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Suit Could Expand False Claims Scope

Posted Aug 22, 2007 6:47 AM CDT
By Debra Cassens Weiss

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A fraud lawsuit against the University of Phoenix could expand the scope of the False Claims Act.

The law, which permits private individuals to sue over fraud committed against the federal government, was once largely used in suits against defense contractors and the medical services industry, the Recorder reports. The suit claims the online university falsely certified that its enrollment counselors did not receive incentives for enrollment activities. Federal law bars paying recruiters based on the number of students enrolled.

"If enforced, the act [can] be used to combat all types of fraud," Burlingame, Calif., lawyer Niall McCarthy told the Recorder. His law firm, Cotchett, Pitre & McCarthy, handles whistle-blower lawsuits.

On Friday, a Sacramento, Calif., federal judge refused to dismiss the case. The university had argued that its $9.8 million settlement of an administrative action by the Department of Education had resolved the dispute and made the case moot.

The suit seeks damages for federal loans and grants paid to students. About 80 percent of the school’s students receive federal aid.

The Justice Department has not intervened in the case, although it opposed the motion to dismiss. But Assistant U.S. Attorney Kendall Newman, who is monitoring the case in Sacramento, told the Recorder the government may still take action. "That is always a possibility. It's one thing we continually look at."

The university’s lawyer told the Los Angeles Times the evidence would show full compliance with the law.

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