Barron's: Washington Post Investigated by the Dept. of Education

March 9th, 2010 7:48 PM

Call it a conflict of interest or what you will - but how should The Washington Post handle formal inquiries into its business practices as it pertains to news coverage?

In July 2009, when the Post got in embroiled in controversy over its own pay-for-play scandal, the Post's media reporter Howard Kurtz took on the newspaper's publisher Katharine Weymouth. However, as the March 8 issue of Barron's pointed out - you would have to be on top of Security and Exchange Commission filings to have caught wind of the newest trouble for the Washington Post Co.'s (NYSE:WPO) relating to it's education division.

"The Washington Post covers government agencies as closely as any daily newspaper. Yet an investor would have had to scroll through the Washington Post Co.'s (WPO) 10-K filing last week to see news of a Department of Education inquiry into its important education unit," Michael Santoli and Bill Alpert wrote for Barron's. "The Post's education business, anchored by the Kaplan for-profit college and test-prep businesses, contributed 58% of 2009's revenue and all of its $195 million of operating income."

As the Barron's article explained, the online education division of Kaplan, Kaplan University, has a high default rate on its student loans. Barron's reported that at four of the institution's 33 reporting units default rates were above 25 percent and subject to Department of Education sanctions. 

However, Santoli and Alpert pointed out any mention of this news has been absent from the Post's business coverage, despite the potential impact on the Post's stock price from the successful portion of the company's operations.

"Most intriguing in the 10-K is the passing (and first) mention that the Education Department has been conducting a ‘Program Review' of Kaplan University's main offices in Fort Lauderdale, Fla., since September," Santoli and Alpert wrote. "The Post business desk seemed not to notice any of this, but Post investors might want to."