Kaplan University Hasn't Cleared Fraud Suit Yet
(CN) - After dismissing claims that Kaplan University defrauded the government, a federal judge expedited briefing for Kaplan's accuser to abate that final judgment.
In recent years, the for-profit school has faced a string of lawsuits from former employees accusing it of violating a program-participation agreement with the Department of Education by failing to comply with the Higher Education Act.
Kaplan University, one of the largest for-profit colleges in the country, offers more than 200 on-campus and online degrees and programs. The university and its parent company, Kaplan Higher Education Corp., are accredited by the Higher Learning Commission. To receive federal grants and loans from the U.S. Department of Education, the university must certify to the government that it complies with the Higher Education Act and other DOE regulations.
Kaplan, which is owned by the Washington Post Corp. and has a large administrative presence in Fort Lauderdale, Fla., is one of several for-profit schools being investigated by Florida's attorney general for alleged misrepresentations in areas such as recruiting, enrollment and financial aid, the Sun-Sentinel reported.
U.S. District Judge Patricia Seitz in Miami previously dismissed claims that Kaplan maximized its federal funding by illegally recruiting unqualified students, misrepresenting students' academic progress, manipulating job-placement statistics and paying recruiters bonuses based on how many students they enrolled.
Seitz nevertheless allowed whistle-blower Jude Gillespie, a former course developer and associate professor, to pursue claims that Kaplan defrauded the government by falsely certifying that it complied with Section 504 of the Rehabilitation Act of 1973.
Gillespie, who worked for Kaplan from April 2004 until April 2005, filed a complaint with the Department of Education's Office of Civil Rights (OCR), alleging that Kaplan had engaged in discrimination and retaliation based on his disability, and that it lacked an adequate "institutional grievance process."
Kaplan employed Gillespie, who was admitted to practice law in Florida in 1992, as a course developer and academic department chair for its College of Legal Studies and as an associate professor of paralegal studies.
In a 2011 ruling, Seitz noted that the OCR had concluded in 2007 that Kaplan was in violation of the Rehabilitation Act, and directed the school to correct specific violations. Among other things, the OCR found that the university lacked procedures to address discrimination separately from harassment, as well as a detailed process by which employees could seek resolutions to their concerns, according to the ruling.
Seitz said Gillespie could pursue alleged violations of the Rehabilitation Act only until the moment when Kaplan corrected the violations, as acknowledged by the DOE's Office of Civil Rights.
Kaplan moved for summary judgment, claiming that Gillespie could not prove its intent to defraud the government, or its noncompliance with the Rehabilitation Act.
On July 16, Seitz found that Gillespie could not establish scienter, the intent to do wrong, as required to support false certification claims.
The False Claims Act, on the other hand, does not require proof of specific intent to defraud. It merely requires proof that the defrauding party acted with deliberate ignorance or "in reckless disregard of the truth," according to the ruling.
"The 'knowing' element of the False Claims Act was not meant to punish honest mistakes or incorrect claims submitted through mere negligence; it was meant to reach the situation where an individual has 'buried his head in the sand' and failed to make basic inquiries which would alert him that false claims are being submitted," Seitz wrote.
Though Kaplan entered a resolution agreement with OCR in October 2005, it did not admit to any violations or noncompliance with the Rehabilitation Act, according to the ruling.
Seitz also noted that on May 24, 2007, OCR sent Kaplan a letter saying that the university had fulfilled its obligations under the resolution agreement and that no further monitoring was necessary.
What's more, several Kaplan employees testified that they had taken steps to ensure compliance with the Rehabilitation Act.
Karen Ross, Kaplan's vice president of human resources and associate general counsel, claimed she had revised the university's handbook using nondiscrimination language that the Equal Employment Opportunity Commission approved. Outside counsel also reviewed the school's training materials, Ross added. She and other employees said they never had any reason to believe Kaplan was not in compliance with the Rehabilitation Act and other laws.
Kaplan's former senior vice president of human resources, Lisa Sicilian, also testified that Kaplan had received no other discrimination complaints before or after Gillespie's OCR complaint. She claimed that, during the investigation of Gillespie's complaint, OCR had told Kaplan's outside counsel that Kaplan was not in violation of the law, despite OCR's findings, according to the ruling.
"Furthermore, there is no evidence of record to indicate that Kaplan knew or should have known that it was not in compliance with the Rehabilitation Act," Seitz added. "Prior to Gillespie's OCR complaint, Kaplan had never had a complaint about its Rehabilitation Act policies. Kaplan had policies and procedures in place to ensure compliance and there is no evidence that those policies and procedures were not followed. Even when OCR made its findings, Kaplan's counsel was told by OCR that Kaplan was in compliance with the Rehabilitation Act. Thus, the evidence does not show that Kaplan 'buried its head in the sand' or failed to make basic inquiries to ensure compliance."
Additionally, Kaplan worked with OCR to address its concerns and met its obligations under the resolution agreement, the ruling states.
Gillespie failed to show that Kaplan had certified compliance with the Rehabilitation Act without even checking the statute and regulations, according to the ruling.
Kaplan employees in charge of ensuring compliance read Section 504, reviewed Kaplan's policies and training materials, and consulted with outside counsel, Seitz found.
Late Friday afternoon, Gillespie asked the court to set aside its July 16 order and final judgment in the case, arguing that they prevented him from obtaining further documents in support of his claims, as ordered by U.S. Magistrate Judge Andrea Simonton earlier this month.
"This foreclosure cut off Mr. Gillespie's rights to evidence bearing on defendants' scienter - the element of False Claims Act liability the court based its entry of final summary judgment upon - which potentially allowed defendants to escape liability when they should not have," Gillespie's motion states. "The entry of the final judgments therefore created an exceptional circumstance which may have led to an extreme result causing hardship to the United States and manifest injustice."
Some weeks earlier, Judge Simonton had set a July 18 deadline for Kaplan to produce certain contested documents, initially listed as privileged. Gillespie said the records, which include more than 150 emails and documents predating April 2005, could have bearing on Kaplan's attempt or failure to comply with Section 504.
Despite its awareness that potential new evidence could help establish the "knowing" element of a false certification claim, the court entered its final judgments two days before the discovery deadline, Gillespie said.
Claiming that a jury should have made the determination, Gillespie said there is a dispute to some of the facts Seitz laid out in her ruling: that Karen Ross was never notified that Kaplan's policies violated the Rehabilitation Act; and that the Office of Civil Rights agreed that there was no violation of Section 504.
In an April motion for partial summary judgment, Gillespie had claimed that the OCR determined in October 2005 that Kaplan's policies and procedures were in fact in violation of Section 504 and its implementing regulations. He also argued that Ross, who was responsible for ensuring Kaplan's compliance with the Rehabilitation Act, was not familiar with Section 504, and had no previous experience with recipients of federal funding.
Gillespie now wants to abate Seitz's final judgment until the magistrate's order can be effectuated. Seitz ordered expedited briefing on the issue Tuesday and directed Kaplan to answer the motion to set aside by Aug. 8.