The university could never make a legal case that it was defrauded, since the "undeserving" student actually paid the full cost of attending the school.
No, fraud isn’t based on a promise that you will be admitted according to your idea of fair criteria; it is based on vouching for something that isn’t so. Colleges don’t actually make promises along the lines you describe. But they have their applicants vouch for the information they provide in their applications.
The law is pretty straightforward here.