The law firm Barrack, Rodos and Bacine announced Jan. 17 that a jury found that Apollo Group Inc., the for-profit company that owns the University of Phoenix Online, and two of its former executives misled investors about a scathing report released by the U.S. Department of Education in 2004.
Leonard Barrack, a member of Temple’s Board of Trustees, is the senior partner of the firm. The trial team consisted of two graduates of Temple’s Beasley School of Law, Jeffrey Barrack and Stephen Basser.
The contents of the report concluded that the university paid enrollment counselors “solely based on the recruiters’ success in securing enrollments,” which violated federal regulations. It added that the university systematically keeps its incentive-based recruitment practices hidden from the Department of Education, according to cfo.com. The report also described a boiler-room like work environment, with penalties for not meeting sales goals.
The case began in 2004 after the Phoenix-based Arizona Republic got hold of the report and released portions of it on Sept. 24. The report was originally to be released on Feb. 27, 2004. Two former executives, chief executive officer Todd Nelson and chief financial officer Kenda Gonzales, were charged with fraudulently concealing the report from investors. Apollo Group has been ordered to pay damages of $5.55 per share to eligible shareholders, which should total around $280 million, according to a statement made by the firm.
According to the Arizona Republic, Basser said the amount is among the largest verdicts in securities litigation. He said such cases are usually settled before trial or dismissed. When they do go to trial, defendants often prevail.
“It’s a great day for shareholders’ rights in America.” Basser said. “Any reasonable investor, I assure you, would have wanted to know the existence of this report.
“We will vigorously pursue these types of cases through verdict, to protect the interests of investors,” he said. “We thank the jury for their close attention to the evidence in the case, and for keeping their eyes on the real story of what happened at this company.”
Barrack, a 1996 graduate of the law school, cited the guidance of his former professor Edward Olhbaum.
“I still remember things [Olhbaum] taught me, and I used them in this trial,” Barrack said. “Temple laid the foundation of our winning this case.”
Brad Larrison can be reached at firstname.lastname@example.org.