On January 16, 2008, at the end of a two-month trial, a federal jury in the United States District Court for the District of Arizona found that Apollo Group, Inc. (“Apollo”) and two former Apollo executives violated federal securities laws by fraudulently misleading its investors about its recruitment policies. The jury awarded shareholders $5.55 per share, or approximately $280 million. The precise amount of damages the defendants will pay will be determined after eligible investors provide evidence to support their claims.

In the securities class action, Apollo’s shareholders alleged that Apollo mislead investors when it failed to disclose a February 2004 U.S. Department of Education report which claimed that the company violated federal regulations by paying University enrollment counselors on a per-student basis. The report also claimed that the University kept its incentive-based recruiting compensation practices hidden from the Department of Education.

Apollo argued that the Department’s report was flawed and that its recruiters were paid based on a number of factors, and not directly in relation to the number of students they enrolled in the University. In addition, Apollo asserted that legally they were not required to disclose unsubstantiated allegations from a preliminary government report.

The jury disagreed with Apollo and found that Apollo and its executives deceived shareholders and regulators by not publicly disclosing the Education Department report.

The jury verdict is believed to be the largest in favor of an investor class since passage of the Private Securities Litigation Reform Act (“PSLRA”) in 1995. Only six cases (including the Apollo Group case) involving post-PSLRA conduct have reached a jury verdict (three verdicts going in favor of the plaintiffs and three going in favor of the defendants). Apollo is considering an appeal of this decision.