Apollo Group's Phoenix To Be Subject Of Ed Dept Program Review

The U.S. Department of Education will conduct a review of Apollo Group Inc.'s (APOL) University of Phoenix, the latest in a series of investigations for the nation's largest for-profit college.

The review will look at the school's administration of federal student financial aid programs for the award years 2009-2010 and 2010 to present, the company said in a securities filing. University of Phoenix derives more than 80% of its revenue from Title IV federal student aid. An award year begins on July 1 and ends on June 30.

Apollo last week disclosed that the Securities and Exchange Commission's Enforcement Division has asked for information on Apollo's insider trading policies and practices, part of a larger informal inquiry first disclosed in October 2009. The SEC is looking at the company's policies alongside a chronology of its internal processing and availability of information regarding a prior program review. That review, begun in February 2009, was completed this past June with Apollo posting a $126 million letter of credit after the report cited the untimely return of some unearned funds. Apollo also reimbursed $660,000 to the Education Department.

Representatives from Apollo weren't immediately available for comment.

Separately, the Florida Attorney General's office last month launched a civil investigation of University of Phoenix and seven other for-profit schools, seeking information on allegations regarding financial aid misrepresentations, deceptive practices in recruitment, enrollment, accreditation, placement and other concerns.

Program reviews aren't uncommon and can be conducted at any school that receives Title IV federal aid, but being the subject of one can weigh heavily on a school. Reviews often drag on for months or even years with little or no communication from the Department of Education.

Grand Canyon Education Inc. (LOPE) said in a filing in July that it is the subject of a program review covering the 2008-2009 and 2009-2010 financial aid years. Also, Corinthian Colleges Inc. (COCO) is in the process of responding to a spring report on its Everest College Phoenix, in which the Education Department characterized certain findings as misrepresentations and a breach of fiduciary duty, the company said. The Education Department has also conducted site visits, the first step in a program review, at other Corinthian campuses within the last few years.

Shares of Apollo were off 2.1% to $37.65 in recent pre-market trading.

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

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