Published Online: October 1, 2004
Published in Print: September 29, 2004, as Apollo Group Fined

Education Inc.

Apollo Group Fined

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The for-profit education company Apollo Group Inc. will be required to pay a $9.8 million fine to the U.S. Department of Education, after the agency recently concluded that the University of Phoenix, a subsidiary of the company, violated federal regulations that prohibit tying employee pay to student enrollment.

Even though it agreed to pay the fine, the Phoenix-based Apollo Group denied any wrongdoing.

A 45-page Education Department report, obtained by Education Week under the Freedom of Information Act, says that University of Phoenix recruiters worked in a high-pressure sales environment and were paid solely according to how many students they enrolled. It also details what the department contends were management’s aggressive tactics to meet enrollment quotas as well as practices to deceive federal regulators.

“Many [recruiters] expressed that while uop at one time focused on the student and stressed ethical conduct, the culture now is one where the emphasis is on increasing numbers, the stock price, and meeting Wall Street’s expectations,” the report says.

But the Apollo Group disagreed with the findings.

“The department’s report was preliminary and most of the allegations … were subsequently proven to be false, misleading, or inaccurate,” Terri Bishop, the senior vice president of public affairs for the company, said in a written statement.

Education Department officials were unavailable for comment last week.

The $9.8 million settlement comes on top of another $4.4 million the company must pay the Education Department after the agency audited the Apollo Group’s Institute for Professional Development.

The university’s student enrollment has skyrocketed from 17,571 in 1991 to more than 323,000 this year. The university, which teaches working adults, has 150 campuses in 30 states, Puerto Rico, Canada, and online.

The amount of federal aid its students received rose from $338 million in 1999 to $869 million last year, and the default rate on uop students’ loans grew from 4.6 percent to 5.8 percent from 1999 to 2001.

Revenue has also risen dramatically for the company, from $69 million in 1991 to $1.3 billion last year. The company’s stock price fell 7 percent to $72.85 per share last week.

Vol. 24, Issue 04, Page 8

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