Under Nondisclosure Agreements, Companies Like the Washington Post Will Continue to Silence Whistleblowers
Sunday, 22 April 2012 08:35
By Danny Weil, Truthout | News Analysis
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By its own admission, The Washington Post Company (WaPo) has been the subject of 16 whistleblower lawsuits claiming fraudulent business practices at their subsidiary Kaplan University over the past several years.

Over the past 12 months, WaPo has settled at least three of these lawsuits, as well as a claim that they misled students in North Carolina at a dental school. In each case, WaPo has admitted to no wrongdoing, but has provided a financial settlement agreement containing a "nondisclosure" agreement muzzling claimants into silence.

In July 2011, WaPo settled a claim with the Department of Justice (DOJ) brought by whistleblower David Goodstein for $1.6 million regarding alleged serious misconduct at the CHI surgical technology program in Broomall, Pennsylvania.

In March 2012, WaPo settled false claim suits brought by Victoria G. Gatsiopoulos and Dolores A. Howland. The legal suits alleged fraudulent business practices at Kaplan's ICM Campus in Pittsburgh, Pennsylvania. Kaplan unsuccessfully attempted to get the suit dismissed in September 2011. These two claims were settled for an undisclosed amount and included a nondisclosure clause.

In November 2011, Kaplan College was exposed by a local TV station for misleading students about the accreditation status of a dental assisting program in Charlotte, North Carolina. Even though Kaplan denied any wrongdoing, students were provided with a settlement estimated at $5 million in exchange for signing a nondisclosure agreement.

Because there is no publicly available information about ten of the sixteen whistleblower suits admitted to by Kaplan, it is reasonable to speculate that some of these suits were also settled with nondisclosure agreements - which would explain why nothing is known about them. And herein lays the problem - corporate secrecy through the use of nondisclosure agreements.

What Is a Nondisclosure Agreement?

In cases like those brought against Kaplan Inc. and its umbrella corporation, The Washington Post, legal settlements by defendants usually require a nondisclosure agreement.

A nondisclosure agreement (NDA) can be entered into by parties to a lawsuit with respect to the disclosure of certain proprietary and confidential information ("Confidential Information"). It requires a legal document be drafted with the terms and conditions for each particular case spelled out in specificity and entirety.

When it comes to legal claims against corporations, NDAs are drafted by corporate lawyers so that the plaintiff typically agrees to forgo any future litigation (forfeiture agreement) against the defendant; the defendant agrees to pay the plaintiff some specified monetary amount. In these cases, there is usually a "non-disparagement agreement" included, prohibiting any of the parties to the settlement from denigrating each other either privately or in public. NDA settlements can also go much further and spell out and require the defendant to change a company policy or perhaps stop some form of nefarious or negligent behavior. They can also include clauses that prohibit any discussion of the settlement agreement itself!

Often, the exact terms of settlement agreements (NDAs) are purposely not publicly disclosed. This is particularly true in high-profile cases where the defendant (a corporation in the case of The Washington Post) is seeking to protect its public reputation. In fact, it is the norm for large companies to settle with plaintiffs for an undisclosed amount and then immediately issue a statement denying any culpability, stating the company did nothing wrong.

Settlement agreements that contain nondisclosure agreements often involve confidentiality agreements that assure the public will never know many, if any, of the facts of a given case. They do this, of course, to avoid the perceived humiliation, embarrassment and often adverse economic and political consequences of a public trial.

In the matter of corporate Kaplan University and The Washington Post, details of any NDA would of necessity include the grubby details of Kaplan University's allegedly fraudulent practices. The NDAs that Kaplan demands not only allow the corporation to wiggle out of disclosing any squalid business practices, but also allow Kaplan/Post attorneys to negotiate their own presumably high fees under the cover of nondisclosure.

It appears the Post's legal strategy in matters like these is to drag lawsuits through the court system and attempt to get them dismissed by judges prior to trial. If the lawsuits survive motions to dismiss or summary judgment motions, WaPo then throws up its hands, states it has done nothing wrong and hurriedly settles these suits with a mandatory nondisclosure agreement in an effort to avoid potentially embarrassing or incriminating disclosures related to questionable business practices at Kaplan University.

In the case of one whistleblower, former Kaplan legal studies Dean Ben Wilcox, WaPo was able to get the DOJ to prosecute Wilcox for allegedly making threats; less than two weeks after Wilcox was sentenced to prison, WaPo attempted to get his false claims lawsuit dismissed. They were unsuccessful and the case, US v. Wilcox, 08cr256, US District Court, Northern Division of Illinois, is now on appeal.

Why Do Persons or Corporations Demand Nondisclosure Agreements for Settlement of Legal Claims?

Legal suits are settled on a daily basis in which such things as sexual molestation by priests, or malpractice by doctors, or the existence of dangerous and defective products are concealed from the public. The plaintiff or claimant in such legal proceedings is often given a choice between accepting compensation and keeping the matter secret or proceeding to trial. Sometimes victims, such as those who have suffered sexual harassment or assault, prefer to have the incidents charged remain private. They are more than happy to keep the charges and settlement details confidential. This is logical. Many other claimants cannot afford the cost of trial and, thus, agree to these agreements under the threat of economic duress.

Questions arise when a defendant is guilty of a charge or charges levied by a claimant, and as a defendant, they demand a nondisclosure clause for any settlement agreement. In this situation, we can ask if sound social and public policy should require that other present or future victims be entitled to know what transpired in the case. In a situation like this, would prohibiting disclosure be metaphorically tantamount to cover-up of a crime scene?

There are many reasons that large corporations or defendants such as The Washington Post/Kaplan, Inc. wish to settle cases with strong "confidentiality agreements" folded into "nondisclosure agreements" equipped with "non-disparagement agreements" that serve to muzzle and silence plaintiffs. Acknowledging malfeasance is one; it's simply bad for business and the company's reputation to admit to criminal, negligent or tortuous behavior. Companies and powerful defendants also want to avoid lengthy public court hearings.

There is an additional reason that many corporations like The Washington Post favor nondisclosure agreements. The amount of money they settle for often serves as a barometer for the level of malfeasance in which they've engaged. The companies know this and they want to ensure that these cases do not inspire other would-be plaintiffs to file similar lawsuits.

The Use of NDAs in Major Litigation Involving the Public Interest

As Mother Jones reported in their coverage of Herman Cain and his allegedly inappropriate sexual behavior, the National Restaurant Association (NRA) reportedly paid off at least two women, who complained about the former presidential contestant's alleged sexual harassment. In exchange for the cash settlement, the women signed confidentiality agreements promising not to talk about their allegations publicly. Details of many of the women's charges, as well as the amounts they were paid to settle, have not been made public as a result of the nondisclosure agreements.

Then, there is the lesser-known case of Massey Energy, which was purchased by Alpha Natural Resources (ANR) Inc. for $7.1 billion last June. Before the sale of the company, a 2010 explosion at Massey's Upper Big Branch mine in West Virginia killed 29 miners. The tragedy was the worst US mining accident in four decades and had many commentators pointing the finger at horrific workplace conditions at Massey. ANR settled 19 remaining Massey wrongful-death lawsuits with the families of coal miners killed in a 2010 explosion. The suits were settled by the company within days of mediation. Terms of the negotiated settlement: no disclosure of the amount paid; no disclosure of the terms of the contract; no disclosure of any matters pertaining to the litigation in question.

Not well known is the fact that nondisclosure agreements are often used by large corporations in an attempt to muscle and intimidate plaintiffs from speaking to law enforcement or government investigators. Corporations frequently have to settle legal cases alleging fraudulent business practices and they like to leave the impression with claimants that nondisclosure agreements also apply to law enforcement or government conducting investigations.

Recently, all of this became clear in Arizona where the Bank of America Corporation is alleged to be holding up an investigation of its loan modification practices by negotiating settlements with borrowers, who must agree to a nondisclosure clause keeping the terms of the settlements secret.

When Bank of America borrowers signed settlement agreements containing nondisclosure clauses, many believed they could not speak with anyone concerning the loan modifications and settlement. As part of the nondisclosure agreement, plaintiffs also promised not to criticize the bank in exchange for receiving cash payments and loan relief (the pesky non-disparagement agreement).

In response to outrage, the Arizona attorney general's (AG) office intervened in the case, asking a court to block aspects of the Bank of America settlements that require nondisclosure. The AG forced the bank to enter into the court record all the nondisclosure agreements the parties signed, so the court might review them. A state judge then ordered Bank of America to notify those parties who signed confidentiality and non-disparagement clauses that they do not need to abide by them when speaking to the AG.

Nondisclosure Agreements Pose Problems for Sound Public Policy and the Public's Right to Know

As noted, nondisclosure agreements usually serve the interests of powerful corporations or influential individual defendants. In the Cain allegations of sexual misbehavior, the nondisclosure agreements prevented the public from knowing more about a presidential candidate; in the Massey miner's deaths, the nondisclosure clauses served to cover up any malfeasance as it might have pertained to work conditions at the mine; and in the case of Bank America, they were used to silence borrowers about loan agreements and modifications that the corporation did not wish to make public.

The frequent use of nondisclosure agreements by corporations, specifically in this case by WaPo to conceal misconduct at Kaplan University, is incompatible with freedom of the press, the first amendment, social and public policy and the public's right to know, not to mention the Post's journalistic ethics. Newspapers are supposed to be about transparency and disclosing information to readers so they can participate wisely in a democracy. The failure of the Post to disclose details of NDAs with whistleblowers is also incompatible with the transparency expected by shareholders in a publicly traded company.

Further compounding the ethical conflict created for the Post newspaper by Kaplan University is the paper's dependence on revenue from Kaplan (62 percent). Despite having a large education journalism staff, the Post chooses to publish virtually nothing about Kaplan or other for-profit colleges. Nondisclosure by WaPo occurs through censorship as well as through signed court documents.

All of this is problematic: after all, we as the public will pay the millions of dollars involved in the settlement of the Kaplan/Washington Post cases, to cover the costs of the suit, pay the fees of the lawyers and cover the settlement itself. We pay by subsidizing Kaplan with Title IV monies. We subsidize Kaplan's profits with federal dollars, and when they engage in alleged malfeasance subject to legal settlement, we, operating as financier for the company, pay for their attorneys and all costs involved in the suits; then, we are not allowed to see the terms of a legal settlement. This runs counter to sound public and social policy. The public should expect and democracy should require full disclosure and complete transparency regarding any case involving federal taxpayer monies. This is the only way an informed populace can ensure that sensible public policy is adopted that is in the best interest of the public.

Courts Have an Obligation to Protect the Public

When it comes to false claims suits like those filed by the government against Kaplan University and its parent corporation The Washington Post, the DOJ and the Department of Education (DOE) have a public duty to protect citizens from predatory violations of DOE guidelines. This obligation falls under qui tam legislation, (the False Claims Act) that harkens back to the Civil War.

The problem is when prosecutions under the False Claims Act, as with so much else involving the government, are broken. Whatever its original purpose, the False Claim Act has now become a legal process that appears to investigate and punish bad actors; in fact, it too often allows the guilty corporations to simply pay a fine and then pen a secret settlement to avoid prosecution. It would be as if bank robbers, after the court determined how much was stolen, who it belonged to and what their motive was, were simply given a minor fine, asked to sign a document, admonished by the court to conduct themselves legally in the future and then allowed to continue business as usual. This is precisely what happened with the University of Phoenix (UOP) and its parent company, the Apollo Group.

In 2009, UOP agreed to pay $78.5 million to settle a false claims suit that had dragged on for more than six years. The lawsuit, brought by two enrollment counselors at UOP, charged that the university had intentionally and knowingly violated federal law under the "Higher Education Act" by awarding incentive pay to recruiters based on students enrolling in the university or simply securing financial aid. This settlement came on the heels of a $9 million settlement payment by UOP in 2004. Both settlements utilized NDAs, and, other than the amount paid, the settlements remains secret. For large corporations like Apollo, settlement payments with ironclad NDAs are simply the cost of doing business.

Nancy G. Krop, the lawyer who obtained the settlement for the two former counselors, speaking to The New York Times after the settlement, stated:

"At the University of Phoenix, they got billions of dollars in federal aid. So even paying $78 million to settle a case, they end up with a lot of money."

But there is more: The CEO of the Apollo Group at the time of the 2009 secret settlement was Todd Nelson. Mr. Nelson left Apollo and is now the CEO for the second-largest for-profit college and university chain, the Educational Management Corporation (EDMC). EDMC is currently being sued under the False Claims Act by the DOJ along with eleven states. This false claims suit is based on allegations that the firm falsely reported to government officials that it was not basing recruiter salaries on incentives. Sound familiar?

Summary

I spoke with an attorney involved in one such lawsuit against another major for-profit university regarding the questionable use of NDAs in settlements with for-profit colleges. The attorney, who prefers to remain anonymous, told me:

"The University of Phoenix case involved an agreement by the plaintiff lawyers not to file into the court record any of the deposition testimony and other evidence of fraud obtained in the lawsuit. I think the DOJ should never have allowed such an arrangement. I think those lawyers should have never entered in such an agreement. It's Government money!! Any such agreements are absolutely unethical. I have always felt that there should be hearings in Congress over the University of Phoenix settlement. It amounts to misconduct!!" [Private email, April 11, 2012.]

The use of NDAs in high-profile litigation is unethical and flies in face of social policy and the public interest. The case of EDMC and CEO Todd Nelson is indicative of what happens when corporations are allowed to pay settlements under cover of NDAs. Nelson is now being named once again in a legal suit that alleges the same misconduct levied against the Apollo Group. This time, the government has alleged that EDMC, under Todd Nelson's tutelage, has stolen billions of dollars in taxpayer funds. Obviously, if citizens are not given the benefit of full disclosure, then social policy and the public interest cannot be protected and preserved and serial crimes like those alleged against EDMC will continue.

WaPo's actions in the case of Kaplan University reinforce the perception that they have something to hide, that Kaplan University is little more than a scam swaddled in secrecy. Evidently, helping the public to understand educational policy in the interest of assuring quality education is not as important to The Washington Post as covering up past alleged illegal activity with nondisclosure agreements in the interest of secrecy and maximizing profits.

All of this is troubling at a time when these for-profit colleges and universities are claiming they can do a better job educating students at a lower cost than can public institutions. Colleges and universities that work for the public interest don't conceal misconduct with nondisclosure agreements, and newspapers dedicated to informing the public don't suppress coverage of such transgressions.

The practice of concealing wrongdoing through the use of nondisclosure settlement agreements demands further legal deliberation. Perhaps we need to rethink and promote a change in what has become an acceptable legal tactic and custom. Secret settlements may protect the innocent at times, but as illuminated by the case of the Washington Post/Kaplan, Inc., the Apollo Group and EDMC: when used by corporate America or deep-pocketed defendants, they have the propensity to serve and protect the guilty or those who have something to hide.

This is wrong and contrary to public policy. There is nothing in the law that says that NDAs must be approved by courts. Courts may exercise their prerogative to consider multiple issues when deciding to approve or disapprove out-of-court legal settlements. Given the gravity of the social policy issues involved in settling false claim cases, a sound legal argument can be made that if a court believes that a settlement should not be the subject of nondisclosure due to the fact that there may be some compelling public interest involved, the court would do well to exercise its prerogative by balancing the competing interests of the parties and, if the court believes it is in the public interest, to refuse requests to approve NDAs.

There are some in the legal profession that would argue that if courts did not approve NDAs such as those used by Kaplan, UOP or EDMC, judicial economy would be threatened and plaintiffs would be required to engage in costly lawsuits. But the case can be made that, in the interest of sound public policy, full transparency, full disclosure and the public's right to know when it comes to covering up alleged malfeasance by corporations such as the Post, courts would better serve the interests of democracy if they were more vigilant in balancing competing interests and exercised their prerogative in refusing to sign off on NDAs.

DANNY WEIL

Danny Weil is a writer for Project Censored and Daily Censored. He received the Project Censored "Most Censored" News Stories of 2009-10 award for his article: "Neoliberalism, Charter Schools and the Chicago Model / Obama and Duncan's Education Policy: Like Bush's, Only Worse," published by Counterpunch, August 24, 2009. Dr. Weil has published more than seven books on education in the past 20 years. You can also read much more about the for-profit, predatory colleges in his writings found at Counterpunch.com, Dailycensored.com, dissidentvoice.com and Project Censored.com where he has covered the issue of the privatization of education for years. He can be reached at weilunion@aol.com. His new book, an encyclopedia on charter schools, entitled: "Charter School Movement: History, Politics, Policies, Economics and Effectiveness," 641 pages, was published in August of 2009 by Grey House Publishing, New York, and provides a scathing look at the privatization of education through charter schools.

Kaplan sets the record straight
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During the past two years, some policy makers have debated the proper role of for-profit colleges and universities in educating working class, adult students for better careers. Politicians, traditional universities, Wall Street “short-sellers,” consumer groups, and others have put increased media attention on the sector and the resulting torrent of claims and selective data has at times distorted the facts.

Here we present answers to key questions, so that you’re armed with the real facts about Kaplan.

What are the facts behind recent reports about Kaplan College's dental assistant training program in North Carolina?

Kaplan Higher Education offers dental assistant training programs at 33 campuses across the country, including Charlotte, NC. Almost 12,000 graduates across the U.S. have successfully earned their Dental Assistant Diploma with us.

The rules and requirements for working as a dental assistant differ from state to state. North Carolina classifies dental assistants into two categories—Dental Assistants-Level 1 (“DA1”) and Dental Assistants-Level 2 (“DA2”)—which determine what types of duties a dental assistant can perform and whether a dentist’s supervision is required in the performance of those procedures. Under North Carolina rules, those who wish to qualify as a DA2 need to either complete 3,000 work hours as a DA1 at a dental office; train in and graduate from a DA2 training program accredited by the American Dental Association’s Commission on Dental Accreditation (CODA); or pass the Dental Assisting National Board exam after completing an additional 3,500 work hours as a DA1.

Our dental assistant diploma program at the Kaplan College-Charlotte campus began in 2010. The 960-hour program—which is based on curriculum used to train dental assistants at other Kaplan programs in other states, including four CODA-accredited campuses—educates students to work at the North Carolina-defined DA2 level. Each individual program choosing to be CODA-accredited needs its own accreditation. In this situation, the accreditor (CODA) requires us to have a graduating class before we could be accredited. This is not atypical. Thus, all of our students signed a disclosure that clearly states they would qualify only to work as a DA1 in North Carolina, despite the fact they took course work associated with a DA2 level of competency.

We recognize however that some of our dental assistant students misunderstood the accreditation process. So, we have taken some extraordinary steps to help them move successfully forward: (1) We are refunding the tuition for all our dental assistant program graduates and current students at the Charlotte campus; (2) They will receive a financial supplement to help bridge any potential gap in what they might earn as a DA1 versus a DA2, and (3) They will receive expanded career services support to help them secure jobs in the field.

In December 2011, we requested that the North Carolina Community College System (NCCCS) withdraw our Dental Assistant program license because we halted our new student enrollments. Without new enrollments, we are not eligible to pursue programmatic accreditation. We will reassess our plans for the Dental Assistant program after current students have graduated.

Withdrawing the license for this program has no effect on the campus’ overall accreditation or other current programs.

What are the facts behind legal claims against Kaplan referenced in media reports?

Some media accounts have showcased old complaints made against the company, filed largely by several serial plaintiffs who have labeled themselves as “whistleblowers” and tried, without success, to shop their legal claims in different venues. These individuals stand to gain a financial windfall if their lawsuits are successful. It is disturbing to see these allegations—and that is all they are—presented as fact.

Here are the facts: no judge has ever ruled in favor of the plaintiffs on any of these claims, which have been pending for years. Of 16 complaints filed, 14 have been dismissed or withdrawn in their entirety. As for the remaining cases, we continue to believe they are without merit.

Further, one of these so-called “whistleblowers” was found guilty by a federal jury in December 2010 on six accounts of cybercrimes (computer hacking and threats) he committed against Kaplan, its students, and its employees. He has been sentenced to a prison term.

What specific steps did Kaplan take to resolve the problems identified by the GAO Report released in August 2010?

In the summer of 2010, the U.S. Government Accountability Office (GAO) presented a report that described unflattering admissions practices at 15 different schools, 2 of which were Kaplan campuses. These incidents involved employees acting completely outside of our procedures and training. We were embarrassed and disturbed. Upon learning of these allegations, Kaplan immediately began its own investigation. Further, we expanded our already robust compliance systems. Kaplan began a pilot third-party verification program for every student enrollment to ensure that each student has been provided with a complete and accurate picture of his or her financial and academic rights and responsibilities and is satisfied with his or her program choice. We initiated our own third-party “secret shopper” program to help ensure any inappropriate practices are quickly identified and fixed. We also implemented a new system of determining our admissions employees’ performance and rewards, which eliminated any consideration of the number of enrollments.

We set up additional reporting mechanisms, so an employee who believes inappropriate behavior is taking place has multiple ways to immediately report it. We have re-doubled our training efforts and are re-training employees. We have also terminated employees who were not compliant with our accepted business practices, Code of Conduct, and companywide ethical standards.

We believe that these measures have been, and will continue to be, effective in preventing the types of incidents described in the GAO report.

On a related note, in December 2010, it was widely reported that the GAO’s original report contained a number of substantive errors. In fact, most of the admissions interactions described in the August 2010 report were subsequently revised by the GAO. These revisions involved clarifications or changes that lessened, or even eliminated, the implication of unseemly practices reported in the original GAO report. The amount and degree of these revisions is not common for most GAO reports. The situation has led to an investigation of the GAO by a Congressional committee, and also is the subject of a lawsuit filed by some schools that believe they were inaccurately portrayed in the original GAO report.

What's the truth about press allegations that Kaplan signs students up for classes without their knowledge and then bills them for classes they never take?

These allegations are baseless. Among the services that Kaplan formerly offered its continuing students was called “courtesy registration,” by which students who were in danger of missing a registration cut-off date for a coming term were pre-registered by their academic advisors for the next course or courses prescribed within their academic major. This “courtesy registration” could not result in a student being charged a single penny without the student’s consent. That’s because our students are never charged tuition for a course unless and until they actually join and participate in the class once the term has begun.
In any event, since mid-2009, Kaplan’s policies have required advance permission from students to pre-register them for classes. But it has always been Kaplan’s policy and practice that students cannot be charged for any class they do not attend and in which they do not participate.

Whistleblower Exposes Educational Fraud at Washington Post Owned Kaplan College
Validated Independent News
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Whistleblower David Goodstein former Director of Education for the Kaplan owned CHI Institute in Broomall, PA was intimately involved in 2006 when an investigation by the State of Pennsylvania into the Medical Surgical Technician program began. When it was suggested by management he bribe local hospital CFO’s with $5,000 or $10,000 dollar gifts to find extern sites for our students he pointed out that to hospitals charging $125 for an aspirin $5k or $10k wasn’t very much money. Perhaps a better solution was to just tell the truth. Kaplan decided he didn’t really grasp the gravity of the situation and the next day they escorted him out the door with my carton of personal belongings.

Kaplan Higher Education Corp, a wholly owned subsidiary of the Washington Post purchased the CHI Institute in Broomall, PA along with many other schools during its expansion phase during the early part of this decade. The Medical Surgical Technician program, although very popular and profitable, had difficulty finding a sufficient number of extern sites from its very beginning.

Students, mostly young minority women, signed up for an $18,000, 50 week program of study to become a Medical Surgical Technician. It was an intense four term program that trained students to assist in the operating room during surgical procedures. The required fourth term was 500 hours as an extern in a bona-fide hospital operating room environment. After completing the program the students could sit for a national certification exam and then likely find employment at excellent salaries in hospitals and out-patient surgical centers. Over 90% of the students in the program applied for federal Title IV loans to finance the cost of tuition and these loans, through private lenders, were guaranteed by the federal government. Many students needed to obtained co-signers to qualify for the loans and had intended to repay the loans when gainfully employed in their chosen field after graduation.

After completing the first three terms students were told that there were no extern sites available and to go home and wait until the school called them. They went home and waited, weeks, months, years and some are still waiting. In the meanwhile their student loans for the first three courses became due after six months and they were saddled with debts of more than $13,000 and nothing to show for it but a bunch of non-transferable credits that are worthless. Most are not able or willing to repay the loans and have defaulted. These defaulted loans have been or will be repaid by the Education Department with tax dollars paid by you and me. Kaplan, however, gets to keep every cent of the tuition charged whether the students finish the program or not. attend.

Title: So You Want to Blow Your Whistle: Confessions of a Whistle Blower
Source: Daily Censored, December 6, 2010
Author: David Goodstein