Klamath Community College sues VA over 'arbitrary and capricious' G.I. Bill dispute

·4 min read

Dec. 6—Claiming it was an "arbitrary, capricious" attack on aviation flight schools, Klamath Community College is suing the federal government for dispute of more than $1.2 million in veteran tuition payments that has already cost the university roughly $75,000.

The community college in Klamath Falls is suing the U.S. Department of Veterans Affairs on claims that earlier this fall the U.S. Treasury began withholding roughly $37,000 per month over Trump-era disputes over covering aviation training programs through the G.I. Bill, according to a lawsuit filed late last month in U.S. District Court in Medford.

The lawsuit alleges that starting in 2017, the U.S. Department of Veterans Affairs used a combination of false statements, mixed messages, incorrect paperwork and "impossible to decipher" alleged discrepancies to dispute tuition payments for veteran students in the program — even for years the VA had already approved the payments.

KCC is one of four Oregon community colleges that offer flight programs such as aviation instruction for airplane and helicopter pilots.

The college claims that a wave of VA audits on the program correlated with a Trump administration cost-cutting proposal that targeted aviation training programs as part of the president's 2017 fiscal budget.

The White House couldn't get congressional support for cutting aviation-training programs from the budget passed in October 2017. Instead, the lawsuit claims, the VA "devised a scheme to limit veterans' benefits" by "purposefully target[ing] aviation flight schools in Oregon as a cost-saving measure."

"The practical effect of the VA's position is that it would require KCC to repay the tuition and fees of a veteran student who had already graduated from the KCC Aviation program," the lawsuit states.

Starting in July 2017, the VA's audits, known as "Annual Compliance Surveys," would seek documentation from the college as far back as 2013 — a time period that "unquestionably" had already been audited.

By the end of the month, the VA suspended its authorization for KCC aviation programs altogether citing a pending audit. The college claims compliance survey findings would be discussed at an "exit interview" that never came.

"Shockingly, when KCC inquired about the lack of an exit interview in January 2018 — six months after the 2017 Compliance Survey site visit — the CSS (Compliance Survey Specialist) falsely claimed that an interview had occurred," the lawsuit states.

The VA specialist's supervisor, identified in the lawsuit as "Coach Sherry Scott," issued a letter determining that the VA made an informal decision that no benefits should have been paid for any student in KCC's two flight programs since November 2015. According to KCC, the VA had already approved 2015 and 2016 aviation programs.

The Jan. 18, 2018 letter from the VA cited "10 categories of alleged discrepancies," KCC states, but did not identify any veteran students in the letter "making it impossible to decipher the VA's allegations."

On Feb. 14, 2019, the VA got a response from the same auditor out of Muskogee, Oklahoma, who had conducted the 2017 Compliance Survey.

Since early 2018, KCC has been asking the VA for a hearing through what's known as the School Liability Process to dispute the VA audit findings.

"Notably, having the same person review work that resulted in approximate $1.3 million in alleged debt is a violation of KCC's due process, and is arbitrary and capricious," the lawsuit alleges.

Meanwhile, about March 2018, KCC started getting "hundreds" of form letters from the VA's Muskogee office about the alleged tuition overpayments. A second wave of similar form letters followed in December 2019.

The form letters were originally made to send to individual students, not colleges.

"Astonishingly, the DMC (Debt Management Center) letters were actually form letters that the DMC would send to students/veterans, as opposed to institutions of higher learning," the lawsuit states.

The form letters cited laws allowing the VA to collect GI Bill tuition debt if a student dies, never attends class or completely withdraws before the term starts. None of those circumstances applied, according to the college.

KCC also ruled out alleged debts resulting in VA data entry errors or duplicate payments. The VA never contacted GI Bill recipients in the aviation programs over the alleged overpayments.

KCC last responded to the VA in December 2020 with a detailed rebuttal letter for each student for whom the government claimed a debt was owed.

At some point between the middle of 2020 and the fall of 2021, the VA transferred the more than $1.2 million debt to the U.S. Treasury for collection.

Starting in October, the U.S. Treasury began withholding the alleged debt without notice from unrelated student funds. The Treasury withheld $37,751 in federal student funds Oct. 6 and another $37,080 Nov. 10.

The lawsuit wants a federal judge to "provide KCC with its due process rights under the School Liability Process," declare that the VA's conclusion about the alleged overpayments violated KCC's Fifth Amendment rights, and for the Treasury and VA to immediately return the $75,000 offset from other fees.

As of Monday morning, the VA had not responded to KCC's lawsuit.

Reach web editor Nick Morgan at 541-776-4471 or nmorgan@rosebudmedia.com. Follow him on Twitter @MTwebeditor.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting