Online college legal troubles worsen Learning Process

Online college legal troubles worsen

Written on July 14, 2011 – 11:30 pm | by Justin Fraser

A whistleblower suit against one of the major for-profit online universities just got some serious backup.

The U.S. Justice Department has joined an employee whistleblower suit alleging that Education Management Corp. (which owns Argosy University, among others) illegally paid recruiters based on the number of students they enrolled.

This practice is forbidden among schools that receive federal financial aid, out of concern it will encourage companies to enroll unqualified students. For-profit colleges can receive as much as 90% of their revenues from financial aid.

The company defends itself, saying the compensation plan was based on legal advice that complied with exceptions to federal law. The Education Department plans to make all incentive compensation for recruiters illegal this July.

This is one of at least 27 whistleblower cases that have been filed against for-profit colleges under the U.S. False Claims Act. If the Justice Department joins such a case, the whistleblower may receive 15-25% of any money recovered.

In 2009, Apollo Group, Inc. (operator of the University of Phoenix) paid $78.5 million to settle a similar suit.

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