Two former recruiters of students at the University of Phoenix who filed a False Claims Act lawsuit against the for-profit institution will receive $19-million, or nearly 30 percent, of the $67.5-million it is paying the government to settle the case. An additional $11-millon will go to the recruiters’ lawyers, according to terms of the settlement, which were made public on Monday.
Phoenix officials, who previously announced that they had set aside $80.5-million for expected settlement costs in the long-running case, declined to specify how the amounts were determined.
The lawsuit, which began in 2003, accused the university of improperly compensating its recruiters in violation of the laws governing federal student aid. In announcing the settlement, Phoenix admitted no wrongdoing. Its lawyers said the university had always complied with the law.
The settlement not only ends the uncertainty and further expense of protracted litigation, but also “opens the door for a more constructive partnership with our lead regulator, the U.S. Department of Education,” said Charles B. Edelstein, co-chief executive of Apollo Group, Phoenix’s parent company, in a news release.
In settling the case, Phoenix said it had also obtained legal releases from the government assuring that it would face no further civil or administrative actions relating to its compliance with policies on “incentive compensation” of recruiters from March 1997 through the present.
The $19-million going to the two former recruiters, Mary Hendow and Julie Albertson, is on the high end of the range that “relators” (the term for people who bring cases like this) usually receive. Typically they are entitled to 15 percent to 30 percent of the government’s share. Officials of the Education Department could not be reached for comment.
Lawyers for the whistle-blowers said they expected that the theories and evidence from this case would help the department tighten its regulations on incentive compensation, which are under review. They also said they hoped the size of the settlement, although far smaller than the $1-billion-plus initially sought, would be a deterrent to institutions’ circumventing the spirit or letter of the law.
The Phoenix case was one of the most high-profile of such actions involving for-profit institutions accused of wrongly paying incentives to recruiters, but it is not the only one expected to be settled soon. According to reports from the Stifel Nicolaus investment bank, DeVry Inc. expects to pay $4.9-million to settle a case, and Grand Canyon Education Inc. is close to settling its case for $5.2-million,
