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A federal judge has declined to toss a whistleblower lawsuit against a Utah-based system of nonprofit colleges.
U.S. District Judge Jill Parrish in a Thursday court order allowed prosecutors to continue arguing that Utah-based Stevens-Henager College received federal funding it was not entitled to. The school is accused of illegally giving bonuses to recruiters based on the number of students they enrolled and hiring faculty who did not meet teaching criteria.
But Parrish on Thursday also dismissed as defendants contract auditors who did not report the bonuses in their review of the school to federal government. Parrish wrote in her order that there was not enough evidence to show the accounting firms of Price Waterhouse Cooper, Shaw & Co., and Weworski & Associates falsified their reports.
The order comes three years after the lawsuit was filed by Katie Brooks and Nannette Wride, former recruiters at Stevens-Henager's Orem campus. The pair sued on behalf of themselves and the government under the federal False Claims Act.
If the court sides with Brooks and Wride, it can order the school to pay triple the amount of damages and penalties — with some going to the whistleblowers. No amount of damages has been identified 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.
Stevens-Henager has campuses in Utah and Idaho. Other defendants include CollegeAmerica, with 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.
The department has said Congress passed a ban on improper incentives to admissions recruiters in part to curtail the enrollment of unqualified students and high default rates on student loans.
Attorneys for the school and whistleblowers could not immediately be reached Thursday.
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