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1 UNITED STATES DISTRICT COURT DISTRICT OF MAINE UNITED STATES OF AMERICA ) Plaintiff, ) v. ) ) MAINE DEPARTMENT OF EDUCATION, ) PORTLAND PUBLIC SCHOOLS, and ) Civil No. THE MAINE FAMILY RESOURCE CENTER, ) ) Defendants. ) its Complaint: COMPLAINT NOW COMES Plaintiff, United States of America, and asserts the following as INTRODUCTION Plaintiff United States of America brings this action against Defendants Maine Department of Education, Portland Public Schools, and the Maine Family Resource Center to recover millions of dollars that Defendants wrongfully obtained from the U.S. Department of Education under the Migrant Education Program. That federal program is designed to provide special funding to State educational agencies and public school districts around the country to assist them in providing supplemental educational and support services that address the special needs of migratory children who move among States, territories, and school districts, and experience educational disruptions and other Courthouse News Service problems as a result of repeated moves. Under the Migrant Education Program, a migrant (or migratory) child is (1) a child who moves across school district boundaries with or to join a family member who has made such a move in order to obtain temporary or seasonal employment in an agricultural or fishing activity, or (2) a child who makes such a move to obtain such employment for himself or herself. Although the actual

2 number of migrant children in Maine is relatively limited, the Defendants grossly overrepresented the number of those children, and thereby obtained more federal funding than was deserved. Moreover, prior to their misrepresentations, the Defendants knew or should have known the falsity of their representations, but they effectively failed to investigate or otherwise correct the problem. PARTIES 1. Plaintiff United States of America ( United States ) brings this action on behalf of itself and the U.S. Department of Education, which is an agency of the United States; its activities, operations and obligations are funded with federal monies appropriated by Congress. 2. Defendant Maine Department of Education ( MDE ) is a public agency established by the State of Maine to administer the State s system of public education. The MDE receives federal grant funds from the U.S. Department of Education under the Elementary and Secondary Education Act of 1965, as amended ( ESEA ). As the State of Maine s State educational agency ( SEA ), the MDE is responsible for administration of the federal ESEA funds it receives from the U.S. Department of Education. At all times relevant to this Complaint, the MDE was the grantee of the federal Migrant Education Program, and in that capacity made annual representations to the U.S. Department of Education regarding the unduplicated number of qualifying migrant children residing in the State. 3. Defendant Portland Public Schools ( Portland ) is a school administrative unit established and organized under the charter for the City of Portland, Maine. Portland s administrative offices are located at 196 Allen Avenue, Portland, Maine Portland -2-

3 received Migrant Education Program funds from the MDE as a sub-grantee in order to provide services to qualifying migrant children residing in the area that Portland serves. The amount of Migrant Education Program funds that the MDE provided annually to Portland was based, in part, on Portland s annual representations regarding the number of qualifying migrant students that Portland identified as residing in the geographic area that Portland serves. 4. Defendant Maine Family Resource Center ( MFRC ) is a nonprofit corporation organized under the laws of the State of Maine and has a principal office in Danforth, Maine. The MFRC received Migrant Education Program funds from the MDE on the basis of a contract under which the MFRC was responsible for identifying migrant children residing in much of the State of Maine. At all times relevant to this Complaint, the MFRC operated out of Maine School Administrative District #14 in Danforth, Maine. JURISDICTION AND VENUE 5. This Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C This Court has personal jurisdiction over the Defendants because they are located within this district and/or are conducting and/or previously conducted business within this district. 7. Venue is proper pursuant to 28 U.S.C. 1391(b) and 1391(c). BACKGROUND Overview of the Federal Migrant Education Program 8. The federal Migrant Education Program ( federal MEP ) is authorized in Title I, Part C of the ESEA, 20 U.S.C et seq. Under the program, the U.S. Department -3-

4 of Education provides annual grant awards to SEAs that choose to participate in the program. SEAs use the funds to provide supplemental education and support services to migrant children in order to help these children overcome the problems caused by the periodic disruption of their education and thereby achieve academically. SEAs may provide these services either directly or through local operating agencies, such as Portland. 9. The definition of a qualifying migrant (or migratory ) child is contained in 20 U.S.C. 6399(2). Under this definition, a qualifying migrant child is a child who, in the 36 months preceding a current school year, has moved from one school district to another on account of the fact that the child, or the child s spouse, parent, or guardian, engages in migratory agricultural, dairy, or fishing work that is temporary or seasonal. In order to qualify for services under the federal MEP, a family must meet these criteria. 10. The U.S. Department of Education has issued implementing regulations governing the definition of a migratory child and related terms at 34 C.F.R (67 Fed. Reg , (Dec. 2, 2002)). These regulatory definitions are the same as those the U.S. Department of Education previously issued at 34 C.F.R (60 Fed. Reg , (July 3, 1995)). 11. Beginning with the federal fiscal year ( FY ) 2002, the U.S. Department of Education has made annual awards of federal MEP funds to the MDE and other SEAs upon approval of their consolidated State program application submitted under 20 U.S.C rather than individual program applications as provided in 20 U.S.C Those consolidated State applications include the general assurances of the SEAs that they will administer and operate the State s MEP and other ESEA programs as required -4-

5 by law. 20 U.S.C. 9304(a). The U.S. Department of Education issued a rule that in submitting consolidated State applications, the SEAs must still (1) comply with all requirements for designing and implementing programs contained in the application requirements of the individual programs, and (2) maintain documentation of this compliance. See 67 Fed. Reg , (May 22, 2002). 12. The U.S. Department of Education allocates federal MEP funds to SEAs based on a formula that takes into account each State s per pupil expenditure for education, as well as the State s count of eligible migratory children residing within the State (referred to as the child count ) and the level of Congressional federal MEP appropriations. 20 U.S.C. 6393(a). Under 20 U.S.C. 6393(a)(2), if Congress in subsequent fiscal years does not appropriate an amount of federal MEP funds that is greater than the amount it appropriated for FY 2002, the Department awards to each State the amount it received for FY 2002, ratably reduced based on the actual amount of Congressional appropriations for that year relative to the amount that was appropriated for FY Since FY 2002, the level of Congressional appropriations for the federal MEP has never exceeded the amount appropriated for FY Because Congress did not appropriate more MEP funding in years subsequent to FY 2002 than it did for FY 2002, the amount of a State s federal MEP award is based on the amount that each State received in FY The FY 2002 award was determined by the child count that the State submitted in the reporting year (i.e., September 1, 2000 to August 31, 2001), which is the base amount. 20 U.S.C. 6393(a)(2)(A). 14. For every subsequent fiscal year, each SEA must annually self-report to the U.S. Department of Education both the number of eligible migratory children who reside in -5-

6 the State and the number who participate in federal MEP-funded summer or intersession programs. 15. The statute directs the Secretary of Education to ratably reduce a State s federal MEP grant award if the numbers and needs of migratory children in that State do not warrant the State s receipt of the calculated award. 20 U.S.C. 6393(c)(2)(A). Maine MEP Organization 16. At the State level, the Maine Migrant Education Program ( Maine MEP ) was managed by the Office of the Director ( Director s Office ) in Augusta. 17. Pamela Gatcomb (Gatcomb) was the Director of the Maine MEP at all times relevant to this Complaint. 18. At the local level, approximately one-third of the school districts in Maine operated their own MEP ( local MEP ) based on the receipt of subgrants of federal MEP funds from the MDE. 19. Typically, those school districts utilized school employees to recruit and service the migrant children in their district. 20. Portland was the largest school district that operated a local MEP. 21. Portland claimed to have a migrant population of approximately 1,000 students. 22. Travers Jackson (Jackson) was the Coordinator for Portland s local MEP. 23. Maine paid Portland approximately $1 million per year to operate its local MEP. 24. Not every school district operated a local MEP; for those that did not, Maine contracted with the MFRC, which operated out of School Administrative District #14 (SAD #14), to recruit and service the migrant children. 25. Maine paid the MFRC approximately $1 million a year to operate its local MEP -6-

7 in areas that did not receive their own subgrants of federal MEP funds. 26. The MFRC employed Travers Jackson at the same time he was employed as Portland s MEP Coordinator. Certificates of Eligibility 27. To document the basis of a child s eligibility for federal MEP funded services, the MDE, as well as its subgrantees and contractors, used a Certificate of Eligibility form ( COE ). 28. Information for the COE was typically gathered in the course of an interview between the parent of an ostensible migrant child, and a locally-based Recruiter or teacher (collectively Recruiter ). 29. When the COE was completed, the Recruiter or the Recruiter s superiors submitted it to the Director s Office for approval and inclusion of the child in MDE s annual child count. 30. In accordance with longstanding Maine MEP policy, when COEs are submitted to the Director s Office, they are to be complete and accurate, not left with blanks. Knowledge of Eligibility Criteria 31. Maine s State and local MEP officials have, for many years, known the applicable criteria to qualify for federal MEP funding. 32. For example, Gatcomb prepared a Handbook that was widely distributed to Recruiters, which included an accurate chart of federal MEP eligibility criteria. 33. Also since the 1990's, officials within the MDE, Portland, and the MFRC have known the difference between a migrant and an immigrant. Specifically, these officials instructed Recruiters to disregard an immigrant family s travel to the United States and to -7-

8 disregard the family s first move to settle in a particular community as migratory for purposes of the federal MEP. State and local officials instructed Recruiters to focus instead on the second move after disembarkation for the purpose of qualifying for federal MEP funding. In the 1990's, MDE specifically notified Portland of various concerns about whether Portland was properly applying federal standards when including immigrants as migratory students. 34. Similarly, officials within the MDE, Portland, and the MFRC have known since the 1990's that landscaping is not a legal qualifying activity for eligibility under the federal MEP. DEFENDANTS MISCONDUCT The MDE s False Count of Eligible Migratory Children in In or around November of 2001, the MDE provided its annual child count for the reporting year to the U.S. Department of Education and represented that the number of students who qualified for federal MEP funding was 9,035 ( Maine s 2001 child count ). 36. Maine s 2001 child count was false. 37. In fact, at the time, the number of Maine students who qualified for federal MEP funding was significantly less. This fact was not reported to the U.S. Department of Education before it awarded funding based on this 2001 child count. The MDE subsequently reported in 2005 that the number of students who qualified for federal MEP funding was no more than 2, In reliance on Maine s 2001 child count, the United States awarded the MDE $4,360,997 of FY 2002 federal MEP funds in July Beginning in September 2002, -8-

9 the MDE began drawing down funds from the total federal MEP award, and by December 2004, the MDE had received the total amount of the award (i.e., $4,360,997). 39. If Maine s 2001 child count as submitted to the U.S. Department of Education in November 2001 had reflected the true number of eligible students (i.e., 2,205), the United States would have awarded Maine no more than $1,178,283 of federal MEP funds. 40. Accordingly, in reliance on the Maine s original 2001 child count, the MDE received at least $3,182,714 more in federal MEP funds than it should have been awarded ($4,360,997 minus $1,178,283). 41. The MDE, Portland, and the MFRC have retained at least $3,182,714 in federal MEP funds to which they were not entitled. Creative Recruiting in Identifying Eligible Children 42. By July 18, 2002, managers of the Maine MEP knew or understood that noneligible children were being identified as migratory children and recruited for federal MEP funded services. 43. Creative recruiting is a phrase that Maine MEP participants used to describe the practice of bending the rules to include students as migrants who in fact did not qualify for federal MEP funding. 44. On August 21, 2002, those who attended a meeting of Recruiters for the Maine MEP were told by the managers of the program that, with respect to COEs, the Recruiters should not write all over them, but instead they should put additional information on a separate sticky note. 45. Similarly, at a training conference on October 8-9, 2002, Gatcomb orally told those present that if there was uncertainty about how to record the information correctly -9-

10 on the COE, then a sticky note should be used. 46. At the same training conference, Gatcomb provided the Recruiters with her list of Frequent Mistakes on COE Forms. 47. Gatcomb s list noted that the Recruiters were to complete all COEs, with all boxes and circles filled in. 48. Gatcomb s oral instructions to record information on sticky notes contradicted her written directive that all COEs be complete. 49. Gatcomb s written list also noted that landscaping, mowing grass and planting flowers or shrubs do not qualify as migratory work for purposes of federal MEP funding, but that clearing brush and pruning trees are eligible activities. 50. The Maine MEP Director s Office approved almost every COE submitted to it by the local MEPs and the MFRC. 51. Many COEs completed during the time period between 2001 and 2003 contain alterations, apparently in the Director s handwriting, such that the word landscaping was crossed out and changed to trimming and pruning trees or bushes. 52. In fact, the families whose COEs had been altered were employed in landscaping businesses, not in commercial forestry or agriculture. 53. Because landscaping is not considered a qualifying activity for purposes of the federal MEP, the alterations made it appear that ineligible children were eligible for MEP funding. 54. The majority of Portland s MEP students were recent immigrants from Somalia and Asia, not migratory workers. 55. For many of Portland s MEP students, the COEs falsely represented that the -10-

11 family had migrated from large urban areas like New York and Chicago, when in fact the families merely changed planes in those cities en route to settling in Portland. 56. In addition, many of Portland s MEP families reported that they moved to Portland for political reasons, not for the migratory reasons that were reported on their COEs. 57. As Director of Maine MEP and a high-level employee within the MDE, Gatcomb impressed upon Recruiters that a school district s funding was directly tied to its ability to keep the numbers up. 58. Gatcomb also informed Recruiters that a school district s federal MEP-funded programs would be discontinued if the district s child count fell below twenty students. The MDE s False Count of Eligible Migratory Children in In or around November of 2002, the MDE provided its annual child count for the reporting period to the U.S. Department of Education and represented that the number of students who qualified for federal MEP funding was 9,475 ( Maine s 2002 child count ). 60. The MDE knew or should have known that, as enumerated by statute, the U.S. Department of Education would use Maine s 2002 child count to determine the size of its FY 2003 federal MEP award if the level of Congressional appropriation for the program exceeded the amount appropriated for FY 2002, or if the numbers and needs of migratory children in Maine did not warrant the award calculated for FY Maine s 2002 child count was false. 62. In fact, at the time, the number of Maine students who qualified for federal MEP funding was significantly less. This fact was not reported to the U.S. Department of -11-

12 Education before it awarded funding based on this 2001 child count. The MDE subsequently reported in 2005 that the number of students who qualified for federal MEP funding was no more than 2, In reliance on Maine s 2002 child count, the United States awarded the MDE $2,117,401 in July Beginning in October 2003, the MDE began drawing down funds from the total federal MEP award for FY However, the MDE only accepted and received $1,792,861 in federal MEP funds for FY If Maine s 2001 and 2002 child count as submitted to the U.S. Department of Education had reflected the true number of eligible students for those reporting years, the United States would have awarded Maine no more than $1,178,283 of federal MEP funds for FY Accordingly, in reliance on the false child counts, the United States awarded Maine more federal MEP funds than it was entitled to receive. In addition, the MDE received at least $614,578 more than it should have received in FY 2003 ($1,792,861 minus $1,178,283). 67. The MDE, Portland, and the MFRC retained and have expended at least $614,578 in federal MEP funds to which they were not entitled. 68. In late November or early December of 2002, Kathryn Manning (Manning) replaced Gatcomb as the Director of Maine s MEP, although Gatcomb continued to work in the Director s Office as a State employee in a modified capacity. 69. The issue of Gatcomb s replacement was discussed on December 5, 2002, at a Regional Migrant Coordinators Meeting. -12-

13 70. Officials within the MDE, Portland, and the MFRC responsible for managing Maine s MEP program attended that meeting at which the ethics of COEs was discussed, including what some perceived as insinuations that incorrect COEs were being submitted. 71. The same meeting included an update that some teachers were raising questions about whether problems with their COEs could jeopardize their employment. 72. On about December 13, 2002, a Regional Migrant Coordinator issued a memo to teachers that advised them, among other things, to watch their COEs for accuracy. At the same time, the memo assured teachers that errors on the COEs would not affect their employment, because they were employed by their districts, not by the MDE. The Revelation of False Child Counts 73. On about January 8, 2003, a Recruiter employed by the MFRC, Thomas Regan (Regan), was terminated from his employment. 74. MFRC representatives informed Regan that he was being fired because he altered a COE after it had been signed by a parent. 75. On about February 1, 2003, in response to his firing, Regan wrote a letter to Manning, the new Director of the Maine MEP. 76. The Regan letter alleged widespread fraud and abuse in the Maine MEP. 77. In the letter, Regan conceded that he altered COEs in the course of his work as a recruiter for the Maine MEP, but he also asserted that [f]udging COE s is the stock and trade of the migrant recruiter! 78. According to Regan s letter, when he approached another Maine MEP Recruiter about the difficulties he was having finding and signing up eligible migrant students, the other Recruiter laughed and said Fudge em! -13-

14 79. Regan s letter asserts that the most common fudge was the so-called intent method, by which the Recruiters would represent that a particular student qualified as a migrant even though, contrary to the applicable regulations, his or her family never actually traveled to another school district for the purpose of finding temporary or seasonal employment. 80. In the letter, Regan also alleged that, if Gatcomb or other Maine MEP managers had wanted to stop Recruiters from fudging COEs, they could have simply arranged for a secretary to verify the information by calling the parents at the phone number listed on each signed form. 81. According to Regan, there was no such quality control ; on the contrary, those who managed the Maine MEP engaged in a practice of laying off Recruiters who would not fudge COEs. 82. In March of 2003, Regan approached his former supervisor, Jackson and discussed the likelihood of a federal audit of the Maine MEP. 83. During the course of that conversation, Regan inquired about what he should do with the underlying Maine MEP documents that he retained. Jackson advised that he would destroy those documents. 84. Several months later, Jackson conceded that a large number of the COEs he completed contained false or misleading eligibility information, including one instance in which a parent called the Director s Office for the Maine MEP to complain about her son being incorrectly counted as a migratory child. 85. Officials within the MDE received other complaints in 2002, prior to Regan s letter, that the COEs contained false information. -14-

15 86. Despite these complaints, the MDE had not effectively investigated the allegations or complaints, nor had anyone within the MDE reported them to the U.S. Department of Education. The MDE s False Count of Eligible Migratory Children in In or around December of 2003, the MDE provided its annual child count for the reporting period to the U.S. Department of Education and represented that the number of students who qualified for federal MEP funding was 7,862 ( Maine s 2003 child count ). 88. Maine s 2003 child count was false. 89. The MDE knew or should have known that, as specified by statute, the U.S. Department of Education would use Maine s 2003 child count to determine the size of its FY 2004 federal MEP award if the level of Congressional appropriation for the program exceeded the amount appropriated for FY 2002, or if the numbers and needs of migratory children in Maine did not warrant the award calculated for FY In fact, at the time, the number of Maine students who qualified for federal MEP funding was significantly less. This fact was not reported to the U.S. Department of Education before it awarded funding based on this 2003 child count. The MDE subsequently reported in 2005 that the number of students who qualified for federal MEP funding was no more than 1, Based on preliminary information received by the U.S. Department of Education, the Department notified the MDE in April 2004, that based on the Department s concerns surrounding the MDE s child counts, the Department would be reducing the MDE s FY 2004 award of federal MEP funds by half of the amount it -15-

16 otherwise would have been eligible to receive based on Maine s 2001 and 2003 child counts. 92. In FY 2004, the United States awarded Maine $2,104,032 in federal MEP funds. 93. If Maine s 2001 and 2003 child counts as submitted the U.S. Department of Education had reflected the true number of eligible students for those reporting years, the United States would have awarded the MDE no more than $1,166, As such, in reliance on Maine s 2001 and 2003 child counts, the United States awarded Maine at least $937,482 more than it should have been awarded ($2,104,032 minus $1,166,550). 95. However, the MDE only received and expended $120,201 in federal MEP funds for FY Maine s 2005 Self-Audit 96. As part of an arrangement with the U.S. Department of Education in the latter half of 2004, the MDE conducted a self-audit to determine whether students enrolled in Maine's MEP for fiscal years 2002, 2003, and 2004, actually qualified as migrant children eligible to be served under the MEP. 97. A statistical sample comprised of 333 migrant children enrolled in Maine s MEP for fiscal years 2002, 2003, and 2004 was selected and re-interviews were conducted throughout the State. 98. Two school districts, Portland and Lewiston, were excluded from the random sample because Maine had determined, prior to the self-audit, that virtually all the children enrolled in these two programs were ineligible. 99. Based on the MDE s own audit, the MDE concluded that approximately -16-

17 seventy-five percent (75%) of the children enrolled in Maine's MEP from FY 2002 to FY 2004 were ineligible to participate in the program Despite these findings, the MDE, Portland, and the MFRC have retained at least $3,797,292 in federal MEP funds to which they were not entitled to receive. Count 1 Payment By Mistake Of Fact (against the Maine Department of Education) 101. This is a claim for recovery of monies paid by the United States to Defendant MDE by mistake The United States realleges and incorporates by reference paragraphs 1 through 102 as if set forth fully herein Maine s 2001 and 2002 child counts ultimately submitted by the MDE to the United States agents constituted misrepresentations of material fact The United States, acting in reasonable reliance on the accuracy and truthfulness of the information contained in the claims, paid to the MDE certain sums of money to which it was not entitled, and thus Maine is liable to account and pay such amounts, which are to be determined at trial, to the United States. Count 2 Unjust Enrichment (against the MDE, Portland, and the MFRC) 105. This is a claim for the recovery of monies by which Defendants MDE, Portland, and the MFRC have been unjustly enriched The United States realleges and incorporates by reference paragraphs 1 through 102 as if set forth fully herein Based on the false representations made in Maine s 2001 and 2002 child counts, -17-

18 the MDE, Portland, and the MFRC - either directly or indirectly received, and have continued to maintain control over, federal monies to which they were not entitled By directly or indirectly obtaining federal funds to which they were not entitled, the MDE, Portland, and the MFRC were unjustly enriched and are liable to account and pay such amounts, or the proceeds therefrom, which are to be determined at trial, to the United States. WHEREFORE, the United States demands and prays: A. On the first cause of action for Payment by Mistake of Fact, for the damages sustained, plus pre-judgment and post-judgment interest, costs and such other and further relief as may be just and proper; B. On the second cause of action for Unjust Enrichment, for the amount of the unjust enrichment, plus pre-judgment and post-judgment interest, costs and such other and further relief as may be just and proper; C. That judgment be entered in favor of the United States and against the Defendants for actual damages, pre-judgment and post-judgment interest, litigation costs, investigative costs, disgorgement of all profits, and an accounting, to the fullest extent as allowed by law, and for such further relief as may be just and proper. -18-

19 Respectfully submitted, Jeffrey S. Bucholtz Acting Assistant Attorney General Civil Division Paula D. Silsby United States Attorney /s/ Evan J. Roth Assistant U.S. Attorney 100 Middle Street Portland, Maine (207) /s/ Allison Cendali Joyce R. Branda Renée Brooker Allison Cendali Attorneys, Civil Division United States Department of Justice Ben Franklin Station - P.O. Box 261 Washington, DC (202) Allison.Cendali@usdoj.gov Date: March 4,