Government elects not to intervene in whistleblower lawsuit against Chabad’s Michigan Jewish Institute.
Nearly seven years after a whistleblower filed suit against the Michigan Jewish Institute (MJI), the U.S. government has elected not to intervene.
The whistleblower, Dawn Klobuchar of Waterford, who worked at MJI as an IT manager, filed the sealed claim in October 2013, under the federal False Claims Act. The suit triggered investigations into MJI that led to the loss of its accreditation.
This is an example of a “qui tam” lawsuit, where a private person pursues a criminal claim in the name of the government and requires the plaintiff to give the government notice and an opportunity to take over, if it chooses. According to one attorney, the government, which usually makes its decision in 60 days, took an extraordinarily long time to decide not to take over the case.
According to U.S. District Court filings released Jan. 6 and Jan. 14, the suit claimed that MJI allegedly enrolled thousands of fictitious and actual Israeli students without their knowledge in a nonexistent study-abroad program designed to fraudulently obtain more than $40 million in federal Pell Grants, which MJI would then split between itself and participating yeshivahs and seminaries in Israel.
Chabad Lubavitch of Michigan’s Response
According to a statement from the New York-based-Chabad, on behalf of Chabad Lubavitch of Michigan, which owns MJI: “In the years since it was founded, MJI has helped thousands of disadvantaged individuals realize their educational dreams, which, for many of them, would have been impossible to otherwise attain.
“Outrageous claims by a disgruntled employee helped spark an almost seven-year investigation, which brought the good work we were doing to a halt.
“We learned last week that the U.S. Attorney’s office has concluded their investigation and that they will not be prosecuting the matter, finally bringing this saga to a close. The wheels of justice turn slowly, but we were confident all along that, ultimately, we would be vindicated.”
Department of Education Investigation
In July 2015, federal agents seized more than 100 boxes of files from MJI offices in Southfield in conjunction with a U.S. Department of Education investigation into its recertification. MJI lost its accreditation on Sept. 27, 2015.
In 2016, the Education Department accused MJI of illegally obtaining federal Pell Grants in its study abroad program and denied the school recertification in the Title IV student financial aid program, making it no longer eligible to receive Pell Grants. MJI appealed the decision and lost.
Michigan Jewish Institute filed its last nonprofit tax forms in 2015 and stopped functioning as a school in 2016. However, the school is still incorporated, according to its annual report with Michigan’s Department of Licensing and Regulatory Affairs, filed in November 2019 by its president, Rabbi Kasriel Shemtov.
According to the Chabad statement: “While we remain committed to fulfilling our mission of helping individuals achieve their academic goals, this news is still fresh, and we are determining the best path forward in realizing our vision. We are grateful to those who have stood by us throughout this almost-seven-year saga.”
The whistleblower now has three months to move forward with the suit or dismiss the claim, although she cannot do so without the consent of the U.S. government, according to court documents.