Whistleblower Exposes How Kaplan University Cheats Low-income Minority students and The Washington Post Benefits

Private Vocational College—Kaplan operates vocational training programs that over enroll students using Federal loans that leave low-income student indebted and unemployed.

A whistleblower source has come forward to expose how CHI/Kaplan, in Broomsall, Pennsylvania over-enrolled students by the hundreds and then abandoned them before internship placement.

 The sources stated,  “I’m one of the good guys and came across your request for info regarding Kaplan while researching Kaplan lawsuits. I know as much as anyone who was involved in the SurgTech program at CHI.  I am personally familiar with the program and those associated with it on the student, staff and management level.  If being a “source” under these conditions will help I will divulge whatever will be helpful to you” (personal correspondence).

Students were enrolled in the CHI/Kaplan Surgical Technology Program year after year, but they were purposefully not being told by Kaplan and their personnel that in all likelihood externship sites, required for the SurgTech program would not be available.  If verified from further investigations the practices amounts to concealment fraud, overt misrepresentation and possible theft of Title IV funds.  CHI/Kaplan upper management, well aware of the lack of externship sites needed to permit students to complete their program, continued for years to recruit and enroll students in a program whose tuition costs approached nearly $24 thousand a year. When the fraud was detected, the college then engaged in illegal practices designed to reduce the number of enrollees by forcing students out on technicalities.  Hundreds of students were unable to finish their programs and had their personal lives and credit history ruined.

 Our ‘source’ had observed how many students were basically thrown into an abyss of emotional suffering and distress due to the actions of CHI/Kaplan and the SurgTech program. S/he saw how many working class minority students suffered garnishment of their wages or shouldered monthly payments beyond their means, while others faced attachment by way of liens on their properties, if they had any.  The students at CHI/Kaplan bore the brunt of economic hardship from which many of them will never emerge.

Kaplan University is owned by The Washington Post, which derives 58% of its entire revenue stream from Kaplan and its various subsidiaries and is well aware of the issues.

Essentially, Kaplan University uses Title IV funds from the government for student loans to pay for tuition — 90% of their revenues flow from Title IV. Kaplan then over-enrolled students in a Surgical Tech program in Pennsylvania during 1996-2007. Surgical Technology is a certificate program that required an extensive externship in order to finish.  Kaplan officials knew there were inadequate externships for the students when they had enrolled.   They used unethical if not illegal methods for weaning out an over-enrolled student population.  One method, was to ’FedX’ students out to different states to complete the externships.  Hundreds of students were negatively impacted.

As my source alleges:

“My accusation is that the school knowingly, over a ten year period, misled by omission, prospective students, their accrediting body,  and the U.S. Dept. of Ed causing the government to approve approximately $24,000,000 ($24,000.00 times 1,000 students) of Title IV student loans based upon false data” (e-mail correspondence).

According to our source, 1,140 names of students that were ‘dropped’ and 25% of those on the list defaulted on their loans.  The other 75% were simply ‘deliquesced’, meaning they vanished from the roles.

The Medical Surgical Technician (MST) program at CHI/Kaplan, in Broomall, Pennsylvania had been a very successful program at CHI (as the school was known) as early as the 1990’s.  The stated purpose of the program at its inception was to train surgical technicians to work in surgical assisting roles alongside doctors and nurses at hospitals or within surgical units. The ‘program’ consisted of a series of difficult and rigorous four terms of study. There would be three didactic classroom terms along with one 500 hour term called an ‘externship’ that was to be taken and completed at a surgical facility or at a hospital.  The internship was mandatory and designed for students so they might get a practical apprenticeship with actual hands-on work, eventually leading them to complete the total four term program and receive their certificates as an MST from CHI/Kaplan.

The program was certified by a national Medical Surgical Technician (MST) organization but in order to graduate and take the certification examination the student had to complete all four terms at CHI/Kaplan.  Successful completion of all four terms, especially the final and fourth term, the externship, all led to a successful candidate receiving their MST certificate. 

SurgTech was one of CHI/Kaplan’s most profitable programs.  Kaplan raked in millions of dollars from the program. They signed up mostly minority female students and immediately got them all set up with Title IV funding.  However, Kaplan had created a dilemma.  They signed up more students than their program could serve and continued to enroll students even in light of the lack of internship opportunities. 

To cover up the enrollment fraud perpetrated by Kaplan, what CHI/Kaplan did was to start ‘warehousing’ students — basically telling them to go home (don’t call us, we’ll call you) or simply avoiding their phone calls and questions until their externships came up. Of course, Kaplan could not say this because then they would be forced to stop the program and loose the Title IV.  Instead, students were simply ‘vanished’ off the enrollment rolls.  They went missing and were listed as ‘drops’ by the college.  This action served the purpose of shielding Kaplan from federal investigation without damming the revenue stream and the fiduciary responsibility of the corporation to its shareholders and investors. 

The fraud occurred in Philadelphia where hundreds of Philadelphia area minority students (90% of the students in the CHI/Kaplan SurgTech program were minority African-American and Hispanic women).  They were induced by Kaplan recruiters to believe entering the medical profession and obtaining an MST license might be their ticket to a liveable wage and dignified career. Unfortunately and of course unbeknownst to the students, CHI/Kaplan had intentionally and deliberately placed students in a program the school knew they could never hope to complete.  Even though top management was aware of the situation since the inception of the program, they continued to schedule both day and evening classes year after year, knowing there were no externships.  The bulk of students 85-90% of the time had no legal or financial resources at all. These students were desperate and were attending what they thought was a bonafide college for purposes of improving their lives. Many working class students worked graveyard shifts or long hours during the day.  Some worked two or more jobs to stay current with payments just to afford the cost of the program.  Yet instead of the career and MST certificate they had hoped for they ended up in a quicksand of debt.

CHI/Kaplan’s attempt to curb or reduce enrollment in a program they knew had no sufficient externship sites went even further.  Many students, for example, would inquire about the SurgTech program and then be led down another road by ‘advisors’ so that the enrollment figures would not increase and Title IV funds would still be received by Kaplan. An example is in 2005 when CHI/Kaplan attempted to cut back on the number of spiraling enrollments in the SurgTech program by twisting students’ arms in an attempt to get them to go into other fields such as plumbing or dental assistance technician programs (e-mail correspondence).

In 2007 the Department of Education (DOE) began looking into the allegations of Title IV fraud on behalf of CHI/Kaplan.  Suddenly, in late 2008, SurgeTech program curiously disappeared from CHI/Kaplan’s degree offerings even though it was one of the college’s most popular programs.  At the time the program vanished we now know state accrediting agencies were threatening to withdraw accreditation.

Questions still remain, however.  Why would Kaplan/CHI pull one of their most profitable courses? Could it be the Department of Education (DOE), eighteen months into investigating the school, was uncovering a lot of criminal activity Kaplan could not explain away?  CHI/Kaplan went from offering the program seven times a year to completely dropping it overnight.

It seems that Kaplan knowingly, over a ten year period, misled by omission, prospective students, their accrediting body,  and  the U.S. Dept. of Ed causing the government to approve tens of millions of dollars of Title IV student loans for a program that students would be unable to finish.  All this based upon false data.

Meanwhile Kaplan, and their investors and shareholders skated to the bank on government subsidies and the Washington Post conveniently concealed the story. 

So, the newspaper that famously broke the Watergate scandal apparently now had little regard for the public it once claimed to have served.  When the then owner of the Washington Post, Katherine Graham, was briefed early on regarding the proposed purchase of the proprietary schools her comment was, “I don’t give a shit about it but if you think it will be profitable, let’s do it”!  Apparently, as we will see, the managing executive of Kaplan Higher Education proprietary school division, Jeff Conlan, took her statement literally.

What can only be cited as a criminal conspiracy and eventual fraud by omission was known by almost everyone at CHI/Kaplan at the time, from the representatives of the CHI/Kaplan program to the Chief Operating Officer for the CHI/Kaplan SurgTech program.  Senior management knew about the fraud but despite this fact, they chose to run the program anyway.  Spurred on by investor’s need for profit Wall Street once again trumped main-street.  The insatiable desire for profits for investors was put ahead of the actual needs of the students the corporation purported to serve.  It was all done in the name of education and targeted at poor, minority students looking to better their lives.

Some of those at Kaplan who should have known at the time would include Charlene Godown, ‘Intern’ Coordinator, Campus President Linda Hartman, Registration Vice President, Marty Ehrenberg,  Regional Vice-President, Mark Ferguson and Jeff Conlon, President of Kaplan Higher Education Corporation (KHEC).

The original CHI Institute, Franklin Mills, was founded in 1981 at the same facility where it operates today – CHI, Broomall. The school expanded its curriculum to include a variety of areas of study to keep up with ‘industry’ demands. In 1985, CHI Institute was recognized by the Pennsylvania State Board of Education to grant an Associate in Specialized Technology (AST) degree.

The CHI Surgical Technology program was brought into the CHI-Broomall school in its entirety sometime in 1997. The ‘educational product’ was always popular and it sold well. The program ran forty-six weeks during the day and seventy six weeks if the student elected to take courses at night. There were three terms on campus and the five hundred hour externship which had to be performed in a bona fide setting, such as an operating room of some sort.  During the externship the student also had to have been involved in a minimum number of procedures (80), in five or six different areas of specialization. 

CHI was purchased by Quest Education in 1998 and then acquired by Kaplan University in 2000. The Washington Post is the parent company of Kaplan. The number of students enrolled in the SurgTech MST program was 1,152 students between 1998 and 2006.

The 2008 10K from WPO indicates a start date of January of 2008 for this investigation but it actually started sooner than that.  In a blistering November 6, 2006 letter sent by Michael Dotts, then the Board Administrator of the Division of Private Licensed Schools and the Bureau of Post Secondary Institution, to Mr. Jim Lincke of CHI/Kaplan Broomall, it is obvious problems with the CHI/Kaplan Surge Tech program was detected years before the Washington Post indicated it had.  The letter states: “On October 31, 2006, the Division of Private Licensed Schools received information indicating that the school has been having trouble placing students in externship sites.  The information stated that students had been put on leaves of absence because the school was unable to place them in externship opportunities in a timely fashion.  The Surgical Technology Program was specifically mentioned as an area of concern.”

So it is clear to us that the Department of Education began looking into the allegations of Title IV fraud at CHI/Kaplan in late 2006, early 2007.  This serves as indisputable proof that WPO knew of the problems with the SurgTech program far longer than they wished to admit.  But it seems this might not have been known by investors at the appropriate time.

Will students deliquesced by the program be eventually compensated, afforded the opportunity for legal redress and made whole, either by a class action suit or other legal remedies?  Or will the Washington Post prove to be too powerful an adversary for the selected leaders in government and the issue involving CHI/Kaplan simply vanish down a rat hole, much like the students?  Will the statute of limitations for the students seeking legal recourse run out?

The answer to these questions is that presently we do not know.  What we do know is that without public knowledge of these events the entire problem may likely be swept under the proverbial rug while the media focuses on ‘regulatory’ requirements instead of the fraudulent day to day business plans employed by these for-profit corporate behemoths like Kaplan University. 

The Washington Post Company is a diversified education and media company.  With Kaplan supplying 58% of their profits one thing we can be assured of is that the debate over public education will not get a fair hearing in the Washington Post, nor Newsweek, nor Cable One, nor Slate –  all but some of the few media outlets owned by the Post.  The corporation’s business plan rests on the pillar of education privatization throughout the world (Kaplan roams the geography in 30 countries).  Now with Kaplan poised to partner with The California Community College System, the corporate camel is getting its nose sunder the public institutional tent.  Like private pike in a public lake Kaplan, and similar proprietary colleges, threaten to devour the educational commons through corporatization at a time when the public commons is economically vulnerable.

Education is a public right for which people have fought for more than five hundred years.  Organized crime in the name of higher education must be prosecuted and when it comes to the predatory for-profit colleges and universities, there is no better place to start than The Washington Post (WPO) and their subsidiary, Kaplan University.