Kaplan University: Preying On 'Pain' And 'Fears' Of Low-Income Students Is Not 'Remotely Deceptive'
"Boiler room" sales tactics at some for-profit colleges have attracted unprecedented government and law enforcement scrutiny over the past two years. But at Kaplan University, owned by the Washington Post Co., marketing techniques such as preying on the "pain" and "fears" of low-income students should come as no surprise, according to the company's lawyers.
There was "nothing remotely deceptive" about the flyers guiding Kaplan recruiters, according to the Washington Post Co.'s defense against a recently dismissed shareholder lawsuit that claimed the company had fraudulent business practices.
"If you can help them uncover their true pain and fear," one flyer stated, "if you get the prospect to think about how tough their situation is right now, if you talk about the life they can't give their family right now because they don't have a degree ... you dramatically increase your chances of enrolling this prospective student."
Responding to allegations, the company's lawyers wrote in their August motion to dismiss, "Plaintiff may think this language unbecoming for an educational institution, but it is not fraudulent." The lawyers also wrote, “It merely encourages admissions advisers to 'ask probing questions to explore student motivation' and to 'keep digging until you uncover their pain, fears and dreams.'" U.S. District Judge Barbara Rothstein dismissed the case on Dec. 23.
As the for-profit college industry has fought back against increased federal government regulation over the past year, the industry's top brass has often argued that its schools serve a noble cause: educating low-income, first-generation college students who have nowhere else to turn. Chief among those spokesmen is Donald Graham, the chairman and chief executive of the Washington Post Co.
"A disaster is shaping up for lower-income students who want a higher education," Graham wrote in an op-ed in the Wall Street Journal last year. "The [administration's] proposed regulations may start with good intentions, but the result will be less access for our nation's most needy students."
But Kaplan and the Washington Post Co. struck a decidedly different tone in a filing defending the company from the investors' class action, essentially acknowledging some of the more controversial tactics and questioning why anyone would object to such a culture.
"Investors would hardly be surprised or disappointed to learn that a 'for-profit' education company would operate like a business," lawyers wrote in response to allegations that Kaplan University had a "corporate culture that transformed supposed admissions advisors into sales persons, potential students into 'leads' and student enrollment into sales."
They went a step further in questioning why investors suing the Washington Post Co. found "something sordid" in Kaplan's use of "football-field sized call centers" and reliance on "telemarketing techniques and sales goals."
"This was neither sordid nor secret," the lawyers wrote. "It is standard practice in the for-profit sector and was well-known to the market for years."
Nearly 30 percent of students at Kaplan schools defaulted on federal loans within three years of graduating or leaving its schools -- one of the highest default rates of any publicly traded college corporation, according to the Department of Education.
Kaplan spokeswoman Melissa Mack wrote in an email that her company disagreed with many of the allegations of the suit's plaintiffs and that "they never even addressed the nature, content and quality of Kaplan's educational offerings, which are very much part of its culture."
"Our motion was very much based on the argument ... that the factual allegations of the complaint were unfounded and that there was nothing false or misleading about any of the company's statements," Mack wrote.
Mack cited an assertion in the Washington Post Co.'s motion last year: "The allegation that it 'mandate[d] ... predatory and deceptive recruitment and enrollment practices' is unsupported, and the isolated abuses alleged are, in any event, immaterial."
The lawsuit against the Washington Post Co. was a class action brought on behalf of shareholders who claimed the company's stock price plummeted once fraudulent business practices were revealed by increased government scrutiny. A federal judge dismissed the case late last month, ruling that plaintiffs failed to establish that Kaplan or the Washington Post Co. "knowingly or recklessly misled the market."
Mack told HuffPost last year that recruiters no longer use such flyers.
See Kaplan University's flyers for recruiters here.
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First Posted: 01/13/12 08:01 AM ET Updated: 01/13/12 08:32 AM ET