Apollo Group Plows Funds Into Compliance Amid Government Scrutiny
03 Septembre 2010 - 10:17PM
Dow Jones News
Apollo Group Inc. (APOL) has spent more than $100 million on new
phone-monitoring software and compliance staff, amid other moves,
as it tries to clean up student recruitment practices and its image
following a damaging government report that showed admissions
officers at for-profit schools using high-pressure tactics to
enroll students.
Apollo, which operates University of Phoenix, also has fired
employees, but the company declined to reveal how many or at what
level. Its top management remains in place.
For-profit schools have come under fire in the past few months,
facing new regulations by the U.S. Department of Education and a
series of Senate hearings as they capture a growing share of
federal student aid dollars and their graduates continue to default
on loans at alarming rates.
Most recently, the U.S. Government Accountability Office issued
a report showing that recruiters at all 15 schools the agency
visited undercover had provided misleading or even fraudulent
information to help boost enrollment.
The stocks of the for-profit educators have suffered as a result
of the increased scrutiny, with many hitting multiyear lows last
month. While the stocks have bounced back a bit--Apollo shares are
up 16% from their August low--the schools need to improve their
image with the public and investors, among other things, to
resurrect depressed valuations and share prices.
Apollo has been reworking its compliance systems for nearly 18
months, reviewing training manuals, improving student services
technology and bringing in a team of fraud examiners and lawyers
when admissions officers overstep boundaries. But it accelerated
the initiative last month after the GAO report fingered two of its
campuses for bad recruiting practices, Apollo spokesman Ryan Rauzon
said in detailing some of the company's plans.
Among Apollo's most far-reaching programs is its bolstered
call-monitoring effort. The company monitors 300,000 phone calls
each week--up from 70,000 per month a year ago--after upgrading its
voice-recognition software to better detect words like
"accreditation" and "borrowing," which recruiters and financial aid
officers often discuss as they encourage prospective students to
enroll.
The use of those words isn't illegal. But telling students that
certain programs are accredited when they aren't, or claiming that
graduates will be able to repay large loans with ease, may put
schools in murky ethical waters. Colleges are barred from basing
recruiters' compensation solely on how many students they enroll,
but many schools still give that metric some weight. As a result,
recruiters often feel pressured to pitch their products hard.
Apollo said that as of Sept. 1, it no longer ties any
compensation to enrollment success, but rather recruiters are paid
based on feedback from current and prospective students.
In the past few weeks, Apollo has also reviewed its recruiter
training manuals and launched a "search and seizure" operation to
remove any materials from admissions offices that may encourage
inappropriate behavior, according to Rauzon.
To be sure, Apollo isn't the only school saying it is making
changes. But as the largest company in the industry--its student
body of 476,000 dwarfs the next-largest, Education Management
Corp.'s (EDMC) 138,800--it is both a lightning rod for criticism
and seen as a leader for change.
"They've been trying to adhere to the spirit of everything, not
just the letter," Trace Urdan, managing director at Signal Hill
Capital Group, said of Apollo's reform efforts.
Washington Post Co.'s (WPO) Kaplan University has suspended new
enrollment at its two campuses cited in the GAO report and said it
will take "all necessary actions" against employees violating its
standards and code of conduct.
Corinthian Colleges Inc. (COCO) and Education Management, also
featured in the report, have said they run mystery shopping
programs. Tony Guida, Education Management's senior vice president
of strategic development and regulatory affairs, said the company
also is trying to make some information, such as graduation rates
and costs, more easily accessible online.
A representative from Corinthian wasn't immediately available to
comment.
-By Melissa Korn, Dow Jones Newswires; 212-416-2271;
melissa.korn@dowjones.com
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