The University of Phoenix will pay the United States $67.5 million to settle a False Claims Act suit brought by two former employees who accused the private for-profit school of failing to abide by certain recruitment provisions, according to a Department of Justice news release ^[1].

Whistleblowers Mary Hendow and Julie Behn filed suit in the Eastern District of California. They accused the school of accepting federal student financial aid while violating regulatory and statutory provisions that prohibit colleges from paying admissions counselors some forms of incentive pay based on the number of students they recruit.

The U.S. did not intervene in the case but provided support to the two whistleblowers, who will receive $19 million in the settlement. The U.S. Department of Education assisted the U.S. Attorney’s Office for the Eastern District of California with the case. The case marks the second-largest settlement for a False Claims Act suit in which the government did not intervene, the Arizona Republic ^[2] reports.

Read the settlement agreement here ^[3].

“The Government recognizes the important role institutions like the University of Phoenix play in providing higher education for many people,” Tony West, Assistant Attorney General of the Civil Division of the Department of Justice, said in the statement. “At the same time, we must ensure that all educational institutions comply with the law and do not misuse taxpayer funds.”

The University of Phoenix is a for-profit school offering online courses, and it is a subsidiary of  publicly traded Apollo Group, which admitted no wrongdoing in the settlement, according to Bloomberg ^[4]. The suit dates to 2003, and in 2004 Apollo separately paid $9.8 million to the Department of Education to settle similar allegations, Bloomberg reports.

Hendow and Behn allege that University of Phoenix paid cash bonuses to them and other employees based entirely on how many students they enrolled, though the school denied that allegation, Inside Higher Ed ^[5] reports. A federal court initially dismissed the suit in 2004, but the U.S. Court of Appeals for the Ninth Circuit ruled in 2006 that the whistleblowers offered valid theories as to how the school sought to defraud the government, according to Inside Higher Ed. The case was set to go to trial in March 2010.