The main University of Phoenix building, at 10400 Linn Station Rd., in Louisville
The main University of Phoenix building, at 10400 Linn Station Road, in Louisville

Two former employees at the Louisville campus of the University of Phoenix (UP) are suing the for-profit school for wrongful terminations, which they claim stem from their refusal to engage in illegal student recruitment efforts.

This case overlaps with a newly announced investigation of the school’s business practices by the U.S. Federal Trade Commission (FTC) for a laundry list of alleged violations, including those related to recruitment. An attorney for the terminated Louisville employees also told IL he and his clients spoke to the FTC for several hours during an interview several months ago.

The two former UP Louisville employees are Marlena Aldrich and Kristen Nolan. Aldrich was a national defense liaison at the school, and Nolan was a national defense liaison manager. They were each tasked with recruiting military service members, and eligible family members, to go to the University of Phoenix in Louisville, located at 10400 Linn Station Road.

Aldrich and Nolan filed their suit June 9, 2015, in Jefferson Circuit Court.

“Plaintiffs inability to meet recruitment goals directly related to their unwillingness to engage in the unfair, deceptive, misleading, unconscionable, fraudulent and unlawful acts set forth in this complaint,” the suit states. “The failure to meet the recruitment goals in turn resulted in their respective terminations.”

The plaintiffs allege the University of Phoenix in Louisville violated requirements for receiving what are called Title IV funds, which are federal student aid funds from the U.S. Department of Education.

According to the suit, a core requirement of the school receiving these funds is that it bans incentive compensation for employees based on hitting recruitment numbers. Aldrich and Nolan allege UP not only used remuneration schemes, but if a military liaison didn’t reach recruitment goals they could be fired, in violation of several federal regulations tied to the Title IV funds.

The suit also opens the lid on what it claims are several ways the University of Phoenix in Louisville misrepresented itself to students and recruited illegally.

For example, the plaintiffs allege UP Louisville misled ex-military students via the students’ applications for Title IV loans. In many instances, tuition costs already are paid by the military, as a benefit of service, and the soldier/veteran didn’t need to repay it. Yet the plaintiffs allege they encouraged such recruits to apply for extra Title IV loans, in turn telling prospects they could use the money to get things like low-interest car loans. This violates the purpose of Title IV loans, which must be used for attending school only.

Job fairs also were used to recruit soldiers/veterans under false pretenses, the suit claims. One such job fair took place at the UP Louisville campus and was organized by “Hiring Our Heroes,” an organization tasked with finding employment for military personnel. According to the suit, University of Phoenix was permitted to participate at the job fair to hire veterans for positions at the school itself. Instead, the plaintiffs claim they were there only to recruit students for the school, not jobs. The plaintiffs say not a single soldier ever got a job from the job fair.

The suit further accuses UP of training recruiters to lie about the kinds of jobs students would get upon graduation, and how employable they would be: “It (UP) represents to recruits that well paying employment is assured upon obtainment of a UP degree … In reality, there is a dismal, perhaps negative correlation between employment and a UP degree.”

The plaintiffs claim they were instructed to falsely state the school has “strategic partnerships” with various corporations, implying these partnerships would ease the way for students to get jobs..

In addition, Aldrich and Nolan are seeking to be recognized as the lead plaintiffs in a class-action suit against the school. The pair alleges they worked more than 40 hours per week with no overtime, and they seek to represent all former UP employees who performed a substantial part of their duties in Kentucky over the past five years who were also similarly not compensated for overtime.

Mark Brenner, senior vice president of external affairs at the Apollo Education Group, the parent company of University of Phoenix, said the school intends to vigorously defend itself “against the fictitious allegations of these former employees.”

In early July, the company responded to the suit by requesting it be dismissed and sent to arbitration. This choice of forum issue is still pending.

On July 28, the Apollo Education Group received notice from the FTC regarding a new investigation of the University of Phoenix as to whether “certain unnamed persons, partnerships, corporations, or others” at the school engaged in deceptive practices related to recruitment, marketing, financial aid, tuition and fees, academic advising, and other issues.

Kirk Hoskins, attorney for plaintiffs Aldrich and Nolan, wrote in an email to IL that he and his clients had a four-hour interview with FTC attorneys several months ago but declined to provide additional details.

IL asked the Apollo Group for additional comments about the FTC investigation, and it referred us to its official statement, which said it intends to cooperate fully with the FTC. An FTC spokesperson declined further comment regarding how big a role the UP Louisville complaint might play in its investigation.

Nationally, the University of Phoenix and Apollo has hemorrhaged over the past several years. In 2010, the school had 460,000 students; that number is now less than half.

Last March, IL wrote about how the 10400 Linn Station Road campus has stopped enrolling students, is set to layoff a huge percentage of its teaching staff, and will close in 2016.

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David Serchuk
David Serchuk is a staff writer at Insider Louisville. He is a former editor at Forbes.com, and an ex-reporter at Forbes magazine. He's written for NPR, CNBC.com, New York, Pittsburgh, Louisville and other publications named for places. He enjoys writing about business, music and other things as well.