The original complaint charges Apollo and certain of its officers with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. More specifically, the Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that the Company improperly based recruiter's compensation on enrollment figures, in violation of U.S. regulations that forbid schools whose students receive federal financial aid from tying pay directly to enrollments; (2) that as a consequence of the foregoing, defendants were able to demonstrate dazzling growth at schools such as the University of Phoenix, even though recruiters bolstered their numbers by signing up unqualified students; and (3) that as a result of the illegal practices, the Company's earnings and net income were materially inflated at all relevant times.
The complaint further alleges that on September 15, 2004, the Wall Street Journal published an article entitled "Will Apollo's Bad Report Card Get Its Shares Grounded?" The article stated that Apollo engaged in a "culture of duplicity" in which supervisors improperly lavished money on sales employees for signing up scores of new students, including those unable to cut it. This news shocked the market. Shares of Apollo fell $1.41 per share, or 1.76 percent on September 15, 2004, to close at $78.68 per share.
According to the Company’s Form 10-K for the fiscal year ended August 31, 2008, in October 2004, three class action complaints were filed in the U.S. District Court for the District of Arizona. The District Court consolidated the three pending class action complaints under the caption In re Apollo Group, Inc. Securities Litigation, Case No. CV04-2147-PHX-JAT and a consolidated class action complaint was filed on May 16, 2005 by the lead plaintiff. The consolidated complaint named us, Todd S. Nelson, Kenda B. Gonzales and Daniel E. Bachus as defendants. On March 1, 2007, by stipulation and order of the Court, Daniel E. Bachus was dismissed as a defendant from the case. Lead plaintiff represents a class of our shareholders who acquired their shares between February 27, 2004 and September 14, 2004. The complaint alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated under the Act by us for defendants’ allegedly material false and misleading statements in connection with our failure to publicly disclose the contents of a preliminary Department of Education program review report. The case proceeded to trial on November 14, 2007. On January 16, 2008, the jury returned a verdict in favor of the plaintiffs awarding damages of up to $5.55 for each share of common stock in the class suit, plus pre-judgment and post-judgment interest. The class shares are those purchased after February 27, 2004 and still owned on September 14, 2004. The judgment was entered on January 30, 2008, subject to an automatic stay until February 13, 2008. On February 13, 2008, the District Court granted our motion to stay execution of the judgment pending resolution of our motions for post-trial relief, which were also filed on February 13, 2008, provided that we post a bond in the amount of $95.0 million. On February 19, 2008, we posted the $95.0 million bond with the District Court. Oral arguments occurred on August 4, 2008 as part of our post-trial motions, during which the District Court vacated the earlier judgment based on the jury verdict and entered judgment in favor of Apollo and the other defendants. The $95.0 million bond posted in February was subsequently released on August 11, 2008. Plaintiffs filed a Notice of Appeal with the Ninth Circuit Court of Appeals on August 29, 2008. The plaintiffs’ brief is due on December 15, 2008, and the defendants’ brief is due on January 13, 2009.
According to a press release dated June 23, 2010, Apollo Group, Inc. announced that the United States Court of Appeals for the Ninth Circuit has reversed a lower court’s ruling in favor of the Company and ordered the lower court to enter judgment against the Company in accordance with the jury verdict in securities litigation arising out of a 2003 program review by the U.S. Department of Education, Apollo Group Inc. Securities Litigation. … Apollo Group Inc. Securities Litigation was tried in Federal District Court in Arizona beginning November 14, 2007. The jury found in favor of the plaintiff on January 16, 2008, and the plaintiff class was awarded damages of up to $5.55 per share. On February 13, 2008, Apollo filed post-trial motions in which it asked the trial court to: (1) reverse the erroneous verdict; (2) order a new trial; or (3) condition denial of Apollo’s motions on the plaintiff’s acceptance of a reduced amount of damages not to exceed $3.49 per share. On August 4, 2008, the trial court overturned the erroneous jury verdict and resolved the case in favor of Apollo, finding that an analyst report on which the plaintiff’s case heavily relied was not a corrective disclosure.
According to the Company's Form 10-K, for the fiscal year ended August 31, 2010, on June 23, 2010, the Court of Appeals reversed the District Court’s ruling in our favor and ordered the District Court to enter judgment against us in accordance with the jury verdict. We intend to petition the U.S. Supreme Court for review of the Court of Appeals’ decision, but historically very few of such petitions are granted. While we are seeking Supreme Court review, the judgment in the District Court is stayed. If our petition to the Supreme Court is not granted and we return to the District Court for post-trial proceedings on class claims and an award of damages, we believe that the actual amount of damages will not be known until all court proceedings have been completed and eligible members of the class present the necessary information and documents to receive payment of the award.
According to an article dated March 11, 2011, on March 7, 2011, in the latest development in a long-running securities suit that is among the few securities class action lawsuits to go to trial and that had previously resulted in a $277.5 verdict in plaintiffs’ favor, the U.S. Supreme Court denied Apollo Group’s petition for writ of certiorari. As a result, the ruling of the Ninth Circuit reinstating the jury’s verdict will now stand. In addition, as a result of the decision to decline taking up the case, the interesting and arguably important issues the cert petition raised will now not be reviewed by the Supreme Court.
On March 11, 2011, the plaintiffs filed Application for Entry of Judgment in Accordance with the Mandate of the Ninth Circuit Court of Appeals.
According to the Judgment signed by Judge James A. Teilborg on April 6, 2011, judgment is hereby entered in favor of Lead Plaintiff/Class Representative Policemen's Annuity and Benefit Fund of Chicago, on behalf of itself and the Class.
According to a press release dated December 9, 2011, a federal judge in Arizona on Nov. 29 preliminarily approved a $145 million settlement between shareholders and Apollo Group Inc. and certain of its executive officers to end the long-running securities class action lawsuit (In re Apollo Group, Inc. Securities Litigation, No. 04-2147, D. Ariz.). U.S. Judge James A. Teilborg of the District of Arizona issued the order, which is subject to final approval and requires the defendants to pay shareholders $145 million. The defendants will be released from any further litigation and admit no wrongdoing under the terms of the settlement agreement.
On April 20, 2012, a Final Approval Order and Judgment was entered into the Court's docket approving the settlement amount and the plaintiffs' motion for Attorneys' Fees.