Piper Jaffray Says Proposed Class Action On Apollo Group (APOL) May Be A "He Said She Said" Case

January 14, 2009 10:46 AM EST

Piper Jaffray comments on Apollo Group, Inc. (Nasdaq: APOL) following a proposed class action suit, which they say looks to be a "He Said She Said" case. The firm is maintained their Buy rating and $107 price target on APOL.

In the complaint, three former UOP students filed a complaint against Apollo Group, Inc. and The University of Phoenix, that with regard to students who dropped from their courses shortly after enrolling, University of Phoenix improperly returned the entire amount of the students' federal loan funds to the lender.

Commenting on management's response, Piper said, "Little was gleaned from our conversation with Apollo management yesterday as to the basis of the complaint. Management indicated it continues to adhere to the same strict formula for disbursement of Title IV funds as it has over the past several years. The company would not comment on any specifics of the proposed class action. Furthermore, the 10Q states the company has not accrued a liability associated with the complaint and intends to "vigorously oppose plaintiffs' allegations"."

Piper's analysts acknowledge that they are not attorneys, but suggested it is possible that Apollo may have "hard evidence" that may refute claims as to UOP's earned Titile IV tuition on behalf of the students. They say, "As a hypothetical example unrelated to the specific case at hand, a student may claim to have attended class for 3 weeks, however a professor's attendance log may indicate the student did not attend class. In this example, the school would return all Title IV funds as unearned tuition. Other "hard evidence" may be a student's verbal communication of withdrawal from a given course. If our speculation is even partially correct, this may lend itself to a "he said/she said" case, occupying a lot of court time and attorney fees. We will continue to pursue additional information regarding this complaint."

Yesterday, Citron Research raised questions about Apollo Group related to the suit.

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