Oregon joins class action against college
SALEM, Ore. (Legal Newsline) - Oregon Attorney General John Kroger announced on Monday that he has filed a lawsuit against the parent company of University of Phoenix and several executives, alleging that they misled investors and students.
In the lawsuit, Oregon is joining a class action suit and seeking lead plaintiff status.
The suit alleges that the Arizona-based Apollo Group, Inc., and its executives violated securities laws by making false and misleading statements to investors and misrepresenting information crucial to investors' ability to accurately assess the risks of their investments.
It is also alleged that the for-profit college deceived investors about its revenue during the years 2007 and 2010, which resulted in an approximately $10 million loss to the Oregon Public Employee Retirement Fund.
Apollo Group allegedly misrepresented its income by not accounting for losses that were the result of student withdrawals from classes.
"Companies that cook their books will have to answer to Oregon in court," Kroger said.
Students were also affected by Apollo's alleged actions, which include failing to follow proper steps when dealing with federal student loans and improperly canceling loans, leaving students on the hook financially for classes they did not take.
Apollo's actions were disclosed in Oct. 2009, causing shares of Apollo stock to fall 17.7 percent and lose nearly $2 billion in market capitalization, Kroger says. Its stock price continued to trade lower over the next few months and remained deflated, with an average closing price of $58 per share in the 90 days subsequent to the disclosures.
Apollo's stock price continued to fall in reaction to political calls for more oversight of the for-profit college industry and Congressional hearings that exposed some of the company's unsavory and improper business practices, Kroger says. By August 13, shares of Apollo were trading at $38.94, down from a pre-disclosure price of $72.97 per share.
The Oregon Public Employees Retirement Fund, which had a value of $51 billion as of Aug. 31. The retirement fund holds stock in Apollo and alleges it was adversely affected by the stock drop.