At Higher Ed Watch, we recently called on U.S. Education Secretary Arne Duncan to open an investigation into allegations that the University of Phoenix, the country's largest chain of for-profit colleges, had deliberately tried to manipulate its cohort default rate. While he's at it, he should also examine the university's student recruiting practices.

In theory, this investigation has already been carried out. In 2004, a Department program review report found that the university had knowingly violated a federal law that bans colleges from compensating admissions officers on the basis of enrollments. The report blasted the university for fostering a high-pressure sales culture that rewarded recruiters who put the most "asses in the classes," including those of unqualified students.

Ultimately, the Education Department reached a $9.8-million settlement agreement with the Apollo Group, the university's parent company, to resolve issues that were raised in the review. The settlement, however, did not include any admission of wrongdoing by the corporation, and university officials continued to defend their practices. "If we were guilty of everything being said in that report, there's no way they'd be willing to reach a settlement or no way they'd be willing to sign a settlement agreement that says there is no admission of guilt," Todd Nelson, the university's then-president and chief executive officer, said in an interview with The Arizona Republic at the time.

Given that level of denial, it's probably not too surprising that things haven't changed that much at the University of Phoenix. At least that's the impression we got from reading internal memoranda made public last month (available on PACER) as part of a federal false claims, employment discrimination, and wrongful termination lawsuit brought against the for-profit college chain by Chad McKinney, a former recruiter at two of the university's San Diego campuses.

At Higher Ed Watch, we have no opinion on the merits of McKinney's case against the University of Phoenix regarding his employment status. However, we do believe that the case raises serious concerns about whether the university is continuing to defy the incentive compensation prohibition. Congress imposed this ban in 1992 as part of an effort to stop for-profit trade schools from actively recruiting unqualified students who could not benefit from the training being offered.

University of Phoenix officials say they are in compliance with the law. They claim to use an intricate matrix to determine the compensation of recruiters - evaluating them on such measures as job performance, judgment, communication skills, and customer service. But according to the lawsuit, the matrix is just "a guise." McKinney alleges in the lawsuit that "all the Corporate Defendants and management were truly concerned about, or took into account when calculating his adherence to the ‘matrix,' were how many students he was able to enroll into the university each month."

The internal University of Phoenix documents revealed in the case appear to bear these allegations out. Managers at the San Diego campus regularly sent e-mails to McKinney and his fellow enrollment counselors (EC's) prodding them to meet their enrollment quotas (for McKinney, it was admitting at least four new students a month), and warning them of the consequences of failing to achieve these goals:

12/19/06 e-mail from Enrollment Manager to McKinney's team

Let's blow January out of the water. Our budget is 48 lives...Some of you have reviews coming up and need January to be BIG...[emphasis added]

3/28/07 e-mail from Associate Director of Enrollment

These 6 EC's have taken over half the applications for the entire campus! These 6 EC's have taken more applications than the other 51 EC's combined. We have two more days. What are you going to accomplish this week? What are you bringing to your team, your campus, your next review? [emphasis added]

As part of his lawsuit, McKinney unearthed a document that lays out the "performance matrix" that the San Diego campuses were using to evaluate enrollment counselors. Under this matrix, job performance is judged almost exclusively on recruiters' success in bringing in new students. For example, the schools reward recruiters for being "motivated to achieve results independently." But this quality is determined solely by the recruiters' "consistency" in "clearing a minimum number of enrollments each month." For example, new employees who enroll three students per month earn "1 review point toward their overall performance evaluation." Those who enroll five students earn "2 review points." But those who fall short of these goals don't get any points. In addition, those who fail to admit more than one student a month are judged to be "unsatisfactory."

McKinney fell short of his quotas, and in March 2007, his supervisor sent him a letter warning him that he would face "disciplinary action" unless he improved his performance "specifically regarding appointments, applications, and starts."

3/13/07 "Discussion Memo" from the Enrollment Manager to McKinney

In the month of February 2007, you had 6 appointments seen, you took 5 applications and 3 of your students started class. This falls below meets expectations for your level.    

Your matrices clearly state that as a level 1 your meeting expectation goal for appointments seen is 3.5 per week, applications taken per week is 1.5 and starts per month is 4..

As always, I am available to assist you in correcting your performance...however, understand that failure to improve your performance may result in further disciplinary action up to and including termination.

In May 2007, McKinney's pay was reduced, from $37,000 to $35,500, because he had failed to meet his quota of enrolling four students that month. Eventually, after complaining to the university's human resources department about the way he had been treated, he was fired.

The documents released as part of McKinney's lawsuit also show how the university's "recruit at any cost" policy encourages the school to lure in unqualified students. In one particularly illuminating e-mail to her staff in December 2006, the enrollment manager wrote:

 Remember, students have to attend THREE nights or post THREE weeks in order to get START credit, which is what counts in the end.

In other words, all that counts is getting students in the door. It doesn't matter whether they are adequately prepared, as long as they are enrolled long enough to be considered a "start." Publicly-traded, for-profit higher education companies, like the Apollo Group, have much incentive to pump up their enrollment numbers. To keep their stock prices up and investors happy, these companies know they have to keep on expanding, even if doing so is not good for the colleges or their students.

The allegations in this case against the University of Phoenix are serious and  the new leadership at the Department of Education needs to pay attention to them. And hopefully if the accusations are borne out, the agency will not let the school off the hook so easily this time.