In a letter from ED in January 2014, ED recertified certain of our institutions on a provisional basis, denied certain pending new program
approval applications, and indicated that all Company institutions must now request ED’s prior approval for establishing eligibility of any new
locations and programs and wait for ED’s decision prior to disbursing any Title IV funds to students attending such new locations and programs.
ED indicated that it was taking these actions because of its conclusion that the Company had admitted to falsifying placement rates and/or grade
and attendance records at various institutions and because of ongoing investigations. The Company disputes ED’s characterization of the
Company’s admission of wrongdoing. On the contrary, the Company has identified only isolated instances in the past four years in which
Company employees have violated Company policy by incorrectly reporting placement results or altering student attendance records. The
Company investigated those matters when it became aware of them, took disciplinary action against the employees involved, and reported the
results to applicable regulatory authorities. The Company believes that isolated deviations from policy by a small number of employees do not
reflect on the Company as a whole. ED also requested additional information from the Company about placement results and attendance and
grade changes to be able to ascertain that the Company and its institutions have the requisite administrative capability to ensure compliance with Title IV requirements. The Company is cooperating with ED in this review.