ORU Pays $300,000 to Settle Recruitment Allegations Lawsuit

Oral Roberts University (ORU) settled a lawsuit that alleged the university paid incentives to recruit online students.

To settle the lawsuit, ORU paid the Department of Justice (DOJ) $303,502.

“I am disappointed that the Department of Justice failed to live up to its calling—to be a department that seeks justice—but instead elected to require ORU to pay monies based upon a meritless claim,” ORU President Billy Wilson says. “The DOJ flatly refused ORU’s repeated requests for a meeting so that ORU could address and respond to these erroneous allegations. The massive amounts of documents and other evidence presented by ORU to the DOJ clearly established that ORU never misused one cent of taxpayer money. A justice system which financially rewards inappropriate conduct and punishes innocent parties is in dire need of reform.”

Maurice “Buddy” Shoe alleged that the university violated the United States Department of Education’s “incentive compensation ban” through a contract with a third party.

Shoe, who filed the lawsuit in 2016, is the president and a minority holder in Joined Inc., a recruitment company.

Reuters reports that Shoe accused ORU of violating Title IV of the Higher Education Act through its dealings with Joined from 2014 to 2016. The Higher Education Act bars colleges receiving federal student aid from compensating recruiters based on their success in enrolling students.

“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 (USDE),” according to a statement from the university.

ORU offered the following background:

Shoe’s complaint wrongly accuses ORU of violating the USDE’s “incentive compensation ban” through a contract with a third party, Joined, Inc. (Joined), to market ORU to potential students and perform a variety of bundled services. The incentive compensation ban prohibits institutions of higher education from providing incentive payments to a person or entity engaged in student recruiting activities. However, a safe harbor provision in the USDE’s guidance 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.

ORU’s agreement with Joined fulfilled the USDE’s stated requirements for the bundled services safe harbor provision. Joined performed a myriad of bundled services for ORU, including marketing and broad dissemination of information for ORU; advertising ORU to groups of potential students; conducting market research; performing student success and retention services; providing general counseling services to students; and assisting ORU with business development.

In a further effort to assure compliance and transparency, ORU provided full advance disclosure to its accreditor of not only its bundled services agreement with Joined, but also its detailed business plans setting forth the potential sharing of net tuition revenue.

Unknown to ORU when it contracted with Joined, North Greenville University (NGU) allegedly had an undisclosed minority ownership interest in Joined. Shoe’s complaint wrongly asserts that this concealed affiliation between NGU and Joined renders the bundled services safe harbor inapplicable. 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. 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. NGU’s ownership interest in Joined is immaterial to the legitimacy of the agreement between ORU and Joined. ORU understands that the bundled services safe harbor has never been enforced or interpreted by the USDE in the manner set forth in Shoe’s complaint.

Importantly, ORU never paid, and Joined never received, incentive compensation. ORU only reimbursed Joined a portion of the actual costs it incurred in 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. During the course of its review of this matter, ORU discovered that a significant amount of the reimbursement payments it made to Joined were for expenses that were not in fact paid by Joined to its vendors or employees. (“Waiting for a paycheck: 58 employees of Joined Inc. are owed $439,000,” The Orange County Register, April 8, 2016)

After Shoe finally disclosed that NGU’s alleged ownership interest in Joined could be viewed as a violation of the USDE rules, ORU immediately moved to terminate its agreement with Joined. The subject of multiple lawsuits across the country, Joined ultimately ceased operations and dissolved.

ORU fully cooperated with the USDOJ and the USDE’s Office of Inspector General in their investigation into the contractual relationships of Joined. ORU provided extensive documentation, e-mails, affidavits from former employees of Joined, and other evidentiary materials, all of which exonerate ORU of any alleged wrongdoing. The USDOJ partially intervened in Shoe’s lawsuit for the purpose of resolving the allegations against ORU.

This is not Shoe’s first lawsuit with Joined Inc.

According to Reuters, Shoe reportedly sued after learning that Joined had illegal relationships with South Carolina’s North Greenville University, which settled for $2.5 million in February, and other schools.

“This resolution stands in stark contrast to the USDOJ’s February 2019 announcement that NGU agreed to pay $2.5 million to resolve Shoe’s allegations of violation of the USDE incentive compensation ban. This resolution concludes a dispute between the parties regarding the scope and application of the incentive compensation ban and the guidance issued by the USDE,” according to ORU.