February, 2021
Washington – Sometimes a sentence appears in an otherwise dry government ruling that is too good, even too humorous, not to single out and savor. I don't know the actual author, but surely this line (highlighted below in full context), from a decision requiring a student loan lender to repay $22.3 million of false claims made against taxpayers, was written with a knowing smile:
"The analysis essential to Navient’s case is the language of the controlling statute and duly promulgated regulations. Policy guidance in the form of a DCL may be helpful in implementing new rules, but such guidance cannot conflict with laws established by Congress or regulations enacted through the rulemaking process....
"The sentence at issue [in the DCL] appears on page 13. Navient asserts that this sentence constitutes the Department’s new and binding interpretation of the law allowing the 9.5 percent floor to be billed on obligations funded partially with tax-exempt and partially with taxable funds. I am unpersuaded that the Department had any intention of hiding a new legal interpretation in a clause in the middle of an otherwise innocuous sentence on the thirteenth page of DCL 93-L161. I agree with FSA’s position and the administrative judge’s holding that DCL 93-L-161 did not and could not establish a binding legal position of the Department that conflicts with the existing statute and regulations. (emphasis added)
Ya think?
Yet on such bizarre findings of hidden meanings were taxpayers defrauded in the hundreds of millions of dollars fourteen years ago by several lenders. And it could have been in the billions.
Lenders like SLFC, KHESLC, and PHEAA employed even more preposterous interpretations of DCLs to make false claims. They once asserted, trying to keep straight faces, that a 1996 DCL's Q and A section, item 30, essentially overturned a 1993 act of Congress.
If only someone in authority back in 2007 had said, with a felicitous turn of phrase, that they were "unpersuaded that the Department would hide language in item 30 of a Q and A subsection of a sub-regulatory DCL in order to overrule Congress." But back then the Department was controlled by the lenders, so no one did.
I recall being present at a deposition in which a lawyer representing lenders knew he'd be asked about such an interpretation. At the outset, the lawyer said he was sick and under heavy medication, so his understanding of the questions to be put to him, let alone his answers, might not be totally reliable. Another lawyer spoke during his deposition with a twinkle in his eye throughout: of course he believed what he was saying; he was even paid $5,000 for his opinion.*
Perhaps someone in the Biden Administration will take note. It may be too late to undo what lenders got by with in the past, but it is not too late to investigate how it happened and to clean house of those aiding and abetting false claims in federal student loan programs. There are many collaborators still around in the interest groups, in the law offices, in loan servicing companies, and in the Department.
While it is good to recover $22.3 million, it will be even better if integrity and the rule of law are finally restored to the Department itself.
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* Interrogating lawyers, condescension dripping, asked why only $5000? Any K Street firm would have charged at least $20,000 for an opinion that would bag millions for a client.
