A securities class action suit was filed against a corporation that operates several for-profit education institutions following claims that it violated federal securities laws.
The lawsuit against Apollo Education Group Inc. was filed in the U.S. District Court for the District of Arizona on behalf of investors who purchased shares in the company during the class period from June 26, 2013 through Oct. 21, 2015, according to a press release. The organization was founded in an effort to offer a college education to adults working full-time in addition to younger students. It’s subsidiaries, Apollo Global, College for Financial Planning, Apollo Education Ventures and University of Phoenix.
Aggressive military recruiting violates law
The class action filing alleged that the defendants made materially false and misleading statements to investors and/or failed to disclose certain information to investors. The lawsuit claimed that a significant allocation of the company’s generated revenues were gathered from “improperly aggressive recruiting tactics” at U.S. military bases nationwide. This strategy is a violation of an executive order signed by President Barack Obama on April 27, 2012.
The lawsuit claims that the recruiting methods used by Apollo on military bases breached a contract the corporation signed with the Department of Defense. The contract, which ran from Feb. 2012 to July 2014, allowed Apollo to work with the agency to improve its tuition assistance programs.
In addition to the military recruiting violations, the class action suit claims the University of Phoenix’s effort to transition its online classroom platform to a cloud-based infrastructure that provided improved reliability, scalability and performance was not working. The complaint alleged that the new system was failing due to software compatibility issues. As a result of the problems with the transition to a cloud-based platform, the school suffered substantial drops in enrollment rates. For these aforementioned issues, the class action suit claims that Apollo’s financial statements were materially false and misleading during the class period.
Lawsuit claims executives cashed out on artificially inflated stocks
The class action lawsuit alleged that as a result of statements portraying the company’s financial status as positive, its stock traded at artificially inflated levels, a press release explained. Its stock traded as high as $35.92 per share on Jan. 22, 2014. The suit goes on to claim that as securities prices rose, Apollo’s senior level executives cashed out. It alleged they sold their shares at artificially inflated prices and took in almost $42 million in total proceeds.
On Feb. 15, 2016, Apollo disclosed that it received a subpoena from the California Attorney General’s office. It requested a number of documents related to the “marketing, recruiting, compensation of enrollment advisors, complaints, financial aid, compliance, accreditation, other governmental investigations, private litigation and other matters.” In addition, the subpoena sought documents touching on the company’s recruiting tactics targeting former members of the U.S. military and California National Guard.”
Over the course of more than a year, Apollo’s stock dropped to a closing price of $8.28 per share on March 17, 2016.