University of Phoenix Caught Cheating Government; Will Pay $78.5 Million

On December 14, 2009, Earth Times reported the $78.5 million settlement of a False Claims Act lawsuit against the University of Phoenix. The lawsuit, which was started by whistleblowers, alleged that the University used false statements to obtain an excess of federal student loans and Pell Grant monies. Reportedly, the University was making incentive payments to recruiters based on the number of students they recruited or enrolled–a direct violation of the Higher Education Act.

“The Higher Education Act prohibits colleges and universities whose students receive federal financial aid from paying their recruiters based on the number of students enrolled, which creates a risk of encouraging recruitment of unqualified students,” explained Nancy Krop, another lawyer on the trial team. “This case focused a powerful spotlight on that law, and how Congress meant it to be applied.”

“The settlement is a huge victory for taxpayers and the federal government,” according to Robert J. Nelson, lead attorney for the whistleblower plaintiffs. “This settlement sends a clear message to the for-profit education industry compliance with the Higher Education Act’s incentive compensation ban must be achieved,” said Nelson.
The University of Phoenix, which denied the whistleblowers’ allegations, previously paid $9.8 million to the Department of Education in 2004 to resolve administrative claims that it was paying improper incentive compensation to its recruiters. Those administrative proceedings were triggered by the allegations of the same whistleblowers in this case. Nearly $11 million of the $78.5 million will be allocated as statutory attorneys’ fees and costs, a portion of which will be paid to the whistleblowers who brought the case.

The False Claims Act is a federal statute that permits whistleblowers to sue on behalf of the government for fraud committed against the government and to share in the recovery if the suit is successful.

If you are seeing fraud on the government, contact us by calling 800-377-1812 for strictly confidential advice from experienced counsel, with no fee obligation.