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4 False-Claims Lawsuits Against Kaplan Are Consolidated

By Goldie Blumenstyk

Four separate whistle-blower lawsuits that accuse Kaplan Higher Education of violating the law in obtaining federal student aid will be consolidated before a single federal judge in Florida, a judicial panel ruled on Wednesday.

Although the circumstances in the cases differ, each of the lawsuits accuses the company of improperly compensating student-recruiters based on the number of people they enroll, assertions that Kaplan maintains are groundless. Kaplan is seeking to have each of the cases dismissed. ( court filing pdf file)

The “incentive compensation” practices alleged in the lawsuits are coming under increasing scrutiny in Washington. The Education Department has said it will be examining such practices in the coming weeks as it considers whether to put in place new rules for federal student-aid programs.

The four lawsuits—first filed under seal in Florida (in April 2007), Illinois (in October 2007), Pennsylvania (in November 2006), and Nevada (in November 2007)—involve the federal False Claims Act, which allows interested parties to sue on behalf of the government for alleged fraud. The parties who bring such suits, known as relators, are entitled to a share of whatever money may be recovered on the government’s behalf.

The relators in the Kaplan cases allege that the company falsely obtained billions of dollars in federal student aid. The government has declined to intervene in the cases, but in at least one of them, it has opposed efforts by Kaplan to have the matter dismissed.

Kaplan had argued against consolidating the lawsuits, contending that under the “first to file” provision of the False Claims Act, “only one of them—at most—will be allowed to proceed past the motion-to-dismiss phase and into discovery.”

But in an order [pdf file] issued on Wednesday, the United States Judicial Panel on Multidistrict Litigation decided otherwise, saying that centralizing the case in Florida, where Kaplan has a large presence, would be a sound course. The judge who will now oversee the cases, Patricia A. Seitz of the U.S. District Court for Southern Florida, is a “seasoned jurist who has the experience necessary to steer this litigation on a prudent course,” the order states.

Kaplan Higher Education is the fastest-growing arm of Kaplan Inc., which is a subsidiary of the Washington Post Company. Kaplan Higher Education operates colleges online and at campuses throughout the United States and overseas, and generated more than $367-million in revenue in the first quarter of 2009.

— Goldie Blumenstyk
Chronicle of Higher Education
2009-06-11
http://chronicle.com/cgi-bin/printable.cgi?article=http://chronicle.com/daily/2009/06/19790n.htm

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