The Washington Post Company wants a Washington federal judge to dismiss a securities class action filed by dissatisfied investors, arguing that the company accurately reported the financial health of its for-profit educational services arm, Kaplan Inc., before its stock value dropped.
A group of investors sued the Post Co., in U.S. District Court for the District of Columbia in October, accusing company officers of misleading investors by releasing false information on Kaplan’s health. The value of the company's stock dropped after the U.S. Department of Education released new data in August 2010 indicating Kaplan could be at risk of losing its federal financial aid.
The Iron Workers Local No. 25 Pension Fund, which held more than 2,000 shares of the company’s stock at the time and claimed losses of about $245,000, is lead plaintiff. The class is being represented by a team from Robbins Gellar Rudman & Dowd. Attorneys there could not immediately be reached.
The Post Co. is being represented by Williams & Connolly’s Kevin Baine and Steven Farina. Neither could immediately be reached on Monday.
In the Post Co.’s motion to dismiss (PDF) filed Friday, the company said it always disclosed in its securities filings that Kaplan “operates in a highly regulated environment… and that changes in government regulations could have a significant negative impact on its operating results.”
The Education Department’s report hit for-profit schools hard across-the-board, the Post Co. argues, noting that its stock value later returned to pre-report levels. The company is claiming that the complaint lacks any specific allegations of deliberate fraud on the part of the Post Co. or its officers, and that any financial losses were the result of changes in the regulatory environment surrounding Kaplan and other similar companies.
“In short, there is no securities fraud in this case—only a plaintiff seeking to secure a windfall based on a temporary drop in stock price that cannot be pinned to anything approaching fraud by any of these defendants,” the company argues.
The case is before U.S. District Judge Paul Friedman.