"We believe the claims are completely meritless and the company will aggressively defend itself," Juhlin said.
The lawsuit was filed by Katie Brooks and Nannette Wride, former recruiters at Stevens-Henager's Orem campus, under provisions of the federal False Claims Act that allow citizens to sue on behalf of themselves and the government. If allegations in this type of case are proven, the defendants can be ordered to pay triple the amount of damages and penalties, and the whistle-blowers are entitled to a share of the money recovered.
No damage amount has been alleged in court documents. The suit alleges that the colleges paid bonuses, commissions and other types of incentives, which are banned at schools that participate in federal student assistance programs that provide loans or grants.
Named as defendants are Stevens-Henager, which has campuses in Utah and Idaho, as well as an online program; CollegeAmerica, which has campuses in Colorado, Arizona, Wyoming and Idaho; and California College San Diego. Many students at the for-profit schools use federal grants and loans to pay for their schooling.
On Thursday, the U.S. Department of Justice announced it had stepped into the case with its own filing last week accusing Stevens-Henager and its owner, The Center for Excellence in Higher Education, of illegally compensating recruiters. Attorneys with Parsons Behle & Latimer in Salt Lake City, who filed the suit on behalf of Brooks and Wride in 2013, will work with the Justice Department and also continue to press the claims involving faculty qualifications.
One of the attorneys, Brandon Mark, said he is pleased with the Justice Department's filing, noting the government typically intervenes in fewer than a fourth of all False Claims Act cases. The decision to take part in the case "demonstrates the significance of our clients' claims," he said.
The Department of Justice said Congress enacted the ban on improper incentives to admissions recruiters to curtail the enrollment of unqualified students, high default rates on student loans, and the waste of loan and grant funds.