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Gaston College fraud alleged

Former financial aid director files suit; college denies claim

The former director of Gaston College’s financial aid office has filed a federal lawsuit accusing the college of misusing student financial aid, including changing grades and attendance records to skirt eligibility rules.

Peggy Oates worked for more than a dozen years as director of the community college’s financial aid office. She was fired in June.

The Mecklenburg County woman claims she was wrongfully terminated because she filed a discrimination complaint against her employer and reported fiscal improprieties and illegal policies at the college.

Gaston College has denied all the allegations of wrongdoing. Its attorney, Deborah Stagner of Raleigh, has asked that Oates’ lawsuit be dismissed.

Oates alleges that she was discriminated against because she is black and accuses the college of violating laws governing financial aid to students.

Oates claims in her lawsuit that she warned the college’s administration, including its president, that the college’s policies and practices were illegal and violated state and federal guidelines and regulations.

Among those violations, according to the lawsuit:

• The college’s failure to repay financial aid funds given to ineligible students.

• The college’s use of financial aid funds to pay old debts of students.

• The college bookstore’s policy of allowing students to buy clothing and non-educational items with financial aid money.

• Repeated instances in which grades and attendance records were changed to circumvent eligibility requirements for financial aid.

The college’s attorney says Oates wasn’t fired because she reported fiscal improprieties and illegal policies in the college’s financial aid program, and the college didn’t retaliate and fire Oates because she filed a charge of racial discrimination.

The college, in its response to the lawsuit, also denies that Oates was discriminated against because of her race and that it knowingly lacked policies, procedures or recordkeeping to properly administer federal financial aid programs.

“In her position as director of financial aid at Gaston College, Oates was responsible for developing, recommending and maintaining policies and procedures to ensure compliance with federal financial aid laws and regulations,” Stagner wrote.

In her lawsuit, Oates alleges that she was asked to engage in racially discriminatory employment practices. She claims her supervisor, Rios Husain, told her she planned to demote and place on probation the director of admissions, Michelle Wray.

The lawsuit alleges that Husain instructed Oates to fire Wray, who is black, when her probationary period had been completed. Oates claims Husain “proposed this facade because if Wray was terminated by Oates … Wray could not allege racial discrimination.”

Oates claims that when she refused to fire Wray, Husain threatened that “no one refused her” and then began “systematically retaliating” against her.

“After Oates refused to participate in this subterfuge, Dr. Rios Husain retaliated against Oates by verbally threatening her, not providing Ms. Oates’ financial aide office with the proper staffing and refusing to provide Oates with critical assistance from the IT Department and Registrar’s Office.”

Gaston College denies those allegations.

“It is specifically denied that Oates was asked or pressured to engage in racially discriminatory employment practices,” the college’s attorney wrote. “It is specifically denied that there was any pre-determined and discriminatory pretense to terminate Michelle Wray.”

Oates claims in her lawsuit that after the college’s administration repeated refused to correct the problems with its financial aid program, she contacted the U.S. Department of Education in February 2011 and requested that an audit be performed of the college’s practices. An audit was conducted, the lawsuit says, and found 10 violations and deficiencies.

The deficiencies involved not only the financial aid office but also the registrar’s office, the admissions department and the IT department, according to the lawsuit.

Oates alleges that the college blamed the audit findings on her while white department heads were not held accountable, disciplined or negatively evaluated. She claims she was the only department head or employee terminated as a response to the audit.

The lawsuit says that in a March 2012 performance evaluation, Oates was reprimanded for allowing the college to implement the unlawful policy of withholding financial aid disbursements to students until they had attended 60 percent of their classes for the semester. Oates says she had voiced her opposition to the proposal and the policy.

After what Oates described as “the unjustified and discriminatory performance evaluation,” she says the college placed her on administrative leave with pay, refused to renew her annual employment contract and terminated her employment in June.

Oates claims that in requesting an audit by the Department of Education, she had sought to “protect the public.” She said she “acted as a whistleblower to stop her employer, Gaston College, from violating federal law.”

Oates is asking to get her job back. She wants back pay and lost job benefits. She’s also asking for a court order requiring Gaston College to implement programs that provide equal employment opportunities for African Americans.

But the college’s attorney wrote: “It is specifically denied that the College’s administration refused to correct issues of concern raised by Oates and others. It is specifically denied that the college knowingly engaged in activities in violation of federal laws and regulations.”

The attorney also denied that Oates’ performance evaluation was unjustified or discriminatory.

“The college’s actions were for legitimate, non-pretextual, non-discriminatory and non-retaliatory reasons.”

The college has asked that the lawsuit be thrown out and that Oates “recover nothing from the College.”

Wright: 704-358-5052
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