Apollo Gets Data Request From Accreditor Following GAO Report

Apollo Group Inc.'s (APOL) University of Phoenix has been asked by its accrediting agency to show evidence it complies with the group's standards, the company said in a securities filing Monday.

Apollo, whose University of Phoenix was featured in an undercover investigation earlier this month by the U.S. Government Accountability Office exposing questionable practices in 15 for-profit schools' student recruitment offices, was asked by the Higher Learning Commission to address the report's allegations and to submit a report detailing any remedial measures being undertaken.

The GAO's report sent shockwaves through the for-profit higher education sector, as it alleged recruiters at the schools--including campuses at University of Phoenix, Washington Post Co.'s (WPO) Kaplan Higher Education unit, Education Management Corp.'s (EDMC) Argosy University and Corinthian Colleges Inc.'s (COCO) Everest College--provided misleading data or even encouraged fraudulent activity in order to boost enrollment figures.

The report was issued during a Senate Health, Education, Labor and Pensions Committee hearing on student enrollment at for-profit schools.

University of Phoenix, with more than 476,000 students online and at bricks-and-mortar campuses, said in the Securities and Exchange Commission filing it believes it is fully compliant with HLC accreditation criteria and will cooperate fully with the agency.

The school has until Sept. 1 to issue the report, which must include evidence demonstrating it isn't encouraging inappropriate behavior by recruiters and detailed information about policies relating to marketing and admissions, among other information.

The data request comes as the accrediting agency, the Higher Learning Commission, is under increased scrutiny as well. The HLC faced criticism earlier this year after granting approval to Career Education Corp.'s (CECO) American Intercontinental University despite expressing concerns over its measure of a credit hour.

The Senate hearing earlier this month included a harsh assessment of accreditors, as legislators questioned their efficacy after allowing schools to practice high-pressure recruiting tactics. The GAO report found some recruiters understated tuition costs, misled prospective students regarding their potential income after graduation and encouraged them to lie on financial aid forms.

The University of Phoenix earlier this month issued a statement reiterating a number of student protection policies, in response to the GAO report findings, and said it has initiated an internal investigation.

"While we still have work to do, we have initiated a rigorous compliance process designed to improve oversight of our policies and procedures including our recruitment practices, and we are making significant improvements to the way we train and evaluate our student counselors," Apollo's co-chief executive Greg Cappelli said in the statement.

The company said it has a "systemic review" of its compensation model for employees who enroll and advise students and is implementing a call monitoring system to oversee calls from prospective students, among other programs.

Corinthian and Education Management have said they conduct "mystery shopping" programs, and Education Management noted it was singled out for some good practices in the GAO report. Kaplan suspended new enrollment at the two schools featured in the investigation and is conducting an internal review.

-By Melissa Korn, Dow Jones Newswires; 212-416-2271; melissa.korn@dowjones.com

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