Academy of Art University: Two Settled Cases in the Public Record

A 2016 San Francisco settlement over building conversions, and a federal whistleblower case over recruiting pay that settled in 2021. What each record says and what it leaves open.

1. The San Francisco settlement, December 2016

In December 2016 the university agreed to a settlement valued at $60 million with the City and County of San Francisco. Both the Associated Press and KTVU report it on December 19, 2016. [1][2]

The city had argued that at least 33 of the university's 40 buildings were out of compliance with zoning, signage or historic-preservation rules, and that the school had removed 160 affordable units from the housing market by converting them to student housing. [1][2]

The settlement resolved the city's claims. It was not a trial verdict, and the university's president said she was "very pleased" with it. [1]

2. The federal whistleblower case, settled 2021

A Bloomberg Law report dated November 8, 2021 describes a False Claims Act case against the university brought by four whistleblowers. The suit alleged that the university obtained funds from the U.S. Department of Education by falsely promising not to reward admissions officers for enrolling more students. Federal prosecutors consented to the dismissal, and the parties filed a stipulation of dismissal on November 5, 2021. The settlement terms were not disclosed in the portion of the article that could be read. [3]

The case was filed in the U.S. District Court for the Northern District of California, captioned Rose et al. v. Stephens Institute, No. 09-cv-05966. The public docket identifies Stephens Institute as the name under which the Academy of Art University case was brought. The complaint was filed on December 21, 2009, under the False Claims Act, with four relators: Scott Rose, Mary Aquino, Mitchell Nelson and Lucy Stearns. [4][5]

Court filings show the case progressed through several stages. In 2016 the court denied the defendant's motion for summary judgment, and in 2018 a divided Ninth Circuit panel affirmed that denial, addressing the materiality standard for False Claims Act claims. [4][6] Bloomberg reports that the parties filed a stipulation of dismissal in November 2021. That stipulation has not been read for this review, so its terms remain to be confirmed. [3]

The whistleblowers' allegations are just that: allegations, which the settlement resolved without a court ruling on their merits. The article was partly paywalled, and the full text should be read before publication.

3. What the record does not show

• It does not show that the 2016 settlement was an admission of any violation of law. The sources report it as a settlement.
• It does not show that the recruiting allegations were proved. The settlement ended the case before a ruling.
• It does not show how many students, if any, were affected by either matter.
• The two matters are unrelated: one concerns zoning and housing, the other federal student-aid funds. Neither article links them.

4. Questions for the university

• What compliance changes followed the 2021 settlement? In particular, how are admissions staff paid, and how is that reviewed?
• What is the status of the housing commitments made under the 2016 settlement, and how many units were restored?
• Will the university publish the terms of both settlements?

Sources