Whistleblower suit against Kaplan University

[nurseprnRN, BSN, RN]

From Daily Report

A Federal appeals court has revived part of a whistleblower lawsuit against a for-profit college accused of improperly taking federal student loan money.

Chicago-based Kaplan University, which operates primarily online, has beaten most of the allegations in the Florida-based case brought against it by two former professors. But on March 11, a panel of the U.S. Court of Appeals for the Eleventh Circuit cleared the way for one claim: that Kaplan violated a federal ban on paying bonuses to college recruiters based on the number of students enrolled.

The case, one of a spate brought against for-profit schools, comes as President Barack Obama and some in Congress have sought to curtail what they say are exploitative practices. Critics say the schools don't prepare students for employment with the sort of income they need to pay back their loans, leading to default.

Wade Dyke, president of Kaplan University, has responded that opponents use misleading, incomplete anecdotes about individual students who may have racked up debt attending multiple schools or borrowed well over the cost of tuition to pay for living expenses.

The Eleventh Circuit case stems from the federal False Claims Act, which enables private whistleblowers to recover money for themselves and the federal government by suing someone who defrauds the government. Schools whose students receive federal loans and grants can be liable under the act if they falsely certify to the U.S. Department of Education that they are complying with federal laws and regulations. Those rules include requiring the schools to monitor their students' academic progress and ban discrimination on the basis of disability.

The case decided by the Eleventh Circuit was brought by two Kaplan paralegal studies professors who were fired in 2005. Both have law degrees.

One, Jude Gillespie, says he was fired after he complained about the school's polices for handling grievances about disability discrimination. Judge Patricia Seitz of the U.S. District Court for the Southern District of Florida dismissed the case.

The other, Carlos Urquilla-Diaz, says he was let go after he complained to Kaplan and indicated that he would be notifying government authorities about his belief that the school paid forbidden incentive compensation to recruiters and used false documents to obtain necessary accreditation. He also claimed the school enrolled employees in its courses, paying their tuition from a company scholarship created with federal grant money, in violation of a rule that a school cannot receive more than 90 percent of its revenue from federal student aid. Diaz also alleged the school falsely claimed its students were making satisfactory academic progress.

Seitz also dismissed Diaz's case, saying his complaint didn't include sufficient allegations to go forward.

[h=2]Incentive Compensation[/h]An Eleventh Circuit panel of Judge Beverly Martin, Senior Judge Joel Dubina and visiting Chief U.S. District Judge Margaret Rodgers of the Northern District of Florida upheld Seitz's ruling in part, but it revived Diaz's claim over the incentive compensation ban.

Under that rule, a school receiving federal financial aid dollars must agree that it will not award recruiters any commission based on success in securing enrollments. During the period covered by the lawsuit, the Department of Education adopted a rule in 2002 that was supposed to make it easier for schools to comply. It said that a school would not violate the incentive compensation ban if it paid recruiters a "fixed compensation," as long as that salary was not adjusted more than twice during any 12 month period, and any adjustment was "not based solely on the number of students recruited, admitted, enrolled or awarded financial aid." (The Obama administration eliminated that safe harbor regulation in 2011.)

Kaplan had a written policy that listed factors besides enrollment numbers that were supposed to determine recruiters' compensation, such as attendance and willingness to work late shifts. Kaplan said Diaz didn't make sufficiently specific allegations to back up his claim that factors besides enrollment numbers were not actually considered in determining compensation. But the Eleventh Circuit rejected Kaplan's argument.

In his opinion for the panel, Dubina noted that Diaz's complaint included specific allegations about four former Kaplan recruiters whose salaries Diaz said were increased or decreased based on the number of enrollments. Diaz contended one recruiter who worked for Kaplan from 2006 to 2008 started at an annual salary of $30,000, saw it rise to $60,000 based on the number of enrollments that he obtained, then saw it drop to $37,000 when his enrollments dropped. Dubina added that the written policy relied on by Kaplan was dated May 2006, meaning it was not in place for the entire period covered by Diaz's allegations, 2004 to 2009.

Dubina agreed with Kaplan that Diaz failed to adequately explain claims that Kaplan's alleged grade inflation practices led to the school falsely telling the government that students were making adequate progress. Diaz also failed in claiming that Kaplan's employee scholarship violated the rule against a school receiving more than 90 percent of its revenue from federal financial aid, wrote Dubina. He also rejected claims that the school made false statements to an accreditation commission.

Although the appeals court upheld the dismissal of Diaz's claims except for those based on the incentive compensation ban, it modified the dismissal so as not to preclude the federal government from bringing a claim against Kaplan. The government has not intervened in the case.

[h=2]Alleged Disability Bias[/h]Gillespie, the other plaintiff, had informed Kaplan that he had a medical disorder and requested several accommodations. (In an email, Gillespie explained that he had asked to begin telecommuting three weeks earlier than he would be required to do so anyway due to a lack of office space for himself and several others.) The request was granted, but Gillespie nonetheless filed a complaint with the Department of Education's Office of Civil Rights.

According to Dubina's opinion, the Office of Civil Rights found that Kaplan hadn't discriminated or retaliated against Gillespie, and the school's policies did not prevent him from being able to voice his grievances. But the office made several additional findings of shortcomings in Kaplan's written policies regarding disabled employees, and Kaplan entered into a voluntary resolution with the office to change its policies.

Gillespie alleged Kaplan violated the False Claims Act when it told the government that it complied with federal laws on discrimination against the disabled. Seitz granted summary judgment to Kaplan, noting the school had relied on its vice president of human resources and associate general counsel, who Seitz said had modeled Kaplan's policies on an example previously approved by the U.S. Equal Employment Opportunity Commission.

Dubina rejected Gillespie's appeal arguments, agreeing with Kaplan that all of Gillespie's evidence didn't create a jury question about whether the school had acted with actual knowledge or the high level of negligence as is required to successfully press a lawsuit under the False Claims Act. Dubina said Gillespie had attempted to create a jury question through "personal, hypercritical assessments" of two Kaplan officials' job performance that were not grounded in the law.

Julian Poon, a partner at Gibson Dunn & Crutcher's Los Angeles office who argued for Kaplan at the circuit last month, referred an inquiry to Kaplan. A statement from Kaplan said it was pleased the court had rejected all but one of the claims.

"These two serial litigants last worked for Kaplan 10 years ago and have pursued claims separately and jointly against us for eight years through more than a dozen legal proceedings, reviewed by multiple government agencies, federal and appellate courts—none with success," said the statement. "We believe this one remaining claim will also be dismissed in due time."

Tampa lawyer John W. Andrews, who argued at the circuit for Diaz, said he hadn't decided whether to appeal further on the claims his client had lost. He said he thought he would be able to proceed on the claim based on the incentive compensation ban, notwithstanding a rule that says only the first to bring a particular claim under the False Claims Act can recover money. Dubina noted that the trial judge hadn't ruled whether Diaz's claims were barred by that rule, and Andrews said he would have to examine whether there have been other claims against Kaplan under the incentive compensation ban.

"I get calls that say 'I've got a $60,000 student loan and nobody will take my credits,'" said Andrews, adding that he hated to see students "getting suckered." But he allowed that he couldn't recover any money for current or former students through his lawsuit, although he said he was looking into possible remedies for them.

Gillespie, who at one point was represented by Andrews but is now representing himself, argued his own case at the circuit.

Gillespie said in an email that he plans to ask the panel to take another look at the case, noting a separate appeal of the district judge's denial of his motion to vacate the summary judgment order remains pending. He said "it would be erroneous to assume" that the circuit's ruling represented a defeat for his lawsuit.

"As a result of my False Claims Act lawsuit and the ensuing Eleventh Circuit decision," he said, "yet another circuit court of appeals has recognized that for-profit schools, which routinely receive billions of dollars a year from the United State government, must comply with the regulations of the Department of Education, as well as their promises set forth in the Participation Program Agreements that all participants in the Title IV student loan funding program must sign in order to participate. As a result of my David v. Goliath lawsuit, yet another circuit court has joined its sister courts to hold these schools accountable."

The case is Urquilla-Diaz v. Kaplan University, No. 13-13672.

Read more: Panel Revives Whistleblower Claim Against Kaplan Univ. | Daily Report

[TheCommuter, BSN, RN]

Thank you for starting this thread, GrnTea.

This is valuable information to know, especially in light of the recent uptick of members making inquiries regarding Kaplan University's online nursing programs.

[elkpark]

I wish we would just shut all these proprietary "schools" down. They are nothing but leeches on society.

[nurseprnRN, BSN, RN]

Kaplan sure isn't the only one doing these dicey practices. But I am not sure that someone who would go to one of them would take the time and have the attention to read this whole article and understand the implications. Not a blanket statement, but seriously, when you read the comments online from people who complain about their experiences, you realize their critical thinking skills aren't that great. The Kaplans, et al. of this world count on that to support their business model.

[elkpark]

Kaplan sure isn't the only one doing these dicey practices. But I am not sure that someone who would go to one of them would take the time and have the attention to read this whole article and understand the implications. Not a blanket statement, but seriously, when you read the comments online from people who complain about their experiences, you realize their critical thinking skills aren't that great. The Kaplans, et al. of this world count on that to support their business model.

Exactly -- these "schools" only stay in business by preying on people who don't know any better, or just don't care.

[TheCommuter, BSN, RN]

The Kaplans, et al. of this world count on that to support their business model.

these "schools" only stay in business by preying on people who don't know any better, or just don't care.

I think these types of schools prey largely on people who were not explicitly trained to be informed consumers of educational products.

[PacoUSA, BSN, RN]

Kaplan, Everest, University of Phoenix: these are 3 schools that if I ever saw them on a resumé I'd automatically toss it away.

[elkpark]

I think these types of schools prey largely on people who were not explicitly trained to be informed consumers of educational products.

Exactly, that's the only way these "schools" stay in business. I didn't mean to imply any criticism of the individuals who are being victimized simply because they don't know how to discriminate among schools. Society should be doing a better job of either 1) informing them, or 2) protecting them from these vultures.