"A child's learning is the function more of the characteristics of his classmates than those of the teacher." James Coleman, 1972

Thursday, January 17, 2008

The Crash of the Phoenix Fraud

While a Federal court has decided on restitution for stockholders based on a jury's determination of fraud, one has to wonder if there will ever be restitution to the tens of thousands of youngsters recruited by bounty hunter "counselors" to waste their money in an effort to attain a credential of marginal value.

From the AP via the NY Times:

PHOENIX (AP) — The Apollo Group Inc., the company that owns the University of Phoenix, fraudulently misled investors in 2004 about student recruitment policies, a federal jury decided Wednesday. The panel ordered the company to pay shareholders about $280 million.

Jurors said Apollo officials “knowingly and recklessly” made false statements in a news release, a filing with the Securities and Exchange Commission and four conference calls with market analysts. By doing so, jurors said, Apollo violated federal securities laws.

The verdict, which comes after a two-month trial in Federal District Court in Phoenix, specified that the company pay certain investors $5.55 a share.

Apollo, based in Phoenix, reported $780.7 million in revenue in the first quarter. The company said it had not decided whether to appeal.

Shareholders claimed that Apollo misled investors four years ago when it kept secret a 2004 Department of Education report that criticized the University of Phoenix’s recruitment policies. The report concluded that the university paid enrollment counselors solely based on the “recruiters’ success in securing enrollments,” which violated federal regulations.

The shareholders singled out a former chief executive, Todd S. Nelson, and a former chief financial officer, Kenda B. Gonzales, as the Apollo officials who failed to inform investors about the report. Investors had sought $5.55 a share in restitution, which company officials estimated would total $280 million.


  1. Anonymous6:32 AM

    Isn't Todd now the CEO of EDMC? Will the trend continue?

  2. Anonymous6:55 AM

    More info at:


    This does not look good for Todd Nelson. He's the new Ken Lay for the education industry.