U. of Phoenix Hit With New Whistle-Blower Lawsuit Over Recruiting Practices

Two former admissions recruiters at the University of Phoenix have filed a federal whistle-blower lawsuit that accuses the giant for-profit university of continuing to violate a ban on paying recruiters based on the number of students they enroll, even after the institution paid $78.5-million in December 2009 to settle a long-running lawsuit that made similar charges.

The new suit seeks to recover millions of dollars in federal and California state student-aid funds provided to the university's students since the prior case was settled. As with similar cases, it cites the False Claims Act in contending that the university fraudulently obtained the aid by falsely certifying to the federal and state governments that it was complying with student-aid rules.

One lawyer who brought the earlier case against Phoenix, Daniel Robert Bartley, is the lawyer in the new one, which was filed under seal in September and was unsealed on Thursday in the federal district court in Sacramento.

Officials of the university were not immediately available on Friday to comment on the suit.

The two former recruiters, Derek Hoggett and Tavis Good, worked in a South Austin, Tex., office of the university for about three years, ending in May 2010 and August 2010, respectively. They allege in the suit that, in salary determinations for recruiters, the university and its parent company, the Apollo Group, created "fake or imaginary qualitative criteria in the Apollo Performance Matrix, while the only criterion for recruiters that truly counts is the number of students enrolled."

They also allege that the fraud is "blatant and systemic and is a direct result of the institution's business plan." In August 2010 compliance officers ordered recruiters to copy and destroy all documents related to training and "sales scripts," the suit asserts. Apollo officials have publicly described the effort as part of their broader companywide overhaul of recruiting practices and a new compensation system that they say is no longer tied to enrollment measures but recruiters' "behaviors." But the lawsuit suggests other motives: "Recruiters were not told to stop using these scripts, they were not to keep any evidence of them."

The U.S. Department of Justice declined to intervene in the case, as it has in another against the Education Management Corporation. But Mr. Bartley said he hoped it would be as supportive of the new case against Phoenix as it was in the previous one, when it helped fend off numerous efforts by the university to have the case dismissed.