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Case 1:09-cv-20756-PAS Document 183 Entered on FLSD Docket 10/06/2009 Page 1 of 5

CASE NO. 09-CV-20756-SEITZ/O==SULLIVAN

UNITED STATES DISTRICT COURT


SOUTHERN DISTRICT OF FLORIDA

CASE NO.: 09-20756-CIV-SEITZ/O==SULLIVAN

UNITED STATES OF AMERICA,


ex rel.CARLOS URQUILLA-DIAZ,
et al.,

Plaintiffs,

v.

KAPLAN UNIVERSITY et al.,

Defendants.

______________________________________/

AGREED MOTION FOR LEAVE TO FILE CORRECTED RESPONSE


TO MOTION TO DISMISS

Relators Jude Gillespie, Carlos Urquilla-Diaz, and Ben Wilcox, by their respective attorneys,

hereby respectfully file this Agreed Motion for Leave to File Corrected Response to Motion to

Dismiss Second Amended Complaint. The grounds for this motion are as follows.

As ordered by the Court, Relators Gillespie, Diaz and Wilcox filed their Response to the

Kaplan Defendants’ Motion to Dismiss Second Amended Complaint on October 5, 2009. Due to

some type of error in the PDF file conversion, the Response filed with the Court contained symbols

substituted in place of apostrophes and quotation marks that had been in the original version of the

Response. Undersigned counsel did not realize this technical error had occurred in the file

conversion until today when a copy of the filed Response was printed. Since the inclusion of the

1
Case 1:09-cv-20756-PAS Document 183 Entered on FLSD Docket 10/06/2009 Page 2 of 5

CASE NO. 09-CV-20756-SEITZ/O==SULLIVAN

symbols makes the Response difficult to read, the Relators seek leave of Court to file a corrected

version of the Response – a copy of which is attached hereto. Counsel for the Kaplan Defendants

have been contacted and advised that they have no objection to the relief requested herein. The

Relators are filling this Motion because the Clerk of the Court advised undersigned that a Notice of

Striking the Response filed on October 5, 2009 would have to be submitted with the corrected

Response. Undersigned counsel believes that such a notice would render the corrected Response

untimely in that it would be filed one day late. Accordingly, in an abundance of caution, the Relators

request leave of Court to file the corrected Response and further request that the Court deem the

corrected Response timely filed.

WHEREFORE, Relators Jude Gillespie, Carlos Urquilla-Diaz, and Ben Wilcox, by their

respective attorneys, hereby respectfully request that this Agreed Motion for Leave to File Corrected

Response to Motion to Dismiss be granted.

Respectfully submitted,

s/ Kimberly L. Boldt
Kimberly L. Boldt, Esq.
Florida Bar No. 957399
kimberly@abbrclaw.com
Alters, Boldt, Brown, Rash & Culmo, P.A.
4141 Northeast 2nd Avenue, Suite 201
Miami, Florida 33137
Telephone (305) 571-8550
Facsimile (305) 571-8558
Case 1:09-cv-20756-PAS Document 183 Entered on FLSD Docket 10/06/2009 Page 3 of 5

CASE NO. 09-CV-20756-SEITZ/O==SULLIVAN

UNITED STATES DISTRICT COURT


SOUTHERN DISTRICT OF FLORIDA

CASE NO.: 09-20756-CIV-SEITZ/O==SULLIVAN

UNITED STATES OF AMERICA,


ex rel.CARLOS URQUILLA-DIAZ,
et al.,

Plaintiffs,

v.

KAPLAN UNIVERSITY et al,

Defendants.

__________________________________/

CERTIFICATE OF SERVICE

I hereby certify that on _____________, I electronically filed the foregoing document with
the Clerk of the Court using CM/ECF. I also certify that the foregoing document is being served this
day on all counsel of record or pro se parties identified on the attached Service List in the manner
specified, either via transmission of Notices of Electronic Filing generated by CM/ECF or in some
other authorized manner for those counsel or parties who are not authorized to receive electronically
Notices of Electronic Filing.

s/ Kimberly L. Boldt

Kimberly L. Boldt, Esq.


Florida Bar No. 957399
kim@abbrclaw.com
Case 1:09-cv-20756-PAS Document 183 Entered on FLSD Docket 10/06/2009 Page 4 of 5

CASE NO. 09-CV-20756-SEITZ/O==SULLIVAN

SERVICE LIST
UNITED STATES OF AMERICA, ex rel. CARLOS URQUILLA-DIAZ et al. v.
KAPLAN UNIVERSITY et al.
CASE NO.: 1:09-cv-20756-CIV-SEITZ/O==SULLIVAN
United States District Court, Southern District of Florida

J. TROY ANDREWS SUSAN N. EISENBERG


hangfire@ix.netcom.com susan.eisenberg@akerman.com
JOHN W. ANDREWS SAMUEL S. HEYWOOD
jwa@ix.netcom.com samuel.heywood@akerman.com
Andrews Law Group MIA RENE MARTIN
3220 Henderson Boulevard mia.martin@akerman.com
Tampa, Florida 33609 Akerman Senterfitt
Telephone (813) 877-1867 1 Southeast 3rd Avenue, 25th Floor
Facsimile (813) 872-9298 Miami, Florida 33131-1714
Telephone (305) 374-5600
Attorneys for Relators Facsimile (305) 374-5095

Attorneys for the Defendants


TIMOTHY J. HATCH CARLOS RAURELL
thatch@gibsondunn.com carlos.raurell@usdoj.gov
NICOLA T. HANNA Assistant United States Attorney
nhanna@gibsondunn.com 99 NE 4th Street
JAMES L. ZELENAY, JR. Miami, FL 33132
jzelenay@gibsondunn.com Telephone: (305) 961-9243
Gibson, Dunn & Crutcher, LLP Facsimile: (305) 530-7139
333 South Grand Avenue
Los Angeles, California 90071 Attorneys for the United States
Telephone (213) 229-7000
Facsimile (213) 229-7520

Attorneys for the Defendants


G. WARE CORNELL, JR.
warecornell@gmail.com
Cornell & Associates, P.A.
1792 Bell Tower Lane, Suite 210
Weston, FL 33326
Telephone: (954) 524-2703
Case 1:09-cv-20756-PAS Document 183 Entered on FLSD Docket 10/06/2009 Page 5 of 5

CASE NO. 09-CV-20756-SEITZ/O==SULLIVAN

Fascimile: (954) 524-2706


Case 1:09-cv-20756-PAS Document 183-2 Entered on FLSD Docket 10/06/2009 Page 1 of 24

UITED STATES DISTRICT COURT


SOUTHER DISTRICT OF FLORIDA

CASE O.: 09-20756-CIV-SEITZ/O==SULLIVA

UNITED STATES OF AMERICA,


ex rel.CARLOS URQUILLA-DIAZ,
et al.,

Plaintiffs,
v.

KAPLAN UNIVERSITY et al.,

Defendants.
______________________________________/

RELATORS’ CORRECTED1 RESPOSE TO DEFEDATS’ MOTIO TO DISMISS


SECOD AMEDED COMPLAIT

Relators Jude Gillespie, Carlos Urquilla-Diaz, and Ben Wilcox, by their respective attorneys,

hereby respond to Defendants Kaplan University, Kaplan Higher Education Corporation and Kaplan

Inc.’s (“the Kaplan Defendants”) Motion to Dismiss the Second Amended Complaint pursuant to

Fed.R.Civ.P. 12(b)(1), 12(b)(6), and 9(b). The Kaplan Defendants’ Motion to Dismiss should be

denied.

I. RELATOR JUDE GILLESPIE’S RESPOSE

A. A Determination of Gatsiopoulos’ “First-to-File” Status Cannot Be Made At This Time,


and Thus Cannot Be a Basis for Dismissal

The Kaplan Defendants argue that Relator Gillespie has failed to comply with 31 U.S.C. §

3730(b)(5) of the FCA — the “first-to-file” rule — because the filing date of the Pennsylvania

lawsuit pre-dates the filing of the Complaint in this action. [DE 171, p. 5]. However, the Kaplan

1
In the PDF file conversion, symbols were inserted in the place of apostrophes and quotation
marks. This corrected version cures that technical error. Relators are submitting this corrected
response with agreement of opposing counsel.
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Defendants wrongly rely on the broad construction of “first to file” found in U.S. ex. rel. Lujan v.

Hughes Aircraft Co., 243 F.3d 1181, 1183 (9th Cir. 2001). [DE 171, p. 6 n.4]. The Ninth Circuit

subsequently clarified and narrowed Lujan to hold that an earlier filed qui tam action dismissed on

jurisdictional grounds does not bar all subsequently filed related actions. Campbell v. Redding Med.

Ctr., 421 F.3d 817, 821 (9th Cir. 2005). The first-to-file rule says that “[w]hen a person brings an

action under this subsection, no person other than the Government may intervene or bring a related

action based on facts underlying the pending action.” 31 U.S.C. § 3730(b)(5) (emphasis added). As

Campbell recognized, an action dismissed on jurisdictional grounds is no longer a “pending action”

within the meaning of § 3730(b)(5). See Campbell, 421 F.3d at 821–22. Thus, even if Gatsiopoulos

is found to be related to this action — which Relator Gillespie disputes — Relator Gillespie’s action

may nonetheless continue if Gatsiopoulos is jurisdictionally flawed and subject to dismissal. In that

event, Gatsiopoulos would no longer be a pending action and Relator Gillespie’s action would

become the first to be filed.

1. The Gatsiopoulos Action May Still Be Dismissed for Lack of Jurisdiction

If a relator does not qualify as an “original source” of the fraud alleged in her complaint, and

there has been a previous public disclosure by someone else of that alleged fraud, then that relator’s

complaint must be dismissed for lack of subject-matter jurisdiction. 31 U.S.C. § 3730(e)(4). Relator

Gillespie made several public disclosures concerning the fraud alleged in this action and is also an

“original source” of his allegations within the meaning of the FCA. If, as Relator Gillespie believes,

the Gatsiopoulos Relators are unable to prove they are “original sources” of their allegations, their

Complaint must be dismissed.

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A public disclosure occurs when facts underlying the fraud are released in “allegations or

transactions in a criminal, civil, or administrative hearing, in a Congressional, administrative,

Government Accounting Office report, hearing, audit or investigation, or from the news media. . . .”

31 U.S.C. § 3730(e)(4)(A). A “civil complaint is unquestionably a public disclosure of allegations”

and within the definition of § 3730(e)(4)(A)’s “civil hearing.” United States ex rel. Siller v. Becton

Dickinson & Co., 21 F.3d 1339, 1350 (4th Cir. 1994). Additionally, Freedom of Information Act

(“FOIA”) requests have been deemed public disclosures under the FCA. United States ex rel. Mistic

PBT v. Housing Auth. Of Pittsburg, 186 F.3d 376, 383 (3d Cir. 1999). Relator Gillespie’s multiple

public disclosures2 about the Kaplan Defendants’ fraud pre-date the Gatsiopoulos November 2, 2006

filing date.

An original source is “an individual who has direct and independent knowledge of the

information on which the allegations are based and has voluntarily provided the information to the

Government before filing an action under this section which is based on the information.” 31 U.S.C.

§ 3730(e)(4)(B). The Gatsiopoulos Amended Complaint fails to allege that its Relators voluntarily

provided information of the claimed fraud to the government prior to filing their original Complaint.

[See Case No. 09-cv-21720, DE 18]. Thus the Gatsiopoulos Relators may not be original sources,

but that determination cannot be made without discovery.

Therefore, if this Court were to determine that this action and the Gatsiopoulos action were

related to the extent that “first to file” became a dispositive issue, it is an issue that cannot be

2
Relator Gillespie’s multiple public disclosures as detailed in the SAC include complaints
and FIOA requests throughout 2005 and early 2006, well before the Gatsiopoulos filing date. (See
SAC ¶¶ 39–45).
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determined without discovery since Gatsiopoulos may be subject to dismissal for lack of subject

matter jurisdiction and this action would become the first action filed under Campbell, supra.

Moreover, where jurisdictional issues under the FCA are closely related to the merits of the case, the

issues are “better addressed following a more thorough gathering of evidence by the parties in the

form of discovery proceedings.” United States ex rel. Sanders v. E. Alabama Healthcare Auth., 953

F. Supp. 1404, 1409 (M.D. Ala. 1996) (applying Eleventh Circuit precedent to an FCA claim).

2. Gatsiopoulos May Be Dismissed for Failure to Plead with Particularity

Qui tam complaints dismissed for a failure to plead with particularity pursuant to Rule 9(b)

are also not “pending actions” within the meaning of the FCA. Walburn v. Lockheed-Martin Corp.,

431 F.3d 966, 972 (6th Cir. 2005). Thus, a subsequent relator’s complaint on the same underlying

facts is not barred by the first-to-file rule. Id.

The Gatsiopoulos Amended Complaint must be dismissed if it was not pled with particularity

in conformity with Rule 9(b). See Clausen, 290 F.3d at 315. Accordingly, this Court must make its

determination regarding the sufficiency of the Gatsiopoulos pleadings before Relator Gillespie’s

action can be dismissed under the first-to-file rule. Walburn, 431 F.2d at 972. The Kaplan

Defendants have certainly argued that Gatsiopoulos fails under Rule 9(b). [See Case No. 09-cv-

21720, DE 47] Therefore, this Court should deny the Kaplan Defendants’ motion to dismiss

Relator Gillespie’s complaint until this Court determines whether the Gatsiopoulos action is properly

pled.

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3. The eed to Conduct Discovery Precludes Dismissal

Moreover it should be noted that there has been no discovery in this case, [see DE 67], or in

the other cases consolidated into the MDL before this Court. [See Case No. 09-cv-21720 DE 60;

Case No. 09-cv-21733 Docket]. The Kaplan Defendants rely on factual assertions in their response

to the Relators’ Second Amended Complaint (“SAC”) that have yet to be proven or tested by

discovery. For example, they assert that the Gatsiopoulos Complaint meets the “first to file”

standard [DE 171, p. 5]. Yet the Judicial Panel on Multidistrict Litigation (“the Panel”) specifically

rejected the Kaplan Defendants’ argument that the False Claims Act’s (“FCA”) “first to file”

provision rendered an MDL unnecessary. [DE 163, p. 2]. There was not then, and there is not now,

enough factual information developed to legally determine whether “first to file” will be a bar to any

of the actions consolidated by the Panel. As more fully discussed below, which Relator was validly

“first to file” is an issue still to be determined and it cannot be determined without discovery.

B. The Distinctions Between the Gatsiopoulos and Gillespie Claims May Result in Both
Actions Proceeding

The Panel also recognized that while there were common issues among the actions, there

were also “non-common” issues. [DE 163, p. 2]. Although the Kaplan Defendants attempt to depict

each action’s claims as being substantially related in toto, only Relator Gillespie’s action maintains a

claim based on the Rehabilitation Act (SAC ¶¶ 46–59). The Kaplan Defendants imply they are now

compliant with the Rehabilitation Act [DE 171, p. 12], rendering the claim moot; yet again, the truth

or falsity of that implication cannot be tested without discovery. The Co-Relators maintain that there

are several significant distinctions among the Complaints, but certainly at least Relator Gillespie’s

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Rehabilitation Act claims are facially distinct from any other claims in the MDL, and warrant a

separate action proceeding forward where Relator Gillespie is indisputably “first to file.”

Relator Gillespie’s action may also be unrelated to Gatsiopoulos — thus also mooting the

“first to file” issue — if it is determined that an action against one legally distinct Kaplan corporate

entity is unrelated to an action against another legally distinct Kaplan entity. Each of the Kaplan

entities subject to the different actions in the MDL signed separate Program Participation

Agreements (“PPA”) with the Government. [See, e.g., DE 172, Exhs. K-N]. Thus, each Kaplan

entity in the MDL may or may not have been in violation of its own PPA — the contract from which

any fraud liability will arise — and each entity may or may not be subject to liability for fraud under

that individual PPA. The Kaplan Defendants’ reliance on U.S. ex rel. Hampton v. Columbia

Healthcare is misplaced because Hampton involved a relator who alleged company-wide fraud

involving Medicare payments that encompassed all of the parent corporation’s various subsidiaries,

thus barring a second action related to just one of those subsidiaries. See 318 F.3d 214, 218 (D.C.

2003). The Gatsiopoulos action is based on allegations at one discreet “brick and mortar” school in

Pennsylvania, whereas the Gillespie action alleges fraud in the operation of the national “online”

school. Again, the Kaplan Defendants in these actions executed separate PPAs from which their

potential liability arises. The Kaplan Defendants would certainly cry “prejudice” or “due process” if

a fraud violation in relation to one discreet PPA at one discreet school in Pennsylvania — out of the

dozens of PPAs their legally distinct schools have executed — was found to be a violation of and by

all of those separate contracts and discreet legal entities. Thus, the mere fact that the Gatsiopoulos

and Gillespie actions are premised on separate PPAs is a legal basis to allow both claims to proceed

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and defeats the Kaplan Defendants’ argument here that the Gillespie action should be dismissed

because the Gatsiopoulos action was the first to be filed. As with the issues discussed in Section A,

discovery is needed to answer certain key factual questions relating to the distinctions between the

claims pled in Gatsiopoulos and here in Gillespie. Therefore the Kaplan Defendants’ motion to

dismiss should be denied.

C. Relator Gillespie Has Adequately Pled His Claims

The Kaplan Defendants misconstrue Rule 9(b) when they state that “[n]one of Relators’

allegations, however, actually demonstrate that Kaplan committed any underlying violation of the

law.” [DE 171, p.9 (emphasis supplied)]. Allegations of fraud in an FCA claim do not require a

relator to prove the fraud. See Lusby, 570 F.3d at 855. A relator’s claims simply must sufficiently

plead “facts as to time, place, and substance of the defendant's alleged fraud.” Clausen, 290 F.3d at

1310. And as the Fifth Circuit has said, “the ‘time, place, contents, and identity’ standard is not a

straitjacket for Rule 9(b)” as long as “particular details of a scheme to submit false claims [are]

paired with reliable indicia that lead to a strong inference that claims were actually submitted.” U.S.

ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009).

Relator Gillespie’s allegations are replete with more than adequate details of time, place and

substance as to the fraud committed by the Kaplan Defendants to satisfy Rule 9(b). Paragraphs 47–

59 of the SAC detail exact dates and details of communications with specific Kaplan personnel

related to the Kaplan Defendants’ violations of section 504 of the Rehabilitation Act of 1973.

Paragraphs 61–71 also provide exact dates and details of conduct (and schemes) and

communications with specific Kaplan personnel related to the Kaplan Defendants’ violations of 34

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C.F.R. 668.34(b)). Relator Gillespie’s allegations are not vague and provide “the time, place and

substance” of his allegations. Thus, this Court should reject the Kaplan Defendants’ bald assertion

that Relator Gillespie has failed to comply with the pertinent pleading requirements of Rule 9(b).

And since Relator Gillespie has met the heightened standard of Rule 9(b), he necessarily has met the

more relaxed pleading requirements of Rule 12(b)(6) and, as detailed more fully below, has stated a

claim upon which relief can be granted.

D. The Relators’ Claim for False Certification Is a Valid Claim

The Kaplan Defendants argue that only their express Acertification@ that they would comply

with the statutory requirements of the PPA could lend validity to Relator Gillespie=s false

certification claim, and that only the Ninth Circuit holds otherwise. They further argue that the

certification must also be expressly linked as a condition of being paid by the government. The

Kaplan Defendants are wrong on both points. First, a number of courts have found that express

Acertification@ is not required to form a valid FCA claim. Second, an express agreement to comply

with statutes in order to Aparticipate@ in Title IV programs has been held to be the equivalent of

express agreement to comply in order to receive payment from the government. Thus, Relator Jude

Gillespie=s claims do not fail as a matter of law, and their arguments do not serve as a valid basis to

dismiss those claims.

1. The Kaplan Defendants’ Mischaracterization of the Law Should be Rejected.

First, the Kaplan Defendants broadly state that Aat least six District Courts around the

country have rejected FCA false certification claims in the context of Title IV funds and the HEA.

[D.E. 171, p. 13]. But in fact, just one of these cases was published, and it and three others were all

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Texas decisions.3 The other two cases were reversed by the Seventh and Ninth Circuits,

respectively. See U.S. ex. rel. Main v. Oakland City Univ., 426 F.3d 914 (7th Cir. 2005) (cert.

denied); U.S. ex rel. Hendow v. Univ. of Phoenix, 561 F.3d 1166 (9th Cir. 2006). There is no

country-wide judicial agreement with the Kaplan Defendants’ position; there only appears to be a

Texas agreement. There is also no Asplit of authority@ among the Circuits on the issue, as the Kaplan

Defendants assert. [D.E. 171, p. 14]. As pointed out by the government in the AStatement of

Interest@ filed in this matter, the Fifth Circuit affirmations of the lower courts are not published and

are therefore not precedential. [See D.E. 28, pp. 2B3]. Only the Seventh and Ninth Circuit decisions

are precedential in the context of HEA-based FCA false certification claims, and they are in

agreement. See Hendow, 561 F.3d at 1173B74. Thus, raising the spectre of a rogue ANinth Circuit

decision@ appears to Kaplan’s attempt to divert the Court=s attention from the fact that the Fifth

Circuit stands alone in agreement with the Kaplan Defendants, and even then only through

unpublished opinions of no precedential value.

2. Express “Certification” Is ot Required for a Valid False Certification


Claim.

The Kaplan Defendants also suggest that no matter what context the false certification claim

arises in, a certification statement is always the required first step for alleging these claims. [D.E.

171, pp. 14, 16]. Although the Eleventh Circuit does not appear to have yet reached the question,

many courts besides Main and Hendow have accepted an Aimplied certification@ or Aagreement to

3
U.S. ex rel. Graves v. ITT Educ., 284 F. Supp. 2d 487 (S.D. Tex. 2003); U.S. ex rel. Gay v.
Lincoln Tech., 2003 WL 22474586 (N.D. Tex., Sept. 03, 2003); U.S. ex rel. Bowman v. Educ.
America, No. H-00-3028 (S. D. Tex. Jan 8, 2004); U.S. ex rel. Payne v. Whitman Educ., No. H-03-
3089 (S.D. Tex. June 20, 2005).
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comply@ as satisfying the first step in alleging a false certification claim. See, e.g., U.S. v. Rogan,

Medicare & Medicaid, 459 F. Supp. 2d 692, 718 (N.D. Ill. 2006) (a knowing submission of false

claims is actionable under the FCA, even if no express certification exists); Ab-Tech Const., Inc. v.

U.S., 31 Fed. Cl. 429, 434 (1994) aff’d 57 F.3d 1084 (Fed. Cir. 1995) (implied certification of

compliance with regulations required for eligibility in government program supported false

certification claim).

What the Kaplan Defendants seemingly fail to remember is that they entered into a binding

agreement with the government. And that agreement — the PPA — “shall condition the initial and

continuing eligibility of an institution to participate in a program upon compliance with the following

requirements . . . .” 20 U.S.C. § 1094(a) (emphasis supplied). Among those requirements are the

agreement to comply with § 504 of the Rehabilitation Act and to comply with the other statutes and

regulations Relators raise in their Second Amended Complaint. As has been well said by the Sixth

Circuit — echoing the U.S. Supreme Court — the government should receive what it bargained for:

Parties that contract with the government are held to the letter of the contract -
irrespective of whether the contract terms appear onerous ex post perspective, or
whether the contract=s purposes could have been effectuated in some other way -
under the maxim that “[m]en must turn square corners when they deal with the
government.”

U.S. ex rel. Compton v. Midwest Specialties, Inc., 142 F.3d 296, 302 (6th Cir. 1998) (quoting Federal

Crop Ins. Co. v. Merrill, 332 U.S. 380, 384 (1947)). Moreover, a treatise on the FCA notes that

more and more courts are endorsing an “implied certification” theory, and that “this trend is

consistent with the basic concept of a false claim under the Act C which is any effort to wrongfully

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deprive the Government Treasury of funds.” Claire M. Sylvia, The False Claims Act: Fraud

Against the Government § 4:43 (Westlaw 2009).

In following this trend, the Ninth Circuit rejected what would be a boon to institutions such

as Kaplan: if only false Acertifications@ carried liability, and false statements were not actionable, it

“would make it all too easy for claimants to evade the law.” Hendow, 461 F.3d at 1172. The term

“certification” does not even appear in the relevant parts of the FCA. Id. (citing 38 USC §§

3729(a)(1), (2)). Thus, “the theory of liability [that] is commonly called ‘false certification’ is no

indication that ‘certification’ is being used with technical precision . . . the theory could just as easily

be called the ‘false statement of compliance with a government regulation that is a precursor to

government funding’ theory.” Id. “So long as the statement in question is knowingly false when

made, it matters not whether it is a certification, assertion, statement, or secret handshake; False

Claims liability can attach.” Id. at 1172. As the Relators here have adequately alleged, the Kaplan

Defendants have continually and knowingly made false statements of compliance with the PPA, and

False Claims liability should attach. Any absence of a formal Acertification@ is not a bar to such

liability.

Finally, if a “certification” is found to be necessary, the Seventh Circuit’s Main decision is

telling. Kaplan’s students are certifying in their applications to the government that they are eligible

to receive funds because, for instance, they have maintained the required C average and/or attend an

eligible institution, when neither may in fact be true. The students are therefore making false

certifications for the Kaplan Defendants’ ultimate benefit, and liability for that may attach to the

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Kaplan Defendants because they caused a false claim to be made. See Main, 426 F.3d at 916; 31

USC § 3729(a)(2).

3. “Participation” Is the Same as “Payment” in the Context of the HEA.

The second key component of the Kaplan Defendants’ argument is that government payments

must be expressly conditioned on making a certification, and no such condition exists here. [D.E.

171, p. 15]. The Kaplan Defendants state that the HEA’s “condition on participation” cannot be the

same. This argument is another chimera rooted in the same Texas decisions as its first component,

along with a number of decisions that do not necessarily support their position. For example, the

Kaplan Defendants cite to U.S. ex rel. Siewick v. Jamiseon Sci., 214 F.3d 1372, 1376 (D.C. Cir.

2000), for the proposition that “all courts of appeals that have addressed the matter” agree with their

position. Clearly, at least the Seventh and the Ninth Circuit have since disagreed. As another

example, reliance on U.S. ex rel. Mikes v. Straus is misplaced. 274 F.3d 687 (2d Cir. 2001). First,

the Mikes’ court recognized the validity of “implied certifications.” See id. at 699. But also, as the

Hendow court pointed out, Mikes specifically confined itself to the Medicare context, which has

distinctly different Acompliance@ language from the HEA. See id. at 700; Hendow, 461 F.3d at 1177.

Hendow clearly articulated that in the context of the HEA, “if we held that conditions of

participation were not conditions of payment, there would be no conditions of payment at all — and

thus, an educational institution could flout the law at will.” 461 F.3d at 1176. “Participation” in the

Title IV/HEA program means that the institution will receive funds — it is the purpose of the

program, embodied in the first line of the PPA statute, that the PPA is “[r]equired for programs of

assistance,” i.e. funds. See 20 U.S.C. § 1094(a) (emphasis supplied). The Hendow court pointed

12
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CASE NO. 09-CV-20756-SEITZ/O’SULLIVAN


out at least three other sections of the controlling law where it is clear that “participation” in the

HEA means the same as being paid under the HEA and carries the same weight as an express

Apayment@ condition. See Hendow, 461 F.3d at 1175-76. If an entity such as Kaplan “had not

agreed to comply with@ all of the regulations it agreed to comply with in order to Aparticipate@ in

Title IV funding, “it would not have gotten paid.” See id. at 1176. Thus, the Kaplan Defendants

struck their bargain with the government, and were paid because of it. But systematically inflating

grade averages so that more students may comply with the Asatisfactory progress@ requirement of 34

C.F.R. § 668.34, and thus more students may obtain Title IV funds is not, as the Kaplan Defendants

urge, a “routine regulatory noncompliance.” [D.E. 171, p. 19]. The government did not bargain for

the Kaplan Defendants to make false statements of compliance with the regulatory requirements, and

this conduct is actionable under the FCA.

The Kaplan Defendants argue that Hendow is dangerous precedent that opens the floodgates

on FCA actions. But what is more dangerous is following the Fifth Circuit’s Texas-based decisions

on HEA/Title IV funds which would actually give the Kaplan Defendants, or any institution, the

unfettered ability to defraud the government in relation to those funds because they could simply

claim there was no express “certification” and only a condition of “participation.” This cannot be the

intent of the law.

II. RELATORS CARLOS URQUILLA-DIAZ’S AD BE WILCOX’S RESPOSE

A. First To File Rule

Various public disclosures occurred prior to United States ex rel. Gatsiopulous v. Kaplan

Career Institute, et al. (hereinafter "Gatsiopulous") . For example the amended complaint alleged

13
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the public disclosure, including the Chronicle's Higher Education article dated March 15, 2006,

entitled, "In an Online First, More than 50 Kaplan U. Professors Back Creation of a Faculty Union."4

As will be shown in discovery Carlos Diaz was the original source and contact for the report of said

article.5

Additionally, a second public disclosure occurred on September 22, 2006 when Carlos Diaz

hand-delivered a package to Equal Employment Opportunity Commission (EEOC) containing e-

mails between himself and Ben Wilcox. In a email dated August 5, 2006 (included in the package)

Relator Wilcox stated: ". . . I will tell all, tell the truth, and expose KU for the fraud, its lies, and

evil illegal acts against you, NLRB, HLC, EEOC, and federal law." Wilcox discusses other

violations of federal law including the HLC violations. ". . . I will blow the doors of the biggest fraud

in education in 50 years." This exhibit was filed in Carlos Urquilla v. Kaplan University, Charge

No.: 563-2006-01581, The U.S. Equal Employment Opportunity Commission, Kansas City Area

Office. (See Exhibit 1 attached).

As documented in Wilcox's required pre-filing disclosures to the U.S. Government, Ben

Wilcox was obviously an original source as defined under the statute (had the independent personal

knowledge for same), which occurred on September 22, 2006, three months prior to the filing of

Gatsiopulous.

B. A Determination that Gatsiopulous is a first to file, Does ot Bar the Instant
Relators from proceeding against against a Separate Entity.

4
(http://chronicle.com/free/2006/03/2006031501t.htm?top20)
5
See Declaration of Diaz, Exhibit 11 attached)
14
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This instant case is critically distinctive from Gatsiopulous (discussed below) and Court

should find that under the circumstances of this case, that Gatsiopulous did not put the government

on notice of fraud at other Kaplan-owned entities.

Initially, USA ex.rel. Mary Hampton v. Columbia /HCA Healthcare Corp. et al, 318 F3d 214

(D.C. Cir., 2003) should not be applied to bar the instant relators claims. The Gatsiopulous

complaint did not allege corporate-wide scheme of fraud; therefore there would be no notice to the

government that they should investigate anything other than this one small proprietary trade school

that had been purchased by Kaplan.6 The allegations in that complaint would have led the

government to believe that this was an isolated event in only one of 60 ground schools that Kaplan

purchased.

In Hampton, the case was dismissed under the first to file rule when a second and later

Relator brought suit against a subsidiary of Columbia /HCA Healthcare Corp. In Hampton, a senior

manager (initial relator named Boston) in HCA's home care group filed the claim alleging corporate-

wide fraud, revealed through internal audits in which HCA perpetuated fraud in providing home

health care services through numerous subsidiaries. The relator (Boston) further detailed examples

of a huge number of illegal billings to Medicare. . . that were separately received by Columbia /

HCA's home health locations (550) in 37 states.

In contrast the relator in Hampton was a high level executive who had access to the

documents for the entire organization, whereas Relator Gatsiopulous only had access to the one

ground trade school. Moreover, in contrast to relators Wilcox/Diaz, the Gatsiopulous complaint

15
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CASE NO. 09-CV-20756-SEITZ/O’SULLIVAN


does not and cannot meet this threshold since it has not detailed out a corporate wide fraudulent

scheme.7

The key fraudulent entity (ICM) in Gatsiopulous is a proprietary, brick and mortar, trade

school which is independently accredited by the ACSI. In contrast the key Defendant here Kaplan

University, holds itself out as an online university which gained more substantial and higher

accreditation from the Higher Learning Commission of the North Central Association of Colleges

and Schools. Moreover, no where in the Gatsiopulous complaint does it allege that the recruiters

were receiving contingent compensation (bonuses) as the instant Relators allege (paragraph 106)

Additionally, ICM (Gatsiopulous) located in Pennsylvania had a different President (Gary D.

Kerber) from Kaplan University which was headquartered in Ft. Lauderdale, Florida and Chicago,

Illinois with Andrew Rosen as President. Both were completely separate operations. Additionally

the admission advisors/recruiters at ICM could only receive compensation for enrollees at that

individual school and not any compensation for students at the instant Defendant. Similarly, the

6
Relators are uncertain of the exact purchase date; however, the school's name was not
changed until December 4, 2006
7
Ben Wilcox was a Dean at Kaplan University who had full access to both the Ft. Lauderdale
and Chicago headquarters. He was provided with daily printouts on such items as the Q-Report and
projected financial budgets based on the number of recruited students. He worked with admissions
advisors; he personally enforced the unlawful rule imposed by Andy Rosen to give all A's and B's as
grades. He was personally familiar with the 90:10 rule scheme. He was very familiar with the
contingent fee regulation under the HEA act and was fully aware that Kaplan claimed they based the
contingent compensation on other false pretenses rather than compensating advisors on recruitment
numbers. He was aware that the only real determining factor regarding an admissions advisor's
compensation was the number of students that they recruited.
Carlos Diaz was an original source in that he had independent knowledge of the facts stated
as his job on behalf of the Washington Post was to work with the President of HEC (Gary Kerber)
which was based in Georgia. He was responsible for the trade schools or ground schools and
coordinating with Andy Rosen and David Clinefelter for Kaplan Inc.
16
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CASE NO. 09-CV-20756-SEITZ/O’SULLIVAN


instant defendant Kaplan University could not receive compensation from any other enrollments

except for Kaplan University.

The instant complaint pleads different types of fraud than those pled in Gatsiopulous. For

instance, the instant complaint alleges a violation of fraud on the Higher Learning Commission,

which is a violation of the False Claims Act, which is an entirely separate theory of recovery alleged

in Gatsiopulous .8

Additionally the complaints in the instant case and Gatsiopulous seeks damages from

different corporations and thus there would be no duplication of damages nor would the government

have to pay two Relator's fees. Further reasoning for not applying Hampton is that there are no

parasitic suits involved in any of the complaints against Kaplan, Kaplan Inc., or Kaplan HEC, as they

were all filed under seal prior to any of the cases being unsealed.

Further, even if the Court determines that Gatsiopulous v. Kaplan Career Institute was the

first to file but the damages could be limited to the one school as pled, the Court can and should

consolidate the cases rather than dismissing Diaz v. Kaplan. This is exactly what was done in the

case cited by the Defense, United States ex rel. William St. John LaCorte v. Smithkline Beecham

Clinical Laboratories, Inc. 149 F3d 227 (3d Cir. 1998).9

8
(See Amicus Curie Brief of U.S. Government filed in U.S. ex rel. O'Connell v. Chapman
University, attached as Exhibit 12) in which the Relators claim that false statements were made to
the WSC accreditors and that had truthful statements been made, it would have resulted in their
decisions not to accredit the various programs.)
9
This appeal involves six suits under the qui tam provisions of the False Claims Act.
Appellee Robert J. Merena filed the first of these qui tam actions against SmithKline on November
12, 1993 in the Eastern District of Pennsylvania. Appellee Glenn Grossenbacher, later joined by
Charles Robinson, Jr., ('the Grossenbacher parties') filed suit in the Western District of Texas on
December 15, 1993. Appellees Kevin Spear, C. Jack Dowden and Berkley Community Law Center
17
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CASE NO. 09-CV-20756-SEITZ/O’SULLIVAN


In summary, even if the Court finds that this is a related case, then both cases should be

allowed to go forward; at least Wilcox and Diaz's case should go forward as they are original sources

due to their independent knowledge and having informed the government prior to bringing suit.

Discovery should be allowed in order to sort out further differences as to why both cases should

proceed.

C. RELATOR'S COMPLAIT STATES A CAUSE OF ACTIO WITH


SUFFICIET PARTICULARITY
The instant complaint is very similar to Hendow v. Phoenix University, and Main v. Oakland,

infra in which the respective Courts held the complaint stated a cause of action.10 The complaint

also describes Kaplan's contingent compensation plan which the DOE found to be fraudulent in a

separate case in 2000.11

('the Spear parties') followed on February 13, 1995 with a suit in the Northern District of California.
The Texas and California courts transferred the Spear and Grossenbacher actions to the Eastern
District of Pennysylvania for consolidation with Merena's case. For the sake of brevity, these three
actions will be referred to collectively as the 'original' lawsuits and their plaintiffs as the 'original'
relators." [149 F.3d 227 (3d Cir. 1998) at pg. 230-231].
10
Even though the U.S. government has not intervened so far in this case, they filed a very
similar if not same amicus curiae brief in both the Hendow and Diaz cases and argued the Hendow
case at oral argument in the 9th Circuit. In the past few days, the news media announced that
Hendow v. Phoenix University is in settlement discussions. The Apollo group posted on its website
its Form 8-K that it filed with the SEC on September 30, 2009; it requested a 45-day stay in order to
try to reach a settlement agreement.(See Exhibit 2; Form 8-K).
11
See Kaplan's Admission Advisor Compensation Plan, Exhibit 4; Kaplan University
President's and Dean's Club Qualifications and Rules; Exhibit 5. The DOE found in 2000 that the
Computer Learning Center, Inc.'s contingent compensation plan, which is very similar to Kaplan's,
was a material breach of the school's PPA. It further violated the statute and regulations. "As can be
seen from the above facts, CLC's compensation plan plainly violates section 487(a)(20) and its
implementing regulations. In practice, CLC's compensation plan calls for compensation
adjustments, made on less than annual increments, that are based exclusively on success in
securing enrollments. The other performance standards in its recruiter compensation plan
amount to mere window dressing, designed to make it appear as if CLC were in compliance
18
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CASE NO. 09-CV-20756-SEITZ/O’SULLIVAN


Relators have stated sufficient detail in the complaint to meet the 9(b) requirements by

specifying the who, what, when and where, have given specific names of recruiters who were paid

the illegal contingent fees (Complaint, ¶106). Also, attached to the complaint were the FAFSA

applications that the students prepared with Kaplan's assistance and which Kaplan forwarded to

obtain compensation under Title IV.12

Kaplan's argument regarding the application of F.R.C.P. 9(b) in a financial aid fraud case

against a for-profit college like Kaplan was recently considered and rejected by United States District

Court for the District of Arizona. U.S. ex rel. Irwin v. Significant Educ., Inc., 2009 U.S. Dist. LEXIS

13832 (February 10, 2009). In Irwin, the court denied the defendant's F.R.C.P. 9(b) motion

indicating that "Irwin details more than twenty separate instances in which GCU violated the

incentive compensation ban by compensating enrollment counselors directly based upon securing

enrollments." Id. at *2.

Contrary to Kaplan's assertion, the complaint adequately pled a fraud in the inducement

claim. The instant complaint is similar to that in Main v. Oakland where the Seventh Circuit

reversed the dismissal of similar complaint and recognized that fraud in the inducement was viable

cause of action under these circumstances.13 Should this Court believe that the instant complaint is

deficient, Relators request leave to amend the complaint accordingly.

with section 487(a)(20)'s ban on incentive compensation." The DOE demanded


$187,497,434.00 (See Exhibit 3; DOE letter dated December 8, 2000).
12
See Consumer's Digest article dated April 2009 (Exhibit 8) discusses many problems with
Kaplan University (and other online universities) associated with recruiting students and paying
illegal compensation.
13
(See Main v. Oakland Complaint, Exhibit 6, and the 7th Cir. opinion; Exhibit 7)
19
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CASE NO. 09-CV-20756-SEITZ/O’SULLIVAN


Further, Defendants contend that there is no liability under the False Claims Act for

presenting false documents to the Higher Learning Commission (HLC) in order to obtain

accredidation. Relators oppose this contention, however in the interests of brief page limitations and

judicial economy, Relators adopt and incorporate by reference the Amicus Curie Brief of U.S.

Government filed in U.S. ex rel. O'Connell v. Chapman University, attached as Exhibit 12.

Relators have more than stated a cause of action to the meet the particularity requirements,

but in an abundance of caution, if the Court finds that more detail is needed, Relators request for

leave to file an amended complaint to provide more detail.

D. DIAZ'S ADEQUATELY PLEAD A RETALIATIO CLAIM

Contrary to Kaplan's assertions, Diaz adequately plead the notice allegations (see Complaint

¶ 250-254). Discovery will show that Diaz provided requisite notice to Kaplan (See letter to Andy

Rosen as CEO and President of Kaplan University, dated March 3, 2006; Exhibit 10). If more detail

is required by this Court, Relators request leave to amend to correct any perceived deficiencies and to

incorporate the above Exhibit.

WHEREFORE, Relator Jude Gillespie respectfully requests that the Court deny the

Kaplan Defendants’ motion to dismiss as detailed herein.

Respectfully Submitted,

20
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CASE NO. 09-CV-20756-SEITZ/O’SULLIVAN


DATED: October 6, 2009

s/ Kimberly L. Boldt /s John W. Andrews


Kimberly L. Boldt, Esq. John W. Andrews, Esq.
Florida Bar No. 957399 FBN: 178531; SPN: 013131
kimberly@abbrclaw.com J. Troy Andrews, Esq.
Alters, Boldt, Brown, Rash & Culmo, P.A. FBN: 105635; SPN: 1842750
4141 Northeast 2nd Avenue, Suite 201 ADREWS LAW GROUP
Miami, Florida 33137 3220 Henderson Blvd.
Telephone (305) 571-8550 Tampa, FL 33609
Facsimile (305) 571-8558 Ph. (813) 877-1867; Fx. (813) 872-8298
Attorney for the Relator(s)

21
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UITED STATES DISTRICT COURT


SOUTHER DISTRICT OF FLORIDA

CASE O.: 09-20756-CIV-SEITZ/O==SULLIVA

UNITED STATES OF AMERICA,


ex rel.CARLOS URQUILLA-DIAZ,
et al.,

Plaintiffs,

v.

KAPLAN UNIVERSITY et al,

Defendants.

__________________________________/

CERTIFICATE OF SERVICE

I hereby certify that on October 6, 2009, I electronically filed the foregoing document with
the Clerk of the Court using CM/ECF. I also certify that the foregoing document is being served this
day on all counsel of record or pro se parties identified on the attached Service List in the manner
specified, either via transmission of Notices of Electronic Filing generated by CM/ECF or in some
other authorized manner for those counsel or parties who are not authorized to receive electronically
Notices of Electronic Filing.

s/ Beth Tyler Vogelsang

Beth Tyler Vogelsang


Florida Bar No. 509401
beth@abbrclaw.com
Case 1:09-cv-20756-PAS Document 183-2 Entered on FLSD Docket 10/06/2009 Page 23 of 24

SERVICE LIST
UITED STATES OF AMERICA, ex rel. CARLOS URQUILLA-DIAZ et al. v.
KAPLA UIVERSITY et al.
CASE O.: 1:09-cv-20756-CIV-SEITZ/O==SULLIVA
United States District Court, Southern District of Florida

J. TROY ANDREWS SUSAN N. EISENBERG


hangfire@ix.netcom.com susan.eisenberg@akerman.com
JOHN W. ANDREWS SAMUEL S. HEYWOOD
jwa@ix.netcom.com samuel.heywood@akerman.com
Andrews Law Group MIA RENE MARTIN
3220 Henderson Boulevard mia.martin@akerman.com
Tampa, Florida 33609 Akerman Senterfitt
Telephone (813) 877-1867 1 Southeast 3rd Avenue, 25th Floor
Facsimile (813) 872-9298 Miami, Florida 33131-1714
Telephone (305) 374-5600
Attorneys for Relators Facsimile (305) 374-5095

Attorneys for the Defendants


TIMOTHY J. HATCH CARLOS RAURELL
thatch@gibsondunn.com carlos.raurell@usdoj.gov
NICOLA T. HANNA Assistant United States Attorney
nhanna@gibsondunn.com 99 NE 4th Street
JAMES L. ZELENAY, JR. Miami, FL 33132
jzelenay@gibsondunn.com Telephone: (305) 961-9243
Gibson, Dunn & Crutcher, LLP Facsimile: (305) 530-7139
333 South Grand Avenue
Los Angeles, California 90071 Attorneys for the United States
Telephone (213) 229-7000
Facsimile (213) 229-7520

Attorneys for the Defendants


G. WARE CORNELL, JR.
warecornell@gmail.com
Cornell & Associates, P.A.
1792 Bell Tower Lane
Suite 210
Weston, FL 33326
Telephone: (954) 524-2703
Case 1:09-cv-20756-PAS Document 183-2 Entered on FLSD Docket 10/06/2009 Page 24 of 24

Fascimile: (954) 524-2706