The Apollo Group Inc, the parent company of for-profit educators The University of Phoenix, acknowledged in a filing on August 31, that it is the subject of a shareholder suit. The suit, filed in Arizona federal court, alleges that the company made materially misleading statements about its business operations between December 7, 2009, and August 3, 2010. The plaintiffs to the suit are seeking class action status.
The complaint includes the company and several of its top executives including the executive chairman, co-chief executive officers, chief financial officer and others, according to a report by Reuters. The complaint alleges that the misrepresentations made by the company artificially inflated the trading price of Apollo common stock, according to the report by the company in its 8-K filing with the SEC. The plaintiffs are seeking compensatory damages.
Apollo is considered a "bellwether" of the for-profit educational industry, reports Reuters. As the industry has come under increasing scrutiny, so has Apollo group. For example, in December 2009, The University of Phoenix and Apollo Group settled with the Department of Education for $78.5 million over whistleblower claims they violated regulations against illegal recruiting when the company paid recruiters based on the number of students they enrolled. Prior to that case, the Apollo Group settled yet another suit for $9.8 million in 2004, over claims of violating federal incentive compensation rules.
Last year, according to Reuters, the SEC investigated Apollo for its revenue recognition practices.
Apollo Group says it will vigorously defend against the current shareholder suit.