News, Views and Careers for All of Higher Education
Aug. 21, 2007
A federal judge has rejected the latest attempt by the University of Phoenix to shortcircuit a potentially massive lawsuit it faces, increasing the chances that the five-year-old case actually goes to trial.
The case, which has been rattling around the federal courts since 2002, hinges on the question of whether the enormous for-profit university violated federal law by paying its recruiters based on how many students they enrolled. A federal appeals court ruled last fall that Phoenix had to defend itself against the charges brought by two former instructors on behalf of the federal government under the False Claims Act, which allows individuals who believe they have identified fraud committed against the government to sue, hoping to be joined by the U.S. Justice Department. (The plaintiff then shares in any financial penalties, which can include trebled damages.)
Phoenix officials had their way in the early court battles, with a federal district court twice dismissing the lawsuit in 2004. But the university’s fortunes began to ebb with the September 2006 ruling by the U.S. Court of Appeals for the Ninth Circuit that was seen by many college lawyers as one of several recent decisions expanding the applicability of the False Claims Act to higher education. Since then, the entire Ninth Circuit court denied a Phoenix petition asking it to rehear the case, and the U.S. Supreme Court refused to hear Phoenix’s appeal.
On Friday, Judge Garland E. Burrell Jr., in the U.S. District Court for the Eastern District of California, rejected Phoenix’s argument (made in this legal filing) that the university could no longer be a legitimate defendant in a False Claims Act lawsuit. The university argued that in agreeing to a 2004 settlement with the university, in which Phoenix agreed to pay $9.8 million to the U.S. treasury, the federal government (through the U.S. Education Department) had accepted an “alternate remedy” to the judgment sought by the plaintiffs, rendering the False Claims Act lawsuit moot.
But the plaintiffs — and the U.S. Justice Department, which filed a brief on their behalf — argued that the settlement could not be seen as an alternative to a ruling in the plaintiffs’ lawsuit because the Justice Department must sign off on all False Claims Act resolutions, and the attorney general had played no role in the Education Department’s settlement with Phoenix. Judge Burrell, in a terse ruling released Monday, sided with the plaintiffs and against Phoenix.
“While we are disappointed with the court’s decision, we look forward to trying this case on its merits,” said Timothy J. Hatch, a lawyer with Gibson Dunn & Crutcher, which is representing Phoenix. “We are confident the evidence will support the fact that University of Phoenix fully complied with the law. The plaintiffs are trying to twist a routine regulatory matter into a federal case of fraud and will not succeed.” Hatch said in an interview Monday that the university was likely to ask higher courts to review Judge Burrell’s ruling, but that it did not expect to prevail.
Nancy G. Krop, a lawyer representing the women who are suing Phoenix, said the decision meant that “we finally have a courtroom” in which to pursue the merits of their case. Krop said she expected to perform extensive discovery aimed at showing that the university paid its recruiters based on how many students they enrolled.
She said she expected the university to ask a judge to rule in its favor on summary judgment, but that she believed a trial will eventually be held on its current schedule — in September 2009.
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Incentives which encourage students to enroll in a school of higher learning, and which encourage them to re-enroll and continue their studies, make imminent sense in the quest to help them increase their human capital. Why do we have bias in the other direction?
Gene Jewett, at 8:35 am EDT on August 21, 2007
Gene, surely you jest?
Why not just bring back the “correspondance schools” of the early 1900s? Get the students in, get their tuition money, and forget ‘em.
Yeah, proprietary schools — good money-makers! Don’t even have to waste money printing diplomas because the “students” were never ready for college and we didn’t invest money in helping them learn.
Good capitalistic plan. Send me $10,000 and I’ll set up a college web site. When the profits start rolling in, I’ll send all the partners your cut (after the politicians and lawyers get their cuts).
Dr. F. Gump, at 9:25 am EDT on August 21, 2007
Is Dr. Gump comfortable making judgments about individuals based on ethnic, racial, or religous sterotypes? Probably not, but he or she is guilty of the same sin by condemning institutions with a profit making charter based on a stereotype. Certainly there are rip off proprietary schools, but the majority deliver quality programs with integrity. Any regular reader of Inside Higher Education knows that many unsavory things go on in public and nonprofits as well. Be fair. Judge insitutions individually, not based on a stereotype. Institutions are as different as people regardless of their ethnic, racial, or religous background and deserved to be treated as such.
Higher Ed Diogenes
Higher Ed Diognes, at 10:10 am EDT on August 21, 2007
I don’t see for profit schools as intrinsically problematic, and there are plenty of real problems in non-profit institutions, but the University of Phoenix isn’t a great example. My sister, who is an elementary school teacher, took some continuing education classes through University of Phoenix and was not impressed.
I applied to teach there at one point, and the more that I saw of their operations, the more it smelled like something two steps up from a diploma mill. All the motions were correct, but I did not come away with the impression that education was the primary goal—profit was.
The other problem with the University of Phoenix is that it creates competitive pressures that encourage non-profit schools that are in the same market segment to start engaging in the same tactics of reducing the amount of work that students have to to do to complete a degree.
Let’s be real here: some non-profit universities, even ones with decent reputations, are operating programs aimed at working adults that are profit centers—and without going into any more detail, let’s just say that the net effect is that competition from U. of P. encourages a race to the bottom of academic standards.
One institution competing in that market segment didn’t want me back because in a class of seven students, there were four As and three Bs—and the concern was that those Bs might discourage students from continuing in the program, when they could go to the University of Phoenix.
Clayton E. Cramer, at 11:40 am EDT on August 21, 2007
Dr. Gump seems to have short-term memory loss. Just a couple months ago it was reported that many, many Universities were deliberately participating in kick-backs with financial lending institutions. I did not see one for-profit institution listed. The fact is for-profits are in higher education and I believe that is a great thing. Competition spurs quality products and besides, most universities and “non-profit” private colleges also engage in high tuition cost, and have millions, if not billions collected from their fundraising activities. Not to say UOP did the right thing but Dr. Gump surely gives a slanted view point as I find most traditional academia personnel tend to do. Perhaps, there is a real threat within their tenured lives that their employers may soon adopt best practices from their for-profit counterparts.
Patrick Schiel, at 12:25 pm EDT on August 21, 2007
Which brings us back to the fact that there are no minimum standards in US higher education.
NYTimes brought this up regarding UoP.
Part of the problem is equating distance learning modes with old fashioned seat-time metrics. Distance ed providers use study-group activities as a surrogate for in-class instruction, about 50% of the time.
I have no idea what the studies say about this practice, but this kind of thing is what gives the national accrediting agencies a bad name with those regionally accredited.
An interesting study would compare the distance ed offered by regionally accredited, brick-and-mortar schools, versus those web-based and nationally accredited.
Org theory tells us that even the traditionals would cave to the lower standard (due to mimetic isomorphism). I even heard a prof say his new American History web-course wasn’t college level. Well, what do you expect?
Where are the minimum standards?
Glen S. McGhee, FHEAP, at 12:25 pm EDT on August 21, 2007
I support the comment regarding the “diploma mill” mentality of U of Ph. Having taught for them for a short period of time, I became convinced that the real issues were recruiting and retaining the students at ALL costs (even passing them when they were failing).
My heart went out to these students who were so under-prepared for higher ed, but they would have beem SO much better off in a technical or community college environment where support services were well developed to help them succeed. Instead, they succeeded without succeeding. I felt it was tragic and morally wrong.
Upton Sinclair, at 12:25 pm EDT on August 21, 2007
The proprietary vs traditional education debate dribbles on...
Proprietary schools typically cater to students who are not as strong academically as those at Ivy League and big state universities. Let’s call it McEducation. Like the fast food chain that this epithet is based on, McEducation is more about quantity than ambiance.
However, the regional accrediting bodies that oversee proprietary schools seem to think that these schools are doing a good job. Otherwise, the accrediting bodies would withdraw their accreditation.
Accrediting bodies are made up of representatives of competing institutions. It is a peer review process. When representatives of traditional schools make on-site accreditation visits to proprietary schools, they often are loaded for bear. Proprietary schools do not get a free pass.
Dig through the archives of Inside Higher Ed, and you will find stories going back several years about scandals at ITT, AIU, and others. This is evidence that the system works. If it did not, then these schools would not have gotten in trouble.
Standards are set. Standards are met. When the standards are not met, the axe falls.
When the axe falls, profits fall, and heads roll. That is the nature of a profit-making enterprise.
Getting back to the McEducation analogy, not every restaurant is going to be Tavern On The Green; not every university is going to be Harvard. Fast food chains and proprietary universities serve very large constituencies that cannot afford Tavern On The Green or Harvard. Local health inspectors and regional accrediting bodies ensure that minimum standards are met, and the system works.
We see a lot of criticism for University of Phoenix, AIU, and others for their sleazy admissions practices, and yet we don’t see the same vitriol aimed at Ivy League schools that admit the offspring of the rich and powerful, even though they are academically and intellectually weak.
University of Phoenix is paying a price for its acts. This is not an indictment against proprietary education. This is an indictment against managers who violated their fiduciary duty to their shareholders. If only the Ivy League and big state universities were scrutinized as closely!
Charles Evans, Executive Director at Free Curricula Center, at 12:25 pm EDT on August 21, 2007
“Dig through the archives of Inside Higher Ed, and you will find stories going back several years about scandals at ITT, AIU, and others. This is evidence that the system works. If it did not, then these schools would not have gotten in trouble.
“Standards are set. Standards are met. When the standards are not met, the axe falls.”
This assumes that the accrediting bodies are doing their jobs well. From what I have seen, a lot of “business education” programs are being operated that don’t conform to the standards of the main, traditional campus. Are these being checked by accreditation bodies, or just the main campus?
Clayton E. Cramer, at 3:55 pm EDT on August 21, 2007
I am a current and long time employee of UOP, both as an administrator and as an instructor. And of course, I can see the eye’s rolling out there, with you thinking about my obvious bias. But there is a huge focus on rigor here. The Academic Affairs department places a very strong emphasis on grade point average in all courses. Any instructor who, somehow, manages to give every student in a course an “A", is strongly counseled by his/her chair in the concept and value of academic rigor. They are often required to take and pass grading workshops. Those who cannot learn the principles of accurate and rigorous grading, will not be offered courses. And a strong focus on retention of students, only makes fiscal sense, for any university. In addition to offering tutoring, writing and math workshops to assist students we work to create relationships with students. Name any other large institution in which academic and finance counselors call every one of their students betwween courses to touch base and help keep them on track. I know first hand that we serve a different population of students, but the diploma mill doesn’t hold water. I did not get my Master’s degree from this University, but from a well respected non-profit. That was a walk in the park, compared to the courses in our programs.
Inez Matric, at 1:25 pm EDT on August 22, 2007
I’ve read the comments and I agree about giving UOP a fair chance. Again, all institutions have issues and UOP is paying for their troubles but who pays at the traditional institution when the Professor is never there, off doing research and states that they hate teaching....Who benefits from that? Who pays when the professor is terrible at teaching and knows it but great at research? The school gets noticed and receives money and the professor is happy but what about the students? At least in the for profit arena, we hope they are there because they want to educate the students. I believe fair is fair but no institution is exempt from problems. Who’s monitoring this sad state of affairs?
Dr. Ed, at 1:50 pm EDT on August 23, 2007
the issue is whether or not UoP 1. broke the law 2. new about breaking the law i briefly worked for this “university” within the past couple of years and they did in fact have enrollment counselors on commission. if they want to be able to use federal financial aid then they have to follow the rules. UoP simply is/has not. they are guilty as charged
jeremy, at 1:35 pm EDT on August 24, 2007
Wow! I’m not usually prone to offense, but I’m feeling a little uneasy about how you all choose to insult the UoP. This is not because I’m an employee, but because I’m a student.
I’m actually very happy with the education I’m recieving at UOP and maybe even a little surprised by how tough it is there. The instructors are my favorite part of the classes. You see, I recieved an associates degree from community college, and while I was pretty happy with that experience, I recognized that the people teaching the classes were career teachers with no business experience. I’ve seen the same thing at my local state university.
On the other hand, at UOP, I get to speak with and recieve teaching from instructors with real world business experience. Their examples come from being in the working enivronment and not just from the textbooks we use in our courses. This is very important for someone like myself who is starting a business and really working to learn ways to be more effective in a managing role.
For instance, among the instructors that have already taught me there is a state public defender, a vice president of a bank, a preparedness expert for the state division of emergency management and an entrepeneur who has owned over thirty businesses! I may be backwards on this, but I’d rather recieve education and impartation from people who have been where I want to be, than people who received a degree in the 70s or 80s and have taught for a living ever since.
Academically, I have found the UOP to be more of a challenge than my experience at community college and state university. I’m ALWAYS reading, researching, working on homework and preparing for presentations. My mind is consistently on my education. I was struggling in a class and barely pulled out a C, but I did it because I ended up putting work into the class and not because the teacher wanted to up the school’s retention.
In another example, a friend of mine from class was in grade trouble and had to meet with the instructor and ended up needing to retake the class. Now this is more the story of an irresponsible student, but framed in this context, it shows that not everyone recieves passing grades just to keep them enrolled.
As far as the case goes, if an educational institution does something wrong, they should be punished regardless of whether they are for profit or not for profit. UOP obviously did something wrong financially, but please don’t disregard their ability provide a quality education.
If you got this far, thanks for reading!
Chris, at 9:40 pm EDT on August 24, 2007
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Order of Phoenix
UoP has only itself to blame for this: It agreed to a settlement that clearly left the door open for this FCA suit to go on.
Thus, lawyers serve their own best interests: They win even when they lose!
Glen McGhee, FHEAP, at 8:20 am EDT on August 21, 2007