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Whistleblower Suit Against Student Loan Companies Unsealed in Federal District Court


The United States District Court for the Eastern District of Virginia today unsealed a lawsuit against a number of student loan companies, including Nelnet, Inc and Sallie Mae, filed on behalf of the United States by Dr. Jon H. Oberg. The action seeks the return of approximately $1 billion in “special allowance” payments wrongfully extracted from the United States Department of Education by the defendants. Under a federal student loan program that was intended to be phased out beginning in 1993, student loan companies were eligible for “special allowance” payments that provided interest rates subsidies guaranteeing a 9.5% return on a limited class of student loans generated from monies raised prior to 1993 with tax-free obligations. Faced with a prohibition on generating new eligible loan pools, the loan companies used sham transactions known internally by names such as “dipping” to multiply the loans on which subsidy payments were claimed and thereby swell their profits at taxpayer expense. The result was an approximately $1 billion windfall which Dr. Oberg now is seeking to recover for the government.

Federal law provides a qui tam remedy to recover government payments made pursuant to illegal claims. Qui tam claims can be brought by knowledgeable individuals, acting as “private attorneys general” on behalf of the government. Dr. Oberg, who filed the Complaint, retired in 2005 after a distinguished career in academia and public service.  As a researcher at the Department’s Institute of Educational Sciences, an arm of the Department legislatively separated from loan administration, he discovered the illegal claims described in the Complaint and reported them through his chain of command.

After being directed by his supervisor not to pursue the issue, Dr. Oberg conducted an investigation that revealed the magnitude of the fraudulent claims. In describing the suit, Dr. Oberg stated that “I have always been a strong supporter of the mission of the Department of Education.  However, particularly in these difficult times, it is critical for both taxpayers and students that federal funds be used to support students in need, not to enrich lenders unlawfully.” 

The case is expected to go to trial in Federal District Court early next year. All inquiries regarding the case should be made to Bert W. Rein (202.719.7080, of Wiley Rein LLP, which is serving as counsel for Dr. Oberg along with The Employment Law Group law firm (202.261.2802,

The Employment Law Group® Law Firm Publishes Column on Seminal SOX Decision

Today, Law360 published a column by principals R. Scott Oswald and Jason Zuckerman of The Employment Law Group® law firm on the Ninth Circuit’s recent decision in Van Asdale v. International Game Technology.  The column discusses how the Van Asdale decision is a substantial victory for SOX whistleblowers in that it resolves ambiguities in favor of employees and rejects arguments that employers commonly assert in SOX whistleblower cases.  To read the column, click here. Additional information on The Employment Law Group® law firm’s Sarbanes-Oxley Whistleblower Practice is available at

Compliance Week Quotes Scott Oswald on High Profile SOX Decision

In an article titled, “Recent Court Decision Clarifies Whistleblower Law,” Compliance Week reports about the Ninth Circuit’s recent decision in Van Asdale v. International Game Technology about the scope of the whistleblower retaliation provision of the Sarbanes-Oxley Act (“SOX”).  According to Scott Oswald, a principal with The Employment Law Group® law firm, the Ninth Circuit’s decision “signals that SOX is still a robust remedy for corporate whistleblowers” despite the Labor Department “undermining the statute in its narrow interpretation of the statute.”  For information on The Employment Law Group® law firm’s Whistleblower Practice, click here.

California Governor Signs into Law New Electronic Discovery Act

On June 29, 2009, California Governor Arnold Schwarzenegger signed into law California’s Electronic Discovery Act.  The new law, which became effective on June 29, 2009, establishes new procedures for parties requesting production to obtain discovery of electronically stored information (ESI) and offers, for the first time, specific definitions of what constitutes electronically stored information.  Other key provisions of the Act include:

  1. Requesting Party Can Specify the Form of Production – Under the new law, the party requesting production of ESI can specify the form in which the responding party must produce the requested information.  If however, the form is not specified in the request for production, the responding party must produce the ESI either in the form that it is ordinarily maintained or in a form that is reasonably usable.
  2. Discovery of Inaccessible Information – The Act permits parties to seek discovery of ESI that is from a source that is not reasonably accessible and unlike the federal rules, the burden is on the responding party to bring a motion for a protective order or to make written objections to such a request, i.e., that the requested information is from a source that is not reasonably accessible because of undue burden or expense.
  3. No Sanctions for Lost, Damaged, or Altered Data – Absent exceptional circumstances, the Act prohibits the court from imposing sanctions on a party for failure to provide ESI that has been lost, damaged, altered, or overwritten as the result of the routine, good faith operation of an electronic information system.
  4. Subpoenas – The Act expressly provides for the use of subpoenas to obtain ESI from nonparties to the suit.                

This bill is significant because it provides needed guidance on the discovery of ESI in California state court litigation and in particular California whistleblower litigation.  To read the bill, click here.

Contra Costa Times Publishes Article About Whistleblower Suit Against Pittsburg School District

In an article titled, “Whistle-blower suit filed against Pittsburg school district,” Contra Costa Times reports about Tim Galli’s whistleblower retaliation lawsuit against the Pittsburg school district.  Tim Galli, a 35-year educator and former Pittsburg High principal, suffered retaliation when he raised concerns about the school district’s questionable budgetary practices, and undisclosed financial conflict of interest between the superintendent and a school board member.  According to the suit, the district “engaged in a cover-up effort to hide their retaliation by dredging up an incident that was months old, undergoing an unconstitutional investigation and ultimately voting to terminate Galli without just cause and without following the most basic due process requirements.”  The Employment Law Group® law firm is representing Mr. Galli in his retaliation action under the California Whistleblower Protection Act.  For information on The Employment Law Group® law firm’s Whistleblower Practice, click here.