Washington Post 2014 Annual Report Download - page 49

On July 22, 2011, the U.S. Attorney’s Office for the Eastern District of Pennsylvania announced that it had entered into a
comprehensive settlement agreement with Kaplan that resolved the U.S. Attorney’s inquiry, provided for the conclusion of
the ED’s program review and also settled a previously sealed U.S. Federal False Claims Act (False Claims Act) complaint
that had been filed by a former employee of the CHI-Broomall campus. The total amount of all required payments by
Broomall under the agreements was $1.6 million. Pursuant to the comprehensive settlement agreement, the U.S. Attorney
inquiry has been closed, the False Claims Act complaint (United States of America ex rel. David Goodstein v. Kaplan,
Inc. et al.) was dismissed with prejudice and the ED will issue a final program review determination. At this time, Kaplan
cannot predict the contents of the pending final program review determination or the ultimate impact the proceedings may
have on the Broomall campus or the KHE business generally.
During 2014, certain Kaplan subsidiaries were subject to two other unsealed cases filed by former employees that
include, among other allegations, claims under the False Claims Act relating to eligibility for Title IV funding. The U.S.
Government declined to intervene in all cases, and, as previously reported, court decisions either dismissed the cases in
their entirety or narrowed the scope of their allegations. The two cases are captioned: United States of America ex rel.
Carlos Urquilla-Diaz et al. v. Kaplan University et al. (unsealed March 25, 2008) and United States of America ex rel.
Charles Jajdelski v. Kaplan Higher Education Corp. et al. (unsealed January 6, 2009).
On August 17, 2011, the U.S. District Court for the Southern District of Florida issued a series of rulings in the Diaz case,
which included three separate complaints: Diaz, Wilcox and Gillespie. The court dismissed the Wilcox complaint in its
entirety; dismissed all False Claims Act allegations in the Diaz complaint, leaving only an individual employment claim; and
dismissed in part the Gillespie complaint, thereby limiting the scope and time frame of its False Claims Act allegations
regarding compliance with the U.S. Federal Rehabilitation Act. On October 31, 2012, the court entered summary judgment
in favor of the Company as to the sole remaining employment claim in the Diaz complaint. On July 16, 2013, the court
likewise entered summary judgment in favor of the Company on all remaining claims in the Gillespie complaint. Diaz and
Gillespie each appealed to the U.S. Court of Appeals for the Eleventh Judicial Court. Arguments on both appeals were
heard on February 3, 2015.
On July 7, 2011, the U.S. District Court for the District of Nevada dismissed the Jajdelski complaint in its entirety and
entered a final judgment in favor of Kaplan. On February 13, 2013, the U.S. Circuit Court for the Ninth Judicial Circuit
affirmed the dismissal in part and reversed the dismissal on one allegation under the False Claims Act relating to eligibility
for Title IV funding based on claims of false attendance. The surviving claim was remanded to the District Court, where
Kaplan has moved for summary judgment.
In January 2013, a former employee of KTP filed a sealed False Claims Act alleging that there were instructors at the San
Antonio campuses of Kaplan College who did not meet Texas’ qualification requirements. The case, captioned United
States of America ex rel. Leslie Coleman v. Kaplan, Inc. et al., was unsealed on December 23, 2014 in connection with
the parties entering into a settlement agreement pursuant to which Kaplan paid approximately $1.3 million, of which
approximately $1.1 million was paid in the form of partial refunds to 289 former students. The settlement agreement
stated that “[d]uring its investigation of the Relator’s False Claims Act allegations, the United States did not encounter
evidence of harm to Kaplan students.”
On December 22, 2014, a former student representative filed a purported class- and collective-action lawsuit in the U.S.
District Court for the Northern District of Illinois, in which she asserts claims under the Illinois Minimum Wage Law and the
Fair Labor Standards Act (Sharon Freeman v. Kaplan, Inc.). The plaintiff alleges that she and other law students who were
student representatives, on their respective law school campuses, of Kaplan’s bar exam preparation business should have
been classified as employees and paid minimum wage. The Company cannot predict the outcome of this inquiry.
On October 21, 2010, KHE received a subpoena from the office of the Florida Attorney General (FL AG). The subpoena
sought information pertaining to the online and on-campus schools operated by KHE in and outside of Florida. In June
2014, Kaplan entered into an Assurance of Voluntary Compliance (AVC) with the FL AG on behalf of Kaplan University,
Kaplan Higher Education Campuses and Kaplan, Inc. This agreement closes the FL AG investigation. The AVC required
Kaplan to pay $200,000 in “investigation costs,” provide certain tuition credits for students who previously dropped from
a program and wish to return, and comply with certain industry best practices. In addition, Kaplan agreed to keep the
Kaplan Commitment in place for Florida students until such time as Kaplan can prove that the program resulted in savings
to Florida students of at least $350,000. This condition was satisfied at the end of 2014.
On December 21, 2010, the U.S. Equal Employment Opportunity Commission (EEOC) filed suit against Kaplan Higher
Education Corporation in the U.S. District Court for the Northern District of Ohio alleging racial bias by Kaplan in
requesting credit scores of job applicants seeking financial positions. In March 2011, the court granted in part the
Company’s motion to dismiss the complaint. On January 28, 2013, the court entered summary judgment in favor of
Kaplan Higher Education Corporation and against the EEOC, terminating the case in its entirety. The EEOC appealed
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