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3 Former Employees Accuse Kaplan U. of Defrauding U.S. Government of Billions
The lawsuit alleges that Kaplan, a subsidiary of the Washington Post Company and one of its most profitable ventures, enrolled unqualified students, inflated their grades so they could stay enrolled, and falsified documents to obtain accreditation for certain academic programs.
By Goldie Blumenstyk
In a wide-ranging federal lawsuit, three former employees claim the for-profit institution cheated the U.S. government of more than $4-billion. Kaplan officials said the accusations are the unfounded charges of disgruntled ex-employees.
Three former academic officers at Kaplan University have filed a wide-ranging federal lawsuit that accuses the fast-growing for-profit institution of defrauding the U.S. government of more than $4-billion.
The lawsuit alleges that Kaplan enrolled unqualified students, inflated their grades so they could stay enrolled, and falsified documents to obtain accreditation for certain academic programs. The suit, filed in U.S. District Court in Tampa, Fla., also accuses the company of paying its own employees to enroll in classes so it could meet the requirement that at least 10 percent of its revenue come from sources other than federal loans and grants.
In addition, the complaint accuses Kaplan, which is a subsidiary of the Washington Post Company and one of its most profitable ventures, of providing its college recruiters with incentives based on the number of students they enrolled, in violation of federal regulations.
In an interview on Wednesday, Kaplan officials strenuously denied the allegations, calling them "all unfounded," and said the parties bringing the case were disgruntled former employees who had made "outlandish claims in numerous forums" in recent years that have been repeatedly rejected.
One of the former officers who filed the suit said on Wednesday that he had firsthand knowledge that Kaplan's accreditation materials were falsified because he took part in the process, submitting data to the North Central Association of Colleges and Schools that purported to show there would be employer interest in a new program in law and legal studies.
"We forged all that. We just drew up whatever numbers we wanted," said the official, Ben H. Wilcox, who is now working as a lawyer in Oklahoma.
Mr. Wilcox was employed at Kaplan from February 2005 until May 2006, serving as a dean of paralegal studies and later dean of extended campuses. He said he was fired; an official speaking for Kaplan said he left by "mutual agreement" with the university.
Alleged Misrepresentations
Mr. Wilcox said he was also part of a university effort to mislead an accrediting team during a site visit to a South Florida campus in what was supposed to be a conference call between the team and a dozen or so Kaplan students. Instead, the people calling in were "all our admissions reps, one floor above us, all on separate lines," said Mr. Wilcox.
Kaplan runs part of its higher-education operations out of South Florida, including a recruiting center for online students.
In addition to its online program, Kaplan operates 70 colleges in the United States and others around the world, and enrolls a total of about 80,000 students. In 2007, its higher-education operations generated revenue of more than $1-billion, of which $745-million came via federal student loans and Pell Grants, according to the Post company's latest filings with the U.S. Securities and Exchange Commission.
The subsidiary, once known as a test-preparation business, entered the college business in 1998 with the founding of an online law school. In 2000 it bought the Quest College chain of 30 institutions, and subsequently expanded operations worldwide.
Whistle-Blower Action
The allegations are contained in a lawsuit filed under the federal False Claims Act, which allows whistle-blowers to sue companies and organizations they accuse of obtaining federal funds under false pretenses. In this case, as with a False Claims Act lawsuit pending against the University of Phoenix, the parties allege that the university obtained federal student aid under false pretenses by obtaining federal loans and grants on behalf of its students, after falsely certifying that it complied with federal laws.
The lawsuit says the company has obtained "over one-half billion" dollars annually since January 1999, and seeks damages of three times that amount plus civil penalties.
When first filed, False Claims Act suits are kept secret, giving the U.S. Department of Justice time to investigate and decide whether to intervene. The lawsuit against Kaplan, filed in April 2007, was unsealed by the court late last month, after the department declined to pursue the case.
Kaplan officials said they had not been subpoenaed or questioned by federal investigators during the period that the suit was under seal—as has been the case for other companies similarly accused—and only learned of it once it was unsealed.
The government could still join the suit. The parties bringing the claim, who are called "relators," can now pursue the case on their own, and if they prevail would be entitled to a share of the damages.
In addition to Mr. Wilcox, the relators are Jude Gillespie and Carlos Urquilla-Diaz, who both worked at the South Florida campus in Fort Lauderdale.
Mr. Gillespie is described in the complaint as a former department chairman and a professor of paralegal studies, who worked on the campus from August 2004 through April 2005. The complaint gives the same description for Mr. Urquilla-Diaz, but other records indicate he worked on the campus as a professor and administrator in the paralegal-studies department from September 2005 through August 2006.
Neither Mr. Gillespie nor Mr. Urquilla-Diaz could be reached for comment on Wednesday. Their lawyer, John W. Andrews of Tampa, said "all three of these people have a legitimate claim."
Strong Denials
In denying the lawsuit's allegations, Kaplan officials took direct aim at the accusers, saying in a written statement that the former employees "have made a laundry list of unfounded accusations, as well as direct threats to our faculty and administrators."
"Their ongoing attempts to hurt the university, its faculty, administration, and students, have continued to fail," the statement said. "They are now trying to use your newspaper as a vehicle for their unfounded claims."
It continued: "In addition, we have strong evidence indicating that one of the plaintiffs illegally accessed our university e-mail system, and sent a series of extremely profane and threatening e-mails to students, faculty, and executives. We have reported this to the FBI."
Kaplan would not say whom it suspects.
In an interview, Mr. Wilcox denied responsibility. Since leaving Kaplan nearly two years ago, he has held three jobs, including two short stints at other for-profit institutions. He served for three months as a dean at the Dallas campus of Westwood College, a division of Alta Colleges Inc. He was also employed by Career Education Corporation, in Schaumburg, Ill.
He and his former co-workers have since become tangled up in a web of legal disputes. Among the several claims filed by Mr. Urquilla-Diaz and Mr. Gillespie over the past few years is a wrongful termination lawsuit brought by Mr. Urquilla-Diaz against Kaplan that names the institution and several employees, including Mr. Wilcox, as defendants.
Mr. Andrews, the lawyer who is representing the three men in their lawsuit under the False Claims Act, is also representing Mr. Urquilla-Diaz in his wrongful-termination suit. He said some of Mr. Wilcox's behavior was ordered by his superiors.
"Unfortunately, good people do some wrong things when they're working for a big corporation," said Mr. Andrews. "I think you'll find that Mr. Wilcox followed orders. I think you'll find his conscience caught up with him."
— Goldie Blumenstyk
Chronicle of Higher Education
2008-03-13
INDEX OF OUTRAGES
Pages: 380
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