WILMINGTON, Del. (AFX) - A federal appeals court in San Francisco Tuesday revived a lawsuit that claims Apollo Group Inc.'s University of Phoenix defrauded the federal government out of hundreds of millions of dollars.
The U.S. Court of Appeals for the Ninth Circuit reversed a ruling that dismissed a whistleblower lawsuit started by two former enrollment counselors at the university, Mary Hendow and Julie Albertson.
The two claim the University of Phoenix falsely certifies to the U.S. Department of Education that it does not pay incentive compensation based on how many students counselors can sign up.
A spokesman for the school could not immediately be reached for comment on the ruling, which allows the lawsuit to move to the next stage.
To get certain federal subsidies, schools are supposed to avoid paying commissions, bonuses or other incentives to recruiters who sign up the most students.
The incentive compensation ban is supposed to help keep the government from picking up the tab for poorly qualified students who will not be able to repay student loans.
Some loans come directly from the Department of Education. Other student loans come from private lenders, but are federally insured.
Hendow and Albertson sued in the name of the government, alleging the University of Phoenix does not comply with the ban, but collects federal subsidies anyway.
The case was dismissed at the pretrial stage in 2004, but the U.S. Department of Justice joined in the effort to get it reinstated on appeal.
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