, P.C., represented PHEAA.

The case is United States ex. rel. v. Penn. Higher Educ. Assistance Agency, 4th Cir., No. 18-1028, 1/8/19.

To contact the reporter on this story: Julie Steinberg in Washington at jsteinberg@bloomberglaw.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com

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