Apollo Group Governance Weakness Leads To Financial Problems

Apollo Group (APOL) issued their earnings and headlined their results by saying

“We are pleased with our first quarter results and continued enrollment growth, particularly among our core bachelor’s programs,” said Apollo Group Co-Chief Executive Officer and Apollo Global Chairman Greg Cappelli”

The emperor wears no clothes today. They snuck in a paragraph well into the press release just before the conference call detail and laid out the bomb shell that they are probably on the hook for $125 million because they are non compliant with returning government funds for students who have discontinued their studies. That’s code for failed or flunked out.

Apollo has the cash to deal with the financial ramifications. At issue is the business model which is commission driven to generate students. This earnings quarter commissions are up and you have to wonder if the sales staff disguised as career counsellors is on the hook for their share of failed students.

Further at issue is the board’s ability to lead. This is a major failure. You can argue about technicalities and Apollo will probably win some technical points in the argument. Investors do not want to be lead anywhere near a problem such as this. This morning they find that they are chin deep in ...

This is where the lead independent director should have been taking the lead and challenging management to ensure they are not in this difficulty. Below please find a brief career background on Mr. Dino J. DeConcini as laid out by Reuters. Judge for yourself if this was the right man for the job.

“Mr. Dino J. DeConcini serves as Lead Independent Director of Apollo Group Inc. He became a member of the Board of Directors of the Company in 1992. He currently serves as lead independent director, Chair of the Nominating and Governance Committee and a member of the Compensation Committee. From December 2006 to October 2007, Mr. DeConcini served as Chair of the Compensation Committee. He also served as a member of the Audit Committee from fiscal year 1996 to March 2009. From 2002 to 2008, Mr. DeConcini was Senior Vice President of Projects International, Inc., an international business consulting firm. From 1995 to 2000, Mr. DeConcini was the Executive Director, Savings Bonds Marketing Office, U.S. Department of the Treasury. From 1991 to 1993 and 1980 to 1990, Mr. DeConcini was a Vice President and partner of Paul R. Gibson & Associates, an international business consulting firm. Between 1981 and 1992, he was a member of the Board of Directors of the University of Phoenix, Inc. He served as a member of the Board of Directors of Arizona Public Service Company from 1980 to 1990. From 1979 to 1995, Mr. DeConcini was a shareholder and employee of DeConcini, McDonald, Brammer, Yetwin and Lacy, P.C., Attorneys at Law. He was Chief of Staff for the Governor of Arizona from 1975 through 1978. Mr. DeConcini was also Chairman of the Arizona Commission on the Arts from 1980 to 1983, and the founder and President of Arizonans for Cultural Development from 1983 to 1986. Mr. DeConcini is a graduate of the Georgetown University School of Foreign Service and the University of Arizona Law School.”