Statement

Statement on Motion to Dismiss False Claims Act Case
Phoenix, Arizona, March 22, 2007 — University of Phoenix, Inc., subsidiary of Apollo Group, Inc. (Nasdaq:APOL), today asked the United States District Court for the Eastern District of California to again dismiss the False Claims Act case brought by two former disgruntled employees, United States of America ex rel. Hendow v. University of Phoenix.

In the motion filed today, University of Phoenix demonstrates that it is no longer a proper defendant in the case. While the Court’s previous two dismissals of the matter were pending on appeal, the government administratively pursued and settled the allegations asserted in the case, constituting an “alternate remedy” to this action under the False Claims Act.

“Legal precedent makes clear that the government may choose one remedy or the other, but not both,” said Timothy J. Hatch of Gibson, Dunn and Crutcher LLP, counsel to University of Phoenix.

Under the False Claims Act, relators, or whistleblowers, sue as “partial assignees” of the government’s claims for alleged injuries to the government. The government may respond to such a case in any number of ways, including by avoiding the suit entirely and instead pursuing “any alternate remedy available to the government.” If the government goes this route, the False Claims Act provides that the suit is displaced by the alternate remedy proceedings and must be dismissed.

In United States of America ex rel. Hendow v. University of Phoenix, the relators filed their complaint on behalf of the government in March 2003. The Department of Justice declined to join in pursuing the matter several months thereafter. And instead, the U.S. Department of Education pursued an administrative “program review” of University of Phoenix based on the relators’ allegations. University of Phoenix believes that the resulting program review report, sent to the institution as a preliminary step in the program review process, was significantly flawed, internally inconsistent, irresponsible and untrustworthy. However, in an effort to avoid protracted administrative and legal challenges to the report, in September 2004 University of Phoenix decided to settle the matter for $9.8 million – less than 1 percent of its cash and cash equivalents at the time.

The Department of Education proceedings constitute the government’s pursuit of an alternate remedy under the statutory terms of the False Claims Act. As such, the relators’ claims cannot proceed and must be dismissed. All that remains for the Court to determine is how much, if any, of the $9.8 million may be awarded to the relators.

Previously, the Court twice dismissed this case, ultimately with prejudice, before it was reinstated by the Ninth Circuit Court of Appeals in September. University of Phoenix in January asked the United States Supreme Court to review the Ninth Circuit decision, as it dramatically expands the scope of the False Claims Act and conflicts with the rulings of other Circuit Court of Appeals. This statute, which is designed to remedy false or fraudulent claims for payment submitted to the federal government, increasingly is being abused as it includes a provision enabling those who bring these lawsuits to reap windfall rewards, from 15-30 percent of any recovery or settlement. If the Ninth Circuit’s decision is not corrected, it will expose all higher education institutions, as well as anyone who conducts business with the federal government, to an increase in meritless litigation and to the risk of substantial False Claims Act liability, which Congress never intended to authorize. A decision by the Supreme Court on whether to hear University of Phoenix’s case is expected in early spring.

A complete copy of University of Phoenix’s motion to dismiss is available in the Legal Information Center at www.apollogrp.edu.

About Apollo Group, Inc., parent company to University of Phoenix:
Apollo Group, Inc. has been providing higher education programs to working adults for more than 30 years. Apollo Group, Inc. operates through its subsidiaries: The University of Phoenix; Institute for Professional Development; The College for Financial Planning Institutes Corporation; and Western International University. The consolidated enrollment in its educational programs makes it the largest private institution of higher education in the United States. It offers educational programs and services at 100 campuses and 159 learning centers in 39 states, Puerto Rico, Washington D.C., Alberta, British Columbia, Netherlands and Mexico.

For more information about Apollo Group, Inc. and its subsidiaries, call (800) 990-APOL or visit Apollo on the company website at: www.apollogrp.edu.

< Back