"The university got ripped off, and we want our money back," university lawyer Lorie Gildea said Monday at a news conference.
Gildea said Haskins' admission to the NCAA that he secretly paid a former tutor $3,000 was the "smoking gun." The lawsuit also contends Haskins told players to mislead investigators after the story broke in March 1999.
The suit, filed in Hennepin County District Court, seeks damages and legal expenses. It cites fraud, deceit and breach of employment agreement.
Calls from The Associated Press to Haskins and his lawyer, Ron Zamansky, were not immediately returned Monday.
Haskins has denied wrongdoing. University president Mark Yudof defended the buyout, saying the school was obligated to give him the money because it had no proof of wrongdoing by Haskins at the time.
After repeatedly denying the accusation, Haskins acknowledged to the NCAA in August that he secretly gave $3,000 to a woman who tutored basketball players after she had been ordered to stay away from the program.
Gildea said the university had been considering suing Haskins for some time but waited until an NCAA investigation was complete. The NCAA is expected to rule in October.
Haskins resigned in June 1999, three months after former tutor Jan Gangelhoff said she had written about 400 research papers and tests for about 20 players during Haskins' tenure.
The NCAA began investigating after the university's nine-month, $2.2 million investigation found systematic cheating and fraud on the men's basketball team.
The findings resulted in the departure of two university administrators and self-imposed sanctions limiting recruitment and a ban from postseason play.
In addition to the NCAA inquiry, a federal grand jury is pursuing the matter because some fraudulent coursework was sent through the mail for correspondence classes.
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