Apollo Group Inc. has agreed to pay $78.5 million to settle a whistleblower lawsuit over the way it paid recruiters for its University of Phoenix subsidiary. The federal lawsuit was brought in 2003 by two former employees who alleged the company violated a federal ban on paying recruiters on the basis of the number of students enrolled. Apollo paid $9.8 million in 2004 to the Department of Education to settle similar allegations. The settlement comes as the Obama administration reviews regulations on incentive compensation. The administration is expected to tighten a 2002 rule that gave colleges some leeway to pay recruiters based on enrollment numbers.
Phoenix is the nation’s largest for-profit college, with 443,000 students. Apollo said it is “confident” it will not face any further civil or administrative exposure relating to its compliance with the Higher Education Act provision relating to incentive compensation from March 1997 through the present. As you probably know, under the False Claims Act, Plaintiffs – known as relators – sue on behalf of the government. The Justice Department then reviews the claims before deciding whether to join the suit, which it declined to do in this case. When the government doesn’t get in, the whistleblower can proceed with the lawsuit.
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