Two University of Phoenix enrollment counselors filed a lawsuit in 2003 alleging that their raises and prizes awarded to them where done based on the number of students they enrolled in the school. They filed a lawsuit against the school. The corporate executives in charge during this period of time are now at different schools, but the case is left unsettled, as of yet.
It is possible that the University of Phoenix parent, Apollo Group Inc, will seek a settlement in the case, before the case is set to be heard in a court of law in March of 2010. The company has not disclosed any terms of a settlement, but some experts believe it could be as high as $250 million, which equates to 25 times the record fine the school had to pay the U.S. Department of Education in 2004, on similar charges.
The school will likely seek out a settlement in the hope of avoiding a very public trial and to dismiss any allegations that similar practices are still occurring. The school is known for its aggressive recruiting tactics. In a time where the American consumer is unwilling to forgive big business corruption, the school would be foolish, some say, to go to trial.
The University of Phoenix is an incredibly sized school. Since it became a for profit school in 1976, it has been an ideal share to own on the stock market. In addition, it has over 420,000 students and its annual revenue is now near $4 billion. It is the largest recipient for federal financial aid to the tune of $3.2 billion in one school year alone.
The case came to head in 2003, when two enrollment counselors filed a lawsuit, on behalf of the federal government, charging that the school defrauded the government by paying recruiters salaries based on the number of students enrolled. Federal law bans schools from offering this type of incentive.
The school itself fought the charges and claimed that the two employees were disgruntled former employees trying to make something small into something big. A judge ruled in 2004 to dismiss the case, but it was restated two years later on appeal. The case is similar to one filed by the U.S. Department of Education in 2004. At that time, the school was fined $9.8 million based on their recruitment practices. In that case, the University of Phoenix did not admit any wrong doing.
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