Washington Post 2011 Annual Report Download - page 99

original jurisdiction, the U.S. District Court for the Western District of
Pennsylvania, and the case was assigned to a judge in that venue
in December 2011. The case is expected to proceed to the
discovery and dispositive motion phases in that venue.
On July 7, 2011, the U.S. District Court for the District of Nevada
dismissed the Jajdelski case in its entirety and entered a final
judgment in favor of Kaplan. That case is currently on appeal in the
U.S. Circuit Court of Appeals for the Ninth Judicial Circuit.
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. KHE also may
receive further requests for information from the Florida Attorney
General. The Company cannot predict the outcome of this inquiry.
On December 21, 2010, the U.S. Equal Employment Opportunities
Commission 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. The Company believes that the
complaint lacks merit. In March 2011, the court granted in part the
Company’s motion to dismiss the complaint. Since that time, the
case is proceeding with the discovery phase.
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 online students
who are residents of Illinois. KHE has cooperated with the Illinois
Attorney General and provided the requested information. KHE also
may receive further requests for information from the Illinois Attorney
General. 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. KHE also may receive further requests for information
from the Massachusetts Attorney General. 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 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. KHE also may receive further requests for information
from the Delaware Attorney General. 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 DOE
pursuant to the U.S. Federal Higher Education Act of 1965 (HEA),
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 has students, be accredited by an accrediting
agency recognized by the DOE and be certified to participate in the
Title IV programs by the DOE. Schools are required periodically to
apply for renewal of their authorization, accreditation or certification
with the applicable state governmental bodies, accrediting agencies
and the DOE. In accordance with DOE regulations, some KHE
schools operate individually or 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,
the schools in KHE have a total of 32 OPEID numbers. Failure to
comply with the requirements of HEA 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 DOE might not successfully assert that one or more of such
schools have previously failed to comply with Title IV requirements.
DOE regulations require schools participating in Title IV programs to
calculate correctly and return on a timely basis unearned Title IV
funds disbursed to students who withdraw from a program of study
prior to completion. These funds must be returned in a timely manner,
generally within 45 days of the date the school determines that the
student has withdrawn. Under DOE regulations, failure to make
timely returns of Title IV program funds for 5% or more of students
sampled in a school’s annual compliance audit in either of its two
most recently completed fiscal years could result in a requirement that
the school post a letter of credit in an amount equal to 25% of its
prior-year returns of Title IV program funds. If unearned funds are not
properly calculated and returned in a timely manner, an institution is
also subject to monetary liabilities, fines or other sanctions.
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, 2011, January 2, 2011 and
January 3, 2010, approximately $1,110 million, $1,460 million
and $1,283 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
HEA and related regulations.
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