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Nelnet trial to start next week


GavelOMAHA – The amounts of money on the line are staggering.

If Lincoln-based student lender Nelnet fails to fend off a lawsuit accusing it of defrauding the federal treasury, it could be on the hook for almost $1 billion.

And for a former Nebraskan who blew the whistle on questionable federal subsidies collected by Nelnet, that result would be like hitting the lottery. Under the little-known law under which Jon Oberg brought the suit, he would receive up to 30 percent of any judgment he recovers for U.S. taxpayers – a figure that could exceed $300 million.

Those are the possible stakes in United States of America ex. rel. Jon H. Oberg v. Nelnet Inc. et al., a case currently set to go to trial next week in a federal court in Virginia.

The suit is the latest chapter in a controversy that began seven years ago when Nelnet, one of the nation’s largest student lenders, used a loophole to boost by about $300 million the federal subsidies it received on some student loans.

Oberg brought the case under the U.S. False Claims Act, which allows citizens to sue on behalf of the government alleging fraud by federal contractors. And under that law, any damages awarded are tripled.

With such big dollars on the line for Nelnet, other lenders, taxpayers and Oberg, a federal judge presiding over the case is strongly urging an out-of-court settlement. The judge last week scheduled a settlement conference for Wednesday and delayed the start of the trial a day, to Aug. 17.

Nelnet officials said they will participate in the settlement meeting but also continue to feel they have a strong defense against the allegations.

“We remain confident in our position,” Nelnet spokesman Ben Kiser said Monday. “The law and the facts have always been on our side, and no new evidence has been presented to change that.”

Oberg’s lawsuit says Nelnet and the other student loan companies out of greed illegally boosted their profits at the expense of a program intended to help students and their families. The companies should not be allowed to get away with their fraudulent financial gains, the suit says.

“In truth, [the student loan firms] were more Bernie Madoff than Mother Theresa,” Oberg’s attorneys say in a court filing. “Their universal goal was to grab every possible taxpayer dollar.”

Nelnet argues that it informed education department officials up front how it was increasing its subsidy billings and the legal basis for the claims – proving there never was any intent to defraud the government.

Nelnet officials cite statements from several department officials, including an assistant secretary who said such increased claims were “no fraud and abuse.”

“Far from being fraudulent, Nelnet’s claims for payment were lawful and proper under the statutes, regulations and agency guidance that existed at the time,” its attorneys wrote in one brief.

Nelnet also argues a 2007 settlement it reached with the U.S. Department of Education over its alleged overcharges long ago resolved the dispute.

By Henry J. Cordes

Published: Tuesday, August 10, 2010 4:10 AM CDT
World-Herald News Service




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