Apollo Accreditor May Ask for Recruiting ‘Corrective Action’

Apollo Group Inc. (APOL), operator of the University of Phoenix, said an accreditor’s panel may recommend "corrective action" after a review of recruitment and financial aid practices at the largest U.S. for-profit college.

The Higher Learning Commission, the college’s principal accrediting body, sent a letter saying the panel had questions about recruiting, admissions and financial aid prompted by the examination, the Phoenix-based company said today in a filing with the Securities and Exchange Commission. Apollo said it will give a "thorough response" to the March 29 request by the April 29 due date.

The Higher Learning Commission formed a panel to review Apollo’s practices after the U.S. Government Accountability Office released a report Aug. 4 on recruiting at for-profit colleges, including campuses of the University of Phoenix. Commission officials may meet with representatives of the university in late May if questions persist, the filing said.

Since the GAO report, Apollo has changed its recruiting, admissions and compensation, “in an effort to improve student outcomes and ensure compliance with stricter regulations and potential new rules,” said Jeff Silber, an analyst with BMO Capital Markets in New York, in a note to clients today. He rates Apollo shares “outperform.”

The Higher Learning Commission sent requests for information to Apollo and three other colleges investigated in the GAO report last year, said Sylvia Manning, president of the accreditor. One of the colleges withdrew its request for accreditation and is no longer affiliated with the commission, Manning said today in a telephone interview. She declined to give the names of the other institutions that were asked to respond to the organization’s inquiries.

GAO revised the report in November without changing its conclusions. Attorneys general in four states and the U.S. Department of Veterans Affairs have begun examining student recruitment in the industry since the GAO’s report.

Apollo rose 31 cents, or less than 1 percent, to close at $41.71 at 4 p.m. New York time in Nasdaq Stock Market composite trading. The shares have declined 32 percent in the past 12 months. Manny Rivera, a company spokesman, declined to comment beyond the filing.

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