Cite as: 522 U. S. 23 (1997)
Opinion of the Court
withdrew and how much the student had paid at that point.2 Refunds to the lender, the applicable regulation, § 682.607, instructed, were to be made within a specified period (30 or 60 days) following the student's withdrawal. The lender would then deduct the refund from the amount that the student owed. If Acme did not refund the loans to the lender, the student—and if she defaulted, the Government—would remain liable for the full amount of the loan.
Around the end of 1987, pursuant to decisions made by the Jacksons and Bates, Acme initiated a pattern and practice of not making GSL refunds. On April 14, 1988, James Jackson sent a letter to Acme's director ordering him, effective the following month, to "tally [Acme's] receipts for the preceding month and remit a management fee of 10% of [the] total receipts to Education America, Inc." App. 4. The letter also told the director to pay the Jacksons a monthly salary. The letter further stated: "If the above creates a cash shortfall in your school, money will be loaned back to you to cover the shortfall." See ibid. Bates, serving as Acme's chief financial officer, permitted these fee and salary payments to take priority over the GSL refunds, and specifically instructed other Acme employees not to make the required GSL re-funds. In late 1988 or early 1989, Education America officials ordered Acme to stop using a special bank account that segregated the unearned student-loaned tuition from the general account. Acme's former owners had used this special account to ensure that funds were always available for timely refunds to lenders.
By October 1988, Acme had amassed roughly $55,000 in unmade GSL refunds. Acme's financial aid director sent James Jackson a letter in January 1989 to draw Jackson's attention to the gravity of the unmade refunds, which then
2 The Department of Education since has consolidated the requirements of §§ 668.22 and 682.606 into the current § 668.22. See 59 Fed. Reg. 61211 (1994).
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