Apollo Group Liable For Up To $277.5 Million After Losing Suit

By Aaron Poehler

Published on January 17, 2008

According to the suit, Apollo Group, along with the company's former Chief Executive Officer Todd S. Nelson and former Chief Financial Officer Kenda B. Gonzales, fraudulently misled investors by not disclosing a 2004 U.S. Department of Education report which accused the company of violating federal rules prohibiting staff members at educational facilities from being paid based on the number of students they enroll at the school. Shareholders filed the suit after the report became public knowledge in September 2004, when the University paid a $9.8 million fine to the Department of Education to settle the issue and the price of Apollo stock dropped significantly.

Nelson and Gonzales, who testified as hostile witnesses for the plaintiffs, confirmed that the company withheld the report to minimize media coverage of the issue and to prevent the company's stock price from falling. Both Nelson and Gonzales left Apollo in 2006.

The jury's decision in the case specified that shareholders are to be paid $5.55 per share in restitution. Apollo will be responsible for paying 60 percent of the $277.5 million damages total, while Nelson must pay 30 percent and Gonzales is liable for 10 percent.

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