Washington Post 2013 Annual Report Download - page 99

Company on all remaining claims in the Gillespie complaint. As of
December 2013, the Diaz and Gillespie rulings were on appeal to
the U.S. Court of Appeals for the Eleventh Judicial Court, where the
Company will seek affirmation of the judgments in its favor.
On July 7, 2011, the U.S. District Court for the District of Nevada
dismissed the Jajdelski complaint in its entirety and entered a final
judgment in favor of Kaplan. On February 13, 2013, the U.S.
Circuit Court for the Ninth Judicial Circuit affirmed the dismissal in
part and reversed the dismissal on one allegation under the False
Claims Act relating to eligibility for Title IV funding based on claims
of false attendance. As of December 2013, this case had been
remanded to the District Court, where discovery is expected to take
place in 2014 as to the remaining allegation in the complaint.
On October 21, 2010, Kaplan Higher Education Corporation
received a subpoena from the office of the Florida Attorney
General. The subpoena sought information pertaining to the online
and on-campus schools operated by KHE in and outside of Florida.
KHE has cooperated with the Florida Attorney General and
provided the information requested in the subpoena. Although KHE
may receive further requests for information from the Florida Attorney
General, there has been no such further correspondence to date.
The Company cannot predict the outcome of this inquiry.
On December 21, 2010, the U.S. Equal Employment Opportunity
Commission (EEOC) filed suit against Kaplan Higher Education
Corporation in the U.S. District Court for the Northern District of
Ohio alleging racial bias by Kaplan in requesting credit scores of
job applicants seeking financial positions. In March 2011, the court
granted in part the Company’s motion to dismiss the complaint. On
January 28, 2013, the court entered summary judgment in favor of
Kaplan Higher Education Corporation and against the EEOC,
terminating the case in its entirety. The EEOC appealed the
judgment to the U.S. Court of Appeals for the Sixth Judicial Circuit,
and briefing on that appeal was completed in November 2013.
On February 7, 2011, Kaplan Higher Education Corporation
received a Civil Investigative Demand from the Office of the
Attorney General of the State of Illinois. The demand primarily
sought information pertaining to Kaplan University’s online students
who are residents of Illinois. KHE has cooperated with the Illinois
Attorney General and provided the requested information. Although
KHE may receive further requests for information from the Illinois
Attorney General, there has been no such further correspondence to
date. The Company cannot predict the outcome of this inquiry.
On April 30, 2011, Kaplan Higher Education Corporation
received a Civil Investigative Demand from the Office of the
Attorney General of the State of Massachusetts. The demand
primarily sought information pertaining to KHE Campuses’ students
who are residents of Massachusetts. KHE has cooperated with the
Massachusetts Attorney General and provided the requested
information, as well as additional information requested in 2012
and 2013. The Company cannot predict the outcome of this
inquiry.
On July 20, 2011, Kaplan Higher Education Corporation received
a subpoena from the Office of the Attorney General of the State of
Delaware. The demand primarily sought information pertaining to
Kaplan University’s online students and KHE Campuses’ students
who are residents of Delaware. KHE has cooperated with the
Delaware Attorney General and provided the information requested
in the subpoena. Although KHE may receive further requests for
information from the Delaware Attorney General, there has been no
such further correspondence to date. The Company cannot predict
the outcome of this inquiry.
Student Financial Aid. The Company’s education division derives
the majority of its revenues from U.S. Federal financial aid received
by its students under Title IV programs administered by the ED
pursuant to the Higher Education Act, as amended. To maintain
eligibility to participate in Title IV programs, a school must comply
with extensive statutory and regulatory requirements relating to its
financial aid management, educational programs, financial
strength, administrative capability, compensation practices,
facilities, recruiting practices and various other matters. In addition,
the school must be licensed or otherwise legally authorized to offer
postsecondary educational programs by the appropriate
governmental body in the state or states in which it is physically
located or is otherwise subject to state authorization requirements,
be accredited by an accrediting agency recognized by the ED and
be certified to participate in the Title IV programs by the ED.
Schools are required periodically to apply for renewal of their
authorization, accreditation or certification with the applicable state
governmental bodies, accrediting agencies and the ED. In
accordance with ED regulations, some KHE schools operate
individually while others are combined into groups of two or more
schools for the purpose of determining compliance with certain
Title IV requirements, and each school or school group is assigned
its own identification number, known as an OPEID number. As a
result, as of the end of 2013, the schools in KHE have a total of 25
OPEID numbers. Failure to comply with the requirements of the
Higher Education Act or related regulations could result in the
restriction or loss of the ability to participate in Title IV programs and
subject the Company to financial penalties and refunds. No
assurance can be given that the Kaplan schools, or individual
programs within schools, will maintain their Title IV eligibility,
accreditation and state authorization in the future or that the ED
might not successfully assert that one or more of such schools have
previously failed to comply with Title IV requirements.
Financial aid and assistance programs are subject to political and
governmental budgetary considerations. There is no assurance that
such funding will be maintained at current levels. Extensive and
complex regulations in the U.S. govern all of the government
financial assistance programs in which students participate.
For the years ended December 31, 2013, 2012 and 2011,
approximately $819 million, $882 million and $1,110 million,
respectively, of the Company’s education division revenue was derived
from financial aid received by students under Title IV programs.
Management believes that the Company’s education division schools
that participate in Title IV programs are in material compliance with
standards set forth in the Higher Education Act and related regulations.
ED Program Reviews. The ED has undertaken program reviews at
various KHE locations. Currently, there are three pending program
reviews, including the ED’s final report on the program review at
KHE’s Broomall, PA, location.
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