Tracking
The Apollo Group
...from the Halls of Learning to Pot Smoking in the Halls
Sightings from The Catbird Seat
~ o ~
November 4, 2006
Apollo Group Inc.
A class action lawsuit was filed on behalf of the International Brotherhood of Teamsters Local 617 Pension and Welfare Funds against Apollo Group Inc. ("Apollo" or the "Company") (NASDAQ: APOL) and certain key officers and/or directors in the United States District Court for the District of Arizona. This action has been brought on behalf of persons who purchased or otherwise acquired Apollo securities during the period between November 28, 2001 and October 18, 2006 (the "Class Period").
The complaint alleges that during the Class Period, defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making materially false and misleading statements to artificially inflate the value of Apollo stock. Specifically, it is alleged that throughout the Class Period, the defendants represented to the Class that it issued stock options to management in accordance with all applicable laws and rules while, in fact, it "backdated" options granted to all levels of management.
On June 9, 2006, in the midst of a nation-wide options scandal in connection with the backdating of options, Apollo announced that it had performed a review of its stock option practices during fiscal 2000-2004 and initially concluded that it had "complied with all applicable laws," and it would hire an outside firm to review those conclusions. The Company flatly denied that it had backdated options. These statements were false and misleading when made because the defendants failed to disclose or indicate that they knew that the option grant process was deficient and could cause the Company to restate its financial statements.
The Company shocked the investing public when, on October 18, 2006, it disclosed that on June 23, 2006 the Company's Board of Directors appointed a special committee of two independent Board members to oversee the investigation of Apollo's stock option grant practices. Further, it was disclosed that the independent outside counsel retained by the special committee had themselves engaged independent accounting advisors to assist in the investigation.
In addition, the Company for the first time disclosed that "various deficiencies in the process of granting and documenting stock options have been identified to date."
Finally, and most unfortunately for Apollo shareholders, the Company disclosed for the first time that "the accounting impact of these matters has not been quantified. There can be no assurance that the results of the investigation will not require a possible restatement of the Company's financial statements when the potential errors are quantified and assessed."
The market reacted quickly to these announcements. Apollo's stock price plummeted to $37.55 per share from its prior day close of $48.68 per share, a 22.86% drop in one day, on massive volume of 28,738,800 shares, more than fifteen times more than the prior day's volume.
October 9, 2006
1 Lightning Bolt
By Phyllis Berman, Forbes
After the university then employing him passed on his idea, professor John Sperling took the plunge. In 1976, at the age of 55, he started the University of Phoenix, catering to already working grown-ups aiming to finish their schooling, add a credential or start a second career. Unlike most institutions of higher education, the corporate parent, Apollo Group (nasdaq: APOL - news - people ), would be flexible in scheduling classes, and it would make a profit.
In 1983 his son, Peter, joined the Phoenix-headquartered operation. The two of them were positioned perfectly for the explosive growth that came in adult and over-the-Internet education. The Sperling family business became the country's largest private university.
Four years after Apollo Group went public in 1994, Sperling père et fils made The Forbes 400 list. Except for a three-year break they have been on ever since, this year at $1.3 billion each (p. 232).
Were they smart or lucky? To us it looks like a desire to show the former over the latter was at least partly behind their decision a few years ago to reduce their active Apollo Group involvement and strike out on sharply different paths to make a splash with new ventures. The Sperlings wouldn't comment.
Early indication: more lucky than smart.
An important outside interest of John, 85, has been getting creatures--perhaps including himself--to live longer. (His Ph.D. from University of Cambridge is unrelated: It's in economics.) His main vehicle seems to be Exeter Life Sciences in Phoenix, where he lives.
For a $2,500 fee one unit, Kronos Group, offers patients a battery of 75 tests to determine how fast they're aging.
Another Sperling business, ViaGen, in Austin, Tex., clones farm animals.
A third, in Sausalito, Calif. and (groaningly) called Genetics Savings & Clone, stores DNA and will clone a customer's cat. The $32,000 price tag may be one reason the last entry on its Web page listing "our latest clones" is dated December 2004. (John spent a reported $2.3 million on a failed effort in Texas to clone Missy, his beloved pet dog.)
A committed liberal, John also published a call-to-action book during the 2004 election season entitled The Great Divide: Retro vs. Metro America. He and four coauthors describe how liberal blue states suck dry conservative red states. John funded a $2 million ad campaign for the book. You might recall the electoral outcome for George W. Bush and his fellow conservatives.
Business associates of Peter, 46, say an additional reason for his other interests was to show that he could thrive outside his father's considerable persona. (Peter has kept his board seat and senior vice president title at Apollo Group, although the corporate Web page doesn't list him among its executive officers.)
For three consecutive years he bought the most expensive house in San Francisco, including $32 million for an unfinished Pacific Heights palace with Gordon Getty and Larry Ellison as neighbors. After spending another $18 million, Peter just put the 22,000-square-foot house up for sale, for an optimistic $65 million.
Bay Area agents even talk about something called the Sperling Factor: "Everyone is expecting to get more for their homes than they are worth." Another Peter Sperling enterprise, Daedalus Real Estate Advisors, is developing resort property in Vail, Colo.
Peter and his family are said to spend most of their time in Santa Barbara, where he once attended the University of California (before earning an M.B.A. from the University of Phoenix). He bought a big house there and helped fund a school and a park.
Also in Santa Barbara: CallWave (nasdaq: CALL - news - people ), a communication services company of which Peter is chairman and a 19% owner. Since the end of 2004 the share price has dropped 80% to a recent $3. He is also chairman of and a large investor in Communication Services, a Phoenix firm that sites cell phone towers, and Ecliptic Enterprises, a small Pasadena, Calif. outfit that provides images from space for government and private customers.
Thus distracted, the pedagogic duo witnessed some serious slippage at their university venture. Growth slowed as baby boomers aged past their likely years of education. Federal regulators are now probing dubious stock option grants while various lawsuits allege violations of federal student loan programs and recruitment abuses. Apollo Group denies wrongdoing.
But from a peak of $98 in June 2004--the very same month John stepped down as chairman--shares have fallen to a recent $50, helping to turn a $3.9 billion family fortune into $2.6 billion. The drop appears to be many times the value of whatever John and Peter have created elsewhere. In January the Apollo Group chief executive was let go, and John returned as "acting executive chairman," a post he retains.
Right now the Sperlings could use a dose of both smarts and luck, if only to disprove that old saw that the fastest way to amass a small fortune is to first have a large one.
www.forbes.com/free_forbes/2006/1009/032.html
April, 1998
HIGH ON A LIE
Funded by Billionaires, the "Medical Marijuana" Movement
is Blowing Smoke in our Eyes
Reader’s Digest
One Saturday last September, 50,000 people, most of them teen-agers, crowded into the Boston Common for the eight annual Freedom Rally. Its organizers billed it as the largest marijuana-legalization event on the East Coast. Strolling through the crowd, holding a joint, was a 17-year-old high-school senior who said his name was Bill. "If they allow sick people to use it," he said, "it can't be that damaging."
Sharing a marijuana pipe with two friends, a 15-year-old named Nicole agreed. "Pot is harmless," she said. "It should be legalized because there are so many medical benefits. It helps you with a lot of things. It's the best."
An increasing number of young Americans agree. They have gotten this idea from a well-funded movement to legalize the "compassionate" use of marijuana. While every legitimate drug requires rigorous testing by the FDA before being approved, marijuana advocates are opting for medicine by popular vote. This year signatures are being gathered for medical-marijuana initiatives in a half-dozen states and the District of Columbia.
Marijuana's main active ingredient, THC, is effective in relieving nausea and inducing weight gain in cancer and AIDS patients. That is why the FDA has approved Marinol, a synthetic pill form of THC. But marijuana in its smoked form has never been shown in controlled scientific studies to be safe or effective. In fact, marijuana smoke contains over 2000 chemicals, many of which produce psychoactive reactions, cause lung damage and - in cancer and AIDS patients - increase the risk of pneumonia and weaken the immune system. Inhaling the smoke also disrupts short-term memory and leads to changes in the brain similar to those caused by heroin, cocaine and other highly addictive drugs.
"There is no conclusive scientific evidence that marijuana is superior to currently available medicines," says Dr. Eric Voth, chairman of the International Drug Strategy Institute in Omaha. "Medical marijuana is a scam that takes advantage of sick and dying patients."
Says Gen. Barry R. McCaffrey ( Ret. ), director of the Office of National Drug Control Policy, "Medical marijuana is a stalking-horse for legalization. This is not about compassion. This is about legalizing dangerous drugs."
"Daddy Warbucks" of Drugs
The legalization of marijuana and other drugs has been debated for more than 30 years, with a vast majority of Americans standing in opposition. Legalization supporters have used the argument that drugs are necessary for medical reasons. But now, for the first time, they have significant financial backing.
In the last six years a handful of America's wealthiest people have contributed $20 million to groups that promote medical marijuana or other radical drug-policy reforms. Billionaire financier George Soros is the biggest giver, donating more than $16 million. Others include Peter Lewis, CEO of Cleveland-based Progressive Corp., the nation's sixth-largest auto insurer, and John Sperling, president of the Apollo Group, a holding company that controls for-profit universities and job-training centers.
In an interview with Reader's Digest, the 76-year-old Sperling said he believes doctors should be allowed to prescribe all drugs, including heroin and LSD.
Lewis declined to be interviewed.
A spokesman for Soros said he does not support drug legalization. Nonetheless, Soros has donated millions since 1992 to groups led by people advocating it. Former Health, Education and Welfare Secretary Joseph A. Califano, Jr., calls him the "Daddy Warbucks of drug legalization."
Soros created a drug-policy institute called The Lindesmith Center and has funded it with $4 million. Its director, Ethan Nadelmann, Soros's point man on drug policy, has said he wants to "legalize the personal possession of drugs by adult Americans."
Soros has also given $6.4 million to the Drug Policy Foundation ( DPF ), a leading advocate for medical marijuana. Its stated mission is "publicizing alternatives to current drug strategies." Its founder, attorney and college professor Arnold Trebach, calls himself a "flat-out legalizer" who advocates the repeal of current drug laws.
Richard J. Dennis, a 49-year-old Chicago commodities trader and member of DPF's board of directors, supports both medical marijuana and legalization in general. In fact, says Dennis, "I'd like to see legalization for adults for all drugs, including heroin."
On DPF's advisory board is Harvard Medical School psychiatrist Lester Grinspoon, a leading advocate of medical marijuana for over 25 years. He compares marijuana's potential benefit to that of penicillin, predicting, "It will be the wonder drug of the new millennium."
Soros, Lewis and Sperling gained their biggest victory in November, 1996 when California voters passed Proposition 215, also knows as the Compassionate Use Act. It allows pot to be grown and smoked for "any illness for which marijuana provides relief." There are no age restrictions. "Illness" is loosely defined and can include headaches, chronic pain and arthritis. A doctor's oral recommendation is all that is required.
The principal author of the California initiative was 52-year-old Dennis Peron, a San Francisco "medical pot club" owner who's been arrested 15 times on marijuana charges. Peron says he worded the initiative vaguely because he believes "all marijuana use is medical."
Peron's Cannabis Cultivators' Club is the state's largest pot club, taking in over $20,000 a day. One day last fall, Peron wandered the club greeting patrons and handed one a bulging quarter-pound bag of marijuana.
Standing in line at Peron's smoke-filled club to buy an eighth of an ounce of high-grade Mexican marijuana was a 39-year-old named Anthony. Under California's law, Anthony is consider a "seriously ill patient" who can purchase and smoke pot. He tokes up four or five times a day.
When asked about his ailment, Anthony answered: "Officially, hernia discomfort from overstrenuous intercourse. Actually, I can't feel it." He said the club admitted him without any medical referral. A self-described "potaholic," Anthony has smoked dope since he was 16. My problems, he conceded, "are related to a general life-style kind of thing."
Peron's club has operated for years, despite violating state and federal drug laws. In August 1996, state drug agents raided it, seizing 86 pounds of pot and $62,000. "The club was running a sophisticated illegal drug-distribution network," said a spokesman of California Attorney General Dan Lungren. A grand jury indicated Peron, and he awaits trial on felony drug charges. Meanwhile, Peron is running for governor of California.
Peron's initiative never would have made it to the ballot without the help of Soros, Lewis and Sperling. California requires 433,269 valid petition signatures before a "citizen's initiative" can be placed on the ballot. As the deadline neared, Peron and his unorganized group of volunteers had collected only 40,000.
That is when Ethan Nadelmann of Soros's Lindesmith Center stepped in. He helped create Californians for Medical Rights, a sophisticated campaign organization that pushed the medical-marijuana initiative. Soros and Lewis pored $400,000 into the group, which paid professional signature gatherers who, in 90days, obtained more than 700,000 signatures.
Once the measure was on the ballot, Soros, Lewis and Sperling contributed $450,000 for advertising. Commercials featured emotional appeals for relief through the use of marijuana. The ads never mentioned that Proposition 215 would allow marijuana to be smoked for any condition, without age restriction and without a prescription.
One of the numerous medical-marijuana clubs that opened as a result of Peron's measure was the Dharma Producers Group in San Francisco, which bragged that it offered "medical marijuana with a Tibetan touch." The club's "medical director," a pony-tailed 52-yar-old named Lorenzo Pace, laughed when he explained his medical-marijuana credentials: "I did preliminary research all through the '60s.:
California for Medical Rights has since changed its name to Americans for Medical Rights. Today it is leading a campaign to place medical-marijuana initiatives on state ballots across the country.
Rx: LSD. - While Californians were voting on medical marijuana, their neighbors in Arizona were considering an even more radical initiative. The Drug Medicalization, Prevention and Control Act of 1996 proposed to legalize not only marijuana but also more tan 100 other drugs - including heroin, LSD and PCP ( angel dust ) - for medical use.
Arizona's initiative was sold to voters as a way to get tough on violent criminals. How? Open up jail space by paroling all first- and second-time drug offenders. This ignored the fact that virtually all of the 1200 inmates affected had plea-bargained down from more serious charges or had prior felony records.
In Arizona, Sperling spearheaded the campaign. He, Soros and Lewis contributed a total of $1.2 million; the DPF gave $303,000. This accounted for 99 percent of the initiative's total funding. As in California, much of this money paid for a massive media campaign. Opponents of the initiative, caught unprepared, did not run a single advertisement.
The measure passed, but a post-election survey revealed that Arizona voters had been badly misled. Seventy-four percent did not believe doctors should be able to prescribe drugs such as heroin, PCP and LSD, as he proposition allowed; 70 percent agreed that the initiative would give children the impression that drugs were also acceptable for recreational use. The state legislature subsequently passed a statute that effectively overrode the initiative.
Fighting Back. - The organizers of Arizona's initiative moved to place a similar measure on the ballot in Washington State. Sperling, Lewis and Soros contributed a total of more than $1.5 million.
Despite being outspent more than ten to one, opponents of the Washington initiative were not about to be caught unprepared. They took every opportunity to stress that the measure was not about compassion, but about legalizing dangerous drugs. Last November voters rejected the measure.
The defeat in Washington has not sidetracked plans for similar medical-marijuana initiatives in other states. Battlegrounds include Hawaii, Florida, Kansas, Main and Alaska.
An Oregon initiative would not only legalize use of many drugs but also permit the sale of marijuana in state liquor stores.
In Washington, D.C., Initiative 59 would allow up to four caregivers, including "best friends," to cultivate pot for a "seriously ill" person. Organizers are hoping that passage of these initiatives will spur Congress to legalize medical marijuana under federal law.
Says Dr. Robert DuPont, a former director of the National Institute on Drug Abuse: "Never in the history of modern medicine has burning leaves been considered medicine. Those in the medical-marijuana movement are putting on white coats and expressing concerns about the sick. But people need to see this for what it is: a fraud and a hoax."
www.mapinc.org/drugnews/v98.n209.a06.html
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Last update May 17, 2007 by The Catbird Seat