The University of Phoenix, the for-profit megaversity owned by the publicly traded Apollo Corporation, and boasting nearly half a million students world-wide is reported by the Chronicle of Higher Education (February 11, 2011, at A1) Phoenix has had its share of litigation in recent years. Though one suspects that management sees this as a cost of doing business, noise being made by the U.S. Department of Education about cracking down on for-profits that lend students federal dollars, only to have them default in huge numbers, may have sobered up some. Comments the Chronicle, "Out of the public eye, North America's largest private university not only put in motion an overhaul of what had come to be seen as its grow-at-any-cost admissions practices. It also ended a compensation schedule tied to enrollment, began a required orientation program for inexperienced students, and instituted a host of other reforms in marketing and nearly every other important facet of this 438,000-student institution."
I wrote about Phoenix a few years ago in Today's Campusmagazine:
Unable to shake qui tam case; University of Phoenix faces the reappearance of an old action
Jim Castagnera
The University of Phoenix (UOP) is a fish stuck on a federal hook. In September 2006, the U.S. Court of Appeals for the Ninth Circuit reinstated the qui tam action brought by two former UOP admissions counselors. The action alleges that UOP is guilty of defrauding Uncle Sam with false payment claims.
Jim Castagnera
Specifically, the suit says that the university secretly compensated admissions personnel for the numbers of new students they attracted. If true, this would be a direct violation of rules regulating federal financial aid practices. According to the Ninth Circuit, the rules are meant to “curb the risk that recruiters will sign up poorly qualified students who will derive little benefit from the subsidy and may be unable or unwilling to repay federally guaranteed loans.”
“This case involves allegations under the False Claims Act that the University of Phoenix… knowingly made false promises ... in order to become eligible to receive Title IV funds,” writes the court. “Appellants, Mary Hendow and Julie Albertson (relators), two former enrollment counselors at the University, allege that the University falsely certifies each year that it is in compliance with the incentive compensation ban while intentionally and knowingly violating that requirement.”
Now back in the hands of the U.S. District Court for the Eastern District of California, the case is grinding forward. On August 20, 2007, Federal Judge Garland Burrell denied UOP’s motion to dismiss the action, claiming the issues are already resolved by a Department of Education (ED) settlement with parent Apollo Group for $9.8 million.
“ED does not have the authority to, and this agreement does not waive, compromise, restrict or settle any past, present or future violations by UOP,” responds Burrell. Motion denied.
Meanwhile, like Banquo’s ghost in Macbeth, a man from El Paso named Leeland White is attempting to win a seat at the Hendow v. University of Phoenix banquet table. Lee White was at one time a UOP student. He attempted his own qui tam action, proceeding without a lawyer. White's case was dismissed in late January 2003 by the federal court for West Texas. Last year, he attempted to intervene in the Hendow case. His motion was denied.
I reached Lee White by telephone recently. He contends he is entitled to enter the action as an additional plaintiff because, “I filed first. Absolutely.” He added that on February 29th he filed his appeal of the dismissal with the same Ninth Circuit Court of Appeals that salvaged Hendow’s case from the legal ash heap. White is still proceeding without a lawyer because, he contends, “Everybody in El Paso is scared of the government.”
Want to learn more about qui tam? Read Michael Goldstein’s GreentreeGazette.com series on the subject by clicking on the "Feature Articles" link to the left.
http://www.greentreegazette.com/articles/load.aspx?art=762
According to Law.com:
Qui Tam Suit Against University Nets $78.5 Million Settlement
Kate Moser
The RecorderDecember 15, 2009
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A team of Bay Area plaintiffs lawyers struck a $78.5 million deal in a long-running false claims suit that accused the University of Phoenix of rewarding recruiters for enrolling students, according to a settlement agreement announced Monday.
The agreement, which includes $11 million in attorney fees for the plaintiffs, is among the largest settlements ever of a False Claim Act fraud case in which the government didn't intervene, said Eric Havian, a qui tam expert and partner with Phillips & Cohen in San Francisco who was not involved in the case.
Former University of Phoenix enrollment counselors Mary Hendow and Julie Albertson filed the suit in 2003, accusing the university of defrauding the government by paying counselors incentive payments for enrolling students. Under Title IV of the Higher Education Act, universities that qualify for student aid are barred from paying incentives, like commissions and bonuses, to recruiters to boost enrollment.
http://www.law.com/jsp/article.jsp?id=1202436337644&slreturn=1&hbxlogin=1
With Apollo Group reportedly doing $5 billion in business a year, this settlement, even factoring in Phoenix's own legal fees, is hardly devastating. But add to this the September 2010 announcement from the US Department of Ed to the effect that:
Department on Track to Implement Gainful Employment Regulations; New Schedule Provides Additional Time to Consider Extensive Public Input
The Department of Education today announced that it is on schedule to implement new regulations of the for-profit education sector dealing with gainful employment and 13 other issues to protect students and taxpayers. The regulations will be released in two phases.
http://www.ed.gov/category/keyword/gainful-employment
Of course, the industry's lobbyists swung into action. Apollo alone reportedly employs a phalanx of nearly 20 of these vultures. Word is that the DOE has backed off of its aggressive stance. Whether that's the case or not, the September initiative was a wake-up call to a sector of higher education that is almost entirely subsidized by federal loan dollars and which has a dismal record of repayments by its former students and alumni.
Here's more on the Univerity of Phoenix and for-profit higher education:
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