January 16, 2008

Jury Finds U. of Phoenix Parent Company Liable for $280-Million

A federal jury in Arizona today found the Apollo Group guilty of misleading investors. It ordered Apollo, the parent company of the University of Phoenix, to repay the shareholders about $280-million.

The jury, which deliberated for two days following a two-month civil trial, concluded that Apollo executives had misled stockholders when they withheld a scathing 2004 report by the U.S. Department of Education that criticized the aggressive recruiting practices of the company’s flagship University of Phoenix

Once the information became public, the price of Apollo stock plummeted.

During the trial, Apollo argued that the report was largely false and based on anecdotal evidence. Therefore, the company said, its failure to disclose its existence to investors had not been misleading.

Lawyers for the plaintiffs argued otherwise. “Any reasonable investor, I assure you, would have wanted to know the existence of this report,” Stephen R. Basser, a lawyer representing shareholders with the policemen’s annuity-and-benefit fund of Chicago, told jurors last week in closing arguments, according to the Associated Press.

Apollo’s lawyer, in a written statement issued after the verdict, said the company disagreed with the jury’s finding and the amount of damages. “The law does not require the disclosure of preliminary or unproven charges in a government investigation,” said the lawyer, Wayne W. Smith. “In not disclosing the report at issue, Apollo acted in good faith and in the best interests of its students, alumni, employees, and shareholders, who could have been unfairly harmed by a premature disclosure.”

The company, with annual revenues of more than $2.8-billion, said it was “evaluating its options for appeal.”

The Education Department report centered on recruiting practices at the University of Phoenix, some of the same issues that are the basis for a separate False Claims Act lawsuit filed against Apollo by two former admissions officers.

The former admissions officers contend the university falsely certified that it was complying with all federal guidelines when it applied for Pell Grants and other federal funds. The officers argue that the university was not complying because of how it paid its admissions recruiters. They are seeking $1.5-billion in damages. Apollo has argued that the settlement it reached with the Department of Education in 2004 resolved any claims that the U.S. government might have. The admissions officers say that that settlement specifically stated that it did not resolve any possible claims under the False Claims Act.

Despite its efforts to have the case dismissed, including an unsuccessful appeal to the U.S. Supreme Court in April, the lawsuit is slated for trial in September 2009. —Goldie Blumenstyk

Comments

1. Despite proven and categorical wrongdoing by UofP, absolutely nothing will happen to this “Univerisity” from accreditors. The Northcentral Association would shut down a smaller college in a heartbeat with these proven allegations, yet they do nothing to UofP. Why???

   — Joe A.    Jan 17, 12:49 PM    #

2. Actually, NCA has never closed a school as a result of Title IV violations.

   Apollo has a thousand times the resources of NCA and would use them all if their accreditation was ever challenged.

   — David    Jan 17, 01:36 PM    #

3. As an alumni of a for-profit university I learned far more about the ethics of these organizations than I could ever learn in a class room. Apollo group isn’t the only one that gets away with contemptable practices. Take a look at Career Education Corparation (CECO) . Like Apollo they are owned by banks, equity groups and such which like you said David…have the resources to beat the allegations. The CEO’s, board members and stock holders get richer. The students get marginal education in many instances. And they who call the shots and own the stocks are the very same who are involved with and own the stocks of the students lending and mortage companies. This being an election year is the time for the students, faculty and staff of these types of institutions to come together to force change. However the passive aggresive enviorments coupled with the organizations clout make this almost impossible for at least the faculty and staff. No one likes a tattle tale. They need their jobs, especially with an economy like we have now. That leaves the students to make the stand. For profits usually (not all) have very weak SGA’s.

   — tm    Jan 17, 03:24 PM    #

4. As a former student of UOP, I know all to well about getting a marginal education. UOP is using damage control to lessen the true impact and voice of the students who got shafted by their bad faith and ill willed transactions.

   In the 21st Century, in America, bigger does not always equal quality, justice, or even sustainable equality. The University of Phoenix portrays the illusion of the Goliath in adult education. The arrogances riddled in their 2006 financial statements are compelling, and well a shame. They believe their untouchable. Out of reach to do what is right and just.

   Not only myself, but tens of thousands of US citizens owe ten of thousands of dollars to The Apollo Group (the holding company to UOP), and have no way to pay them back. I say, one day the smoke and mirrors will clear.

   The Federal Government allows UOP to still take taxpayers and students’ monies for which they will have a hard time paying back, since the degree “ain’t” worth the paper it is printed on in the job market to prospective employers, sadly. There’s a hole in the ship’s floor! $280 million dollar hole that is.

   — -RS    Jan 18, 12:56 PM    #

5. Get real RS! You sound like a student that failed to obtain a degree from UOP. I’m telling you their degree is worth something. There are thousands of students that are currently working in jobs they never would have been without a degree. Also, there are many CEO’s, VP’s, and so forth that are running companies with graduate degrees from UOP. I think before you shout your bad experience you should do some research on this topic.

   — DP    Jan 21, 06:59 PM    #

6. Dp, you sound like a person receiving a check from Apollo Group on every first and fifteenth.

   I used to…

   And I want to take this opportunity to apologize to every student that I wore down and talked into starting a degree plan with UOP as an “enrollment counselor”, while I should have had the title of “sales rep”.

   The fact of the matter is that yes, the degree is worth “something”, however it is definitely NOT worth the tens of thousands of dollars it costs to acquire. Don’t you think employers hear about all the lawsuits and fines UOP has encountered in just the past five years? Look it up, they’ve been bombarded from the board of education and other groups for things like recruitment tactics, compliance issues and even instruction curriculum among many other things! I was an employee as recently as early January, and they STILL are holding contests with prizes to see who can schedule the most appointments, or turn in the most applications and basically enroll the most students.

   They spend more money on recruitment then they do on instruction! I wonder why they only have a 12% graduation rate. And yes, there are people working with degrees from UOP but there are also CEOs, VPs and so forth out there that don’t even have a degree at all.

   The sad part is that UOP seems to have no intention to change any of the things wrong with anything unless they are forced to. As long as people are not educated on the way they do bad business, they are going to keep hitting up every sucker they can to enroll with a third rate school.

   — dallas    Jan 25, 11:10 AM    #

7. Let’s say that DP really doesn’t know what she/he is talking about and has blinders on for what is really happening.

   I am putting together groups in all states that UoP has “offices” and reporting information to several regulatory agencies.

   UoP is failing on many levels and this suit is exposing their lies, deception, and killing the hopes and dreams of many students both young and old.

   I have suffered through professors who shouldn’t be teaching, administrators who should be in jail, and major corporations basically laughing at the so-called UoP degree.

   — DS    Jan 25, 01:13 PM    #

8. Bubba says – The bottom line where the rubber meets the road is the “money” that’s what UOP is all about and so are many others – gotta pay for houses, cars, vacations, etc and you gotta have studentsd to do it!

   — BUBBA    Jan 25, 04:51 PM    #

9. As an enrollment counselor I can tell you straight up I have NEVER received a single thing,monetarily or otherwise to enroll a student, NEVER! Not ONCE! and I have not been paid based on the enrollments I have. I just don’t understand why a voice is given to these disgruntled employees and treated like their word is gospel…it’s not and those of you who are buying into this crap are wrong. I was a student at UOP long before I started working here and I can tell you from a student’s perspective as well as an employee that the education here is worthy, pertinent and credible. It is less expensive than most public institutions and if we are so awful tell me why just about every college in this country have adopted our online format and problem-based learning model?

   — Tina    Jan 29, 10:49 AM    #

10. Tina, you are reaching. UoP did not invent the online format, and the approach the company takes is inferior to that of quality higher education opportunities in most traditional IHEs. I realize you work there, but it ain’t the greatest.

    — Online Savvy    Jan 30, 03:57 PM    #

11. It should not come as a surprise to anyone that a for-profit company is in it for the profit. They are beholden to stock holders, not students or alumni. If the product sells and the stockholders make money, U of P is successful. Graduation rates only matter if they cut into profits for these guys. For that reason, no for-profit should be regionally accredited…their mission is not to educate, it is to make money.

    — administrator    Jan 30, 04:30 PM    #

12. Well I have a question to all those against UOP, what alternative does a working adult have for completing his/her education? or securing a degree? Not every student is alike nor do the circumstances of all. If an individual couldn’t study earlier for any reason, he/she shouldn’t be discouraged to further strenghten his/her qualifications. Its not possible for many working adults to become a full time student. Is not it better to get enrolled with a national, regionally accredited univeristy than a small local school or college? Many of whom don’t even offer higher degrees. What other accredited university is there for working adults that matches the flexibility offered by the UOP?

    — Sohail    Feb 4, 06:34 PM    #

13. Hey, administrator, if the school is so terrible then why do they continue to bring in thousands of students and lots of money each year? My wife is currently enrolled in accounting, and I’ve learned a ton from her financial classes. If someone with a degree from UoP presents what they’ve learned and doesn’t just try to flash a degree at the potential employer’s faces, then that person will be hired. If no one ever got hired from UoP they would go out of business pretty quickly, would they not?

    Also, for the ones who graduate and don’t get hired (and subsequently complain here), look at their English in their posts. Perhaps that’s why your degree was useless—you couldn’t write professionally, so what did you expect? An employer doesn’t want someone who can’t spell or assemble sentences for any position besides scrubbing toilets or running a register.

    — RCSIII    Feb 8, 09:10 PM    #

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