03.09.16

In Letter to Education Department, Durbin Raises Concerns About Apollo Sale

[WASHINGTON, D.C.] – In a letter to Under Secretary Ted Mitchell at the Department of Education, U.S. Senator Dick Durbin (D-IL) today questioned how the sale of Apollo Education Group to a group of private investors will impact students and taxpayers at a time when the University of Phoenix – owned by Apollo – has come under increased scrutiny from state and federal regulators.

   

“While it is still unclear what the transaction and new ownership will mean for academic quality and student outcomes, it is clear that it means less information about the company and its operations will be required to be made publicly available,” wrote Durbin.  “No longer will the company be required to make public information about its finances, state and federal investigations and lawsuits, or other key aspects of its operations.  Essentially, a company that receives more than $2 billion annually from federal taxpayers – nearly 80 percent of its revenue – is going dark.”

   

According to public filings with the Securities and Exchange Commission, Apollo Education Group is under investigation by several state Attorneys General.  Recently, the California Attorney General sent the company a second Investigative Subpoena “relating to marketing, recruiting, compensation of enrollment advisors, complaints, financial aid, compliance, accreditation, other governmental investigations, private litigation and other matters, as well as additional information relating to marketing and services to members and former members of the U.S. military and California National Guard.”  The company is being investigated by the Securities and Exchange Commission, the Department’s own Inspector General, and the Federal Trade Commission.  Finally, the company also was recently sanctioned by the Department of Defense for violations of voluntary military education program rules.

   

“Prospective students and current students should not be kept in the dark about investigations and potential misconduct involving the University of Phoenix.  The Department of Education can play an important role in making sure students and taxpayers are aware of this and other information,” Durbin wrote.

   

Text of today’s letter is below.

   

                                                            March 9, 2016

 

   

The Honorable Ted Mitchell

Under Secretary

U.S. Department of Education

400 Maryland Avenue, SW

Washington, DC 20202

   

Dear Under Secretary Mitchell:

   

            I write today to express my concerns with the potential sale of Apollo Education Group, which owns University of Phoenix, to a group of investors including Apollo Global Management and the Vistria Group.  I also write to seek clarification about the scope of information that students and taxpayers will be able to obtain about the company should it go private. 

   

            Earlier this month, Apollo Education Group announced a $1.1 billion deal, which if finalized, will take the country’s largest for-profit education company private.  While it is still unclear what the transaction and new ownership will mean for academic quality and student outcomes, it is clear that it means less information about the company and its operations will be required to be made publicly available.  No longer will the company be required to make public information about its finances, state and federal investigations and lawsuits, or other key aspects of its operations.  Essentially, a company that receives more than $2 billion annually from federal taxpayers – nearly 80 percent of its revenue – is going dark.

   

            And it’s happening at a time when the University of Phoenix has come under increased scrutiny from state and federal regulators.  According to public filings with the Securities and Exchange Commission, Apollo Education Group is under investigation by several state Attorneys General.  In fact, the California Attorney General just sent the company a second Investigative Subpoena “relating to marketing, recruiting, compensation of enrollment advisors, complaints, financial aid, compliance, accreditation, other governmental investigations, private litigation and other matters, as well as additional information relating to marketing and services to members and former members of the U.S. military and California National Guard.”  In addition, the company is being investigated by the Securities and Exchange Commission, the Department’s own Inspector General, and the Federal Trade Commission.  The company also was recently sanctioned by the Department of Defense for violations of voluntary military education program rules.

   

Prospective students and current students should not be kept in the dark about investigations and potential misconduct involving the University of Phoenix.  The Department of Education can play an important role in making sure students and taxpayers are aware of this and other information.  Accordingly, please answer the following questions:

   

Please describe any information that Apollo Education Group is currently required to disclose to the public as a publicly traded company that it would not be required to disclose as a privately held company.

   

What Department of Education reporting requirements exist to replace the data Apollo Education Group will no longer be required to provide publicly if the company becomes private?  Will the Department seek any assurances by the new owners to provide additional information to it or the public to increase transparency, especially in the areas of executive compensation and disclosing state and federal investigations and lawsuits?

   

If Apollo Education Group becomes a privately held company, will the Department inform students and taxpayers about information that the Department learns about government investigations or lawsuits involving the company or its schools? 

     

Thank you for your consideration of my concerns and I look forward to your prompt response.

   

                                                Sincerely,