The 9th U.S. Circuit Court of Appeals in San Francisco has restored a whistle-blower lawsuit that accuses Santa Ana-based Corinthian Colleges of violating federal law by paying bonuses to recruiters based on how many students they enrolled into the for-profit vocational schools.
Federal law was enacted to outlaw such commissions out of fears that they reward recruiters who sign up unqualified students who eventually won't or can't repay federally guaranteed loans.
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Former Corinthian employees Nyoka Lee and Talala Mshuja filed a whistle-blower lawsuit in 2007 accusing the public company of doing just that. The suit contends Corinthian, which receives billions of dollars in federal subsidies, of paying recruiters bonuses of 2.5% to 10% of their salaries based on the number of students they enroll.
A federal judge in Los Angeles previously dismissed the lawsuit, claiming Corinthian did not violate federal law even if the allegations are true, but the appeals court disagreed. You can read the opinion here.
"We continue to believe that there is no basis for this case and we will contest it vigorously," vowed Corinthian spokesman Kent Jenkins in a statement (via the Los Angeles Times).