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![]() ![]() So-called incentive compensation is banned by federal financial-aid regulations to reduce the risk of loan defaults by unqualified students. Recruiters who enrolled many students were rewarded with DVD players or spa trips to the Sonoma Mission Inn Hotel and Spa. The suit alleges the University of Phoenix violated federal law by ranking counselors by their sign-ups and giving the highest producers bigger salaries, benefits and incentives. According to the lawsuit, the University of Phoenix takes in more federal student financial aid than any other for-profit the vast majority of its revenue comes from federal aid packages.įormer employees Mary Hendow of Los Altos and Julie Albertson of Belmont filed the whistle-blower lawsuit in federal court in 2003, accusing the university of fraudulently obtaining hundreds of millions of dollars in financial aid. The key to for-profit colleges is federal financial aid, which is wired directly to the schools to pay tuition for needy students. ![]() Of the university’s thousands of recruiters, the majority are in San Jose and Phoenix, homes to its two largest campuses. The dispute offers a window into the world of for-profit higher education, the fastest-growing segment of the nation’s post-secondary education system. The plaintiffs are entitled to receive from 15 percent to 30 percent as a reward for coming forward. The bulk of the damages would be awarded to the federal government. The university, which vigorously denies wrongdoing, could be forced to turn over an estimated $1.5 billion in grants and loan default payments, plus penalties of as much as $1 billion – an outcome it has said could lead to bankruptcy, according to the attorneys for the two women. And on Monday, a Sacramento judge will consider another request by the university to have the case dismissed. The two Bay Area women filed the suit in 2003. Supreme Court last month allowed the case of two ex-recruiters suing the nation’s largest for-profit university to proceed.
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