U. of Phoenix Case Rises from Loss

Judge overturns federal jury's ruling that parent Apollo Group defrauded investors, which was to have led to $280m in shareholder payments.

Apollo Group Inc., best known for its University of Phoenix subsidiary, said a judge overturned an earlier verdict that had found the company fraudulently misled investors about its student recruitment policies.

It had been ordered to pay shareholders about $280 million.

Shareholders had claimed that Apollo misled investors four years ago by keeping secret a U.S. Department of Education report that criticized the University of Phoenix’s recruitment policies. The DoE report had concluded that the school paid enrollment counselors “solely based on (the) recruiters’ success in securing enrollments,” which violated federal regulations. It added that the university systematically keeps its incentive-based recruitment practices hidden from the Department of Education.

“It has always been Apollo Group’s position that the plaintiffs in the case did not suffer any damages arising from the disclosure of the initial government report and its unsubstantiated allegations, and we are pleased that the Court has agreed,” said P. Robert Moya, senior vice president, general counsel and secretary for Apollo.

The case, a consolidated securities class action brought by the Policemen’s Annuity and Benefit Fund of Chicago, was tried in an Arizona federal district court in November 2007, with the jury finding in favor of the plaintiffs this January.

“We think it was an error for the judge to take the verdict away from the jury,” the pension fund’s attorney, Jeffrey Barrack, told Reuters. “We will take whatever steps necessary to see that the jury’s verdict stands.”

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