Investors are suing the University of Phoenix and its parent company, Apollo Education Group Inc., alleging that they hid the fact that millions of dollars in revenue for the for-profit college came from a sophisticated – and prohibited – strategy of targeting veterans.
In a class-action lawsuit filed Monday in the U.S. District Court of Arizona, investors said the University of Phoenix violated federal securities laws by touting its financial success while concealing that “a substantial portion” of those profits came from prohibited military recruiting tactics and marketing. As a result, investors wrote, Apollo’s stock “traded at artificially inflated levels.”
The University of Phoenix’s improper recruiting came to light after our investigation exposed how the school violated the intent of a 2012 executive order to protect veterans from abusive recruiting by for-profit colleges. The University of Phoenix sidestepped that order and paid the military about $1 million in recent years for exclusive access to several military bases, held recruitment events disguised as résumé workshops and included military logos without the required permission on custom-engraved “challenge coins” handed out by recruiters.
The investigation prompted the Pentagon to put the University of Phoenix on probation and ban troops from using federal funds for the school’s classes in October. The Pentagon lifted that ban in January, but the school remains under formal probation and will be strictly monitored by the Pentagon through 2017.
The University of Phoenix’s missteps with the military caused its stock to plunge, according to the class-action lawsuit. Apollo Education’s shares dropped 80 percent thanks to recent events, according to the lawsuit, “erasing more than $3 billion in market capitalization.”