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By Krisztina Than and Marton Dunai BUDAPEST (Reuters) - Hungarian Prime Minister Viktor Orban said on Friday a Budapest university founded by financier George Soros had "cheated" in awarding its diplomas and violated Hungarian laws. Orban, outspoken critic of liberal civil organizations funded by Soros, said the Central European University's fate depended now on talks between Hungary and the United States. The U.S. State Department said in a statement that CEU was a "premier academic institution" that promoted academic excellence and critical thinking. "We urge the Government of Hungary to avoid taking any legislative action that would compromise CEU's operations or independence," acting spokesman Mark Toner said. In an interview on state radio, Orban said the CEU violated rules by issuing diplomas recognized both in Hungary and the U.S. as the university operates exclusively in Hungary and has no campus in the United States. "Hungary is a sovereign country, it supports knowledge in all cases but does not tolerate cheating," Orban said. "Not even a billionaire can stand above the law, therefore this university must also obey the law." The CEU said it operated lawfully and was accredited to award Hungarian and U.S. degrees. "The CEU utterly rejects the Prime Minister of Hungary's false allegations that CEU is 'cheating'," CEU said in a statement. "We have been lawful partners in Hungarian higher education for 25 years and any statement to the contrary is false." A year before 2018 elections, Orban has raised the stakes in his fight against civil organizations funded by U.S. financier and philanthropist Soros. Earlier this week, his government submitted a bill to parliament to regulate foreign universities, which could force the CEU founded by Soros in 1991 out of the country. CEU has said the bill, which Hungarian news web site 444.hu said could be discussed in Parliament as early as Monday, threatened academic freedom in Hungary. Hungarian scholars and teaching organizations have come out in support of CEU, saying it was one of the preeminent centers of thought in the country and deserved to be saved. (Editing by Ralph Boulton)