PROTECT CONSUMER JUSTICE.ORG

University of Phoenix will pay $78.5 million to settle a lawsuit by whistle blowers Mary Hendow and Julie Albertson, who helped expose that the nation’s largest for-profit school had violated federal law.

The company will pay more than half the money–$48.5 million–to the U.S. Department of Education. The whistle blowers will receive $19 million.

As the Sacramento Bee’s Denny Walsh reports today, the whistle blowers filed their suit in March 2003, alleging that they the university violated federal law by paying them incentives based on the number of people they enrolled in the programs. The for-profit college gets as much as 86% of its revenue from federal student aid.

“On behalf of the plaintiffs, we are pleased that the parties have been able to reach an agreement on terms that protect the interests of the government and the taxpayers,” said Robert J. Nelson, Lieff, Cabraser, Heimann & Bernstein, lead counsel for the plaintiffs. “The case raised several challenging issues, many of them novel, which made settlement of the case appropriate.”

The Arizona-based University of Phoenix 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.

Here is our past report on the case. Here is a recent report detailing the amount of money for-profit schools receive from the federal government. Here is University of Phoenix’s statement on the settlement.

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