CONTINGENCIES Litigation, Legal and Other Matters . The Company and its subsidiaries are subject to complaints and administrative proceedings and are defendants in various civil lawsuits that have arisen in the ordinary course of their businesses, including contract disputes; actions alleging negligence, libel, defamation, invasion of privacy; trademark, copyright and patent infringement; U.S. False Claims Act (False Claims Act) violations; violations of applicable wage and hour laws; and statutory or common law claims involving current and former students and employees. Although the outcomes of the legal claims and proceedings against the Company cannot be predicted with certainty, based on currently available information, management believes that there are no existing claims or proceedings that are likely to have a material effect on the Companys business, financial condition, results of operations or cash flows. However, based on currently available information, management believes it is reasonably possible that future losses from existing and threatened legal, regulatory and other proceedings in excess of the amounts recorded could reach approximately $45 million . Her Majestys Revenue and Customs (HMRC), a department of the U.K. government responsible for the collection of taxes, has raised assessments against the Kaplan U.K. Pathways business for Value Added Tax (VAT) relating to 2017 and earlier years, which have been paid by Kaplan. Kaplan is continuing to pay the disputed VAT for subsequent periods. Kaplan has challenged these assessments and the case is currently on appeal to a tax tribunal with a hearing expected in January 2019. The Company believes it has met all requirements under U.K. VAT law and expects to recover the 15.4 million receivable related to the assessments that have been paid. If the Company does not prevail in this case, a pre-tax charge of 15.4 million will be recorded to operating expense in the Companys condensed consolidated statement of operations. In March 2018, HMRC issued VAT guidance with an effective date of May 31, 2018 that could impact the U.K. Pathways business if this guidance were to become law; this new guidance is separate from the VAT case discussed above. The Company is in the process of reviewing this new guidance, and considering the possibility that this guidance could be part of U.K. legislation in the future. If the Company is not successful in preserving a valid exemption under U.K. VAT law, the U.K Pathways business would incur additional VAT expense in the future. In connection with the sale of the KHE Campuses business in September 2015, Kaplan is secondarily liable on a number of leases that were transferred to the buyer, Education Corporation of America (ECA); the leases run through 2024 with commitments totaling approximately $16.3 million at September 30, 2018. In September 2018, ECA announced plans to close a number of its campuses and teach out certain programs. In October 2018, ECA filed in Federal Court for receivership in pursuit of a plan to reorganize its business and continue operations. If ECA is unsuccessful in its reorganization plan, the Company would become primarily liable under the transferred leases. Department of Education (ED) Program Reviews. The ED has undertaken program reviews at various KHE locations. On February 23, 2015, the ED began a review of Kaplan University (KU). The review relates to Kaplans administration of its Title IV and Higher Education Act programs and the initial focus was on the 2013 to 2014 and 2014 to 2015 award years. In September 2018, the ED issued a preliminary report with respect to this program review that included a number of findings related to Return to Title IV Funds as discussed in the Companys 2017 Annual Report on Form 10-K. The preliminary report also included requests for additional information related to student attendance and other areas. While the Company does not expect this open program review to have a material impact on KHE, the Company cannot predict the final outcome of this review, when it will be completed or any liability or other limitations that the ED may place on KHE as a result of this review. In addition, there are two open program reviews at campuses that were part of the KHE Campuses business prior to its sale in 2015 to Education Corporation of America (ECA), and we await the EDs final reports on the program reviews at former KHE Broomall, PA; and Pittsburgh, PA, locations. Kaplan retains responsibility for any financial obligation resulting from the ED program reviews at KU and KHE Campuses business that were open at the time of sale. The Company does not expect the open program reviews to have a material impact on KHE; however, the results of open program reviews and their impact on Kaplans operations are uncertain.