Case 3:12-cv DMS-RBB Document 1 Filed 07/26/12 Page 2 of 23

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2 Case :-cv-0-dms-rbb Document Filed 0// Page of!i '' ' 0 Plaintiff, David Stein ("Plaintiff'), alleges the following based upon Plaintiff's personal knowledge as to himself and the investigation of Plaintiff's counsel, which included, among other things, a review of public documents, conference call transcripts and announcements by Defendant Bridgepoint Education, Inc. ("Bridgepoint," "BPI," or the "Company"), United States Securities and Exchange Commission ("SEC") filings, wire and press releases published by and regarding Bridgepoint, and securities analysts' reports and advisories about the Company. Plaintiff believes that substantial additional evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. NATURE OF THE ACTION. This is a federal class action on behalf of purchasers of the common stock of Bridgepoint who purchased or otherwise acquired Bridgepoint common stock between May, and July,, inclusive (the "Class Period"), seeking to pursue remedies under the Securities Exchange Act of (the "Exchange Act").. Bridgepoint is afor-profit provider of postsecondary education services with its headquarters in San Diego, California.. The Company's two regionally accredited academic institutions, Ashford University ("Ashford") and the University of the Rockies (together, the "BPI Institutions"), provide education programs both online and at their physical campuses located in Clinton, Iowa and Colorado Springs, Colorado.. The BPI Institutions, and in turn, Bridgepoint, derive the substantial majority of their revenue from various federal student financial assistance programs under Title IV of the Higher Education Act of ("Title IV").. Access to Title IV funds requires that the BPI Institutions be accredited by one of several Department of Education-approved bodies. Accordingly, continued accreditation is crucial for BPI and it could not continue to operate without accreditation.. The BPI Institutions are currently accredited by the Higher Learning Commission of the North Central Association of Schools and Colleges (the "HLC"), the accrediting body that COMPLAINT FOR VIOLATION OF THE - - DOCS\v I

3 Case :-cv-0-dms-rbb Document Filed 0// Page of accredits institutions in the central U.S., where the BPI Institutions' physical campuses are ~ located.. Due to the enormous growth of Bridgepoint's online education program (based in California), and in light of newly adopted HLC rules requiring HLC-accredited institutions like Bridgepoint to have a "substantial presence" in the central U.S., Bridgepoint decided in 0 to change its primary accreditor from the HLC to the Accrediting Commission for Senior Colleges 0 and Universities of the Western Association of Schools and Colleges ("WASC"), the accrediting body for California colleges and universities.. In January 0, Ashford submitted its application for the first stage of the WASC accreditation process. In May, WASC deemed Ashford eligible to proceed to the second, much more intensive stage of the accreditation process, and BPI publicly announced that fact on May, on a conference call with investors.. Unbeknownst to investors until July, however, WASC also informed Bridgepoint in May that it had "concerns" about Ashford's ability to satisfy certain accreditation criteria. WASC further informed BPI which criteria would merit special attention in the second phase of the accreditation process, such as student retention and an adequate number of faculty. 0. On July,, BPI filed a Form -K with the SEC reporting that WASC had provided formal notice on July, that Ashford's application for accreditation had been denied.. In addition, BPI disclosed that the HLC had informed Ashford that it would be required to demonstrate that it had a "substantial presence" in the HLC's geographic region not later than December, in order to comply with the HLC's jurisdictional requirements.. On news of the WASC accreditation denial, Bridgepoint's stock price dropped $. per share to close at $. per share on July,, a decline of nearly %.. The WASC accreditation denial also triggered further regulatory action by the HLC. On July,, the Company disclosed that Ashford had received a letter from the HLC COMPLAINT FOR VIOLATION OF THE - - DOCS\v

4 Case :-cv-0-dms-rbb Document Filed 0// Page of requiring Ashford "to provide certain information and evidence of compliance with HLC accreditation standards" in light of the recent determination by WASC.. On this news, Bridgepoint's stock declined an additional $. per share or nearly %, to close at $. per share on July,.. As further detailed below, during the Class Period, Defendants made false and misleading statements and omitted material information concerning the accreditation status of 0, ' ' the BPI Institutions that misled investors concerning the risks to their continued accreditation.. As a result of Defendants' wrongful acts and omissions, Plaintiff and other Class members have suffered significant damages. JURISDICTION AND VENUE. The claims asserted herein arise under and pursuant to 0(b) and (a) of the Exchange Act, U.S.C. j(b) and t(a), and SEC Rule lob-, C.F.R. 0.Ob-.. This Court has jurisdiction over the subject matter of this action pursuant to U.S.C. and of the Exchange Act.. Defendant Bridgepoint's principal executive offices are located at 00 Evening Creek Drive North, Suite 00, San Diego, CA.. Venue is proper in this District pursuant to U.S.C. (b), because the Company's principal executive offices are located in this District, the Defendants do business in this District, and many of the acts and practices complained of herein occurred in substantial part in this District.. In connection with the acts alleged in this Complaint, Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including, but not limited to, the mails, interstate telephone communications and the facilities of the national securities markets. PARTIES. Plaintiff purchased Bridgepoint common stock as set forth in the accompanying certification, and has been damaged thereby. COMPLAINT FOR VIOLATION OF THE - - DOCS\v

5 Case :-cv-0-dms-rbb Document Filed 0// Page of 0 ''. Defendant Bridgepoint is a for-profit provider of postsecondary education services incorporated in Delaware in and headquartered in San Diego, California. Bridgepoint owns and operates two academic institutions, Ashford University and the University of the Rockies.. Defendant Andrew S. Clark ("Clark") founded the Company in 0. He is, and at all relevant times was, Chief Executive Officer ("CEO") and President. During the Class Period, Defendant Clark sold, shares of Bridgepoint stock for proceeds of $,,.. Defendant Daniel J. Devine ("Devine") is, and at all relevant times was, Bridgepoint's Chief Financial Officer and Executive Vice President. During the Class Period, Defendant Devine sold,00 shares of Bridgepoint stock for proceeds of $,,.. Defendant Jane McAuliffe ("McAuliffe") is, and at all relevant times was, Bridgepoint's Chief Academic Officer and Executive Vice President. During the Class Period, Defendant McAuliffe sold 0,000 shares of Bridgepoint stock for proceeds of $,0,. Defendants.". The defendants described in - are referred to herein as the "Individual. By virtue of their positions at Bridgepoint, the Individual Defendants had access to the adverse and undisclosed information about Bridgepoint's accreditation status. The Individual Defendants directly participated in the management of Bridgepoint, were directly involved in the operations of Bridgepoint at the highest levels, were privy to information concerning Bridgepoint and were involved in the dissemination of the materially false and misleading statements and information alleged herein. CLASS ACTION ALLEGATIONS. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedure (a) and (b)() on behalf of a class consisting of all persons or entities who acquired Bridgepoint common stock during the Class Period, and who were damaged thereby (the "Class"). Excluded from the Class are Defendants, the officers and directors of Bridgepoint, members of the Individual Defendants' immediate families and their legal representatives, heirs, successors or assigns and any entity in which Defendants have or had a controlling interest. COMPLAINT FOR VIOLATION OF THE - - DOCS\v

6 Case :-cv-0-dms-rbb Document Filed 0// Page of 0 0. The members of the Class are so numerous that joinder of all members is impracticable. During the Class Period, Bridgepoint common stock was actively traded on the New York Stock Exchange in an efficient market. While the exact number of Class members is unknown to Plaintiff at this time and can only be ascertained through appropriate discovery, Plaintiff believes that there are hundreds if not thousands of members in the proposed Class. Bridgepoint has more than million shares outstanding.. Plaintiff's claims are typical of the claims of the members of the Class, as all members of the Class are similarly affected by Defendants' wrongful conduct in violation of federal law as described herein.. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class action securities litigation. Plaintiff has no interests which conflict with those of the Class.. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are: (a) whether the Exchange Act was violated by Defendants' acts as alleged herein; (b) whether public statements made by Defendants to the investing public misrepresented or omitted material facts; (c) whether Defendants' statements omitted material facts necessary to make the statements made, in light of the circumstances under which they were made, not misleading; (d) whether Defendants knew or deliberately disregarded that their statements were false and misleading; (e) whether the price of Bridgepoint common stock was artificially inflated during the Class Period; and (~ to what extent the members of the Class have sustained damages and the proper measure of damages. COMPLAINT FOR VIOLATION OF THE - - DOCS\v I

7 Case :-cv-0-dms-rbb Document Filed 0// Page of 0. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy, since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the management of this action as ~ a class action. BACKGROUND. Bridgepoint is a for-profit provider of postsecondary education services headquartered in San Diego, California.. Bridgepoint owns and operates two regionally accredited academic institutions, Ashford University and the University of the Rockies, which offer associate's, bachelor's, master's and doctoral programs in the disciplines of business, education, psychology, social sciences and health sciences. The BPI Institutions provide online education programs as well as programs at traditional campuses located in Clinton, Iowa and Colorado Springs, Colorado.. The BPI Institutions derive the substantial majority of their revenue from various federal student financial assistance programs under Title IV of the Higher Education Act of. In the years ended December,, 0 and 0, Ashford University derived.%,.0% and.%, respectively, and the University of the Rockies derived.0%,.% and.%, respectively, of their respective revenues from Title IV programs administered by the Department.. To participate in Title IV programs, a school must obtain and maintain authorization by the state education agency or agencies where it is physically located, be accredited by an accrediting agency recognized by the Department of Education and be certified by the Department of Education as an eligible institution.. Accreditation therefore is crucial to the viability of BPI. Bridgepoint stated in its Form 0-K that "[]oss of accreditation would denigrate the value of our institutions' educational programs and would cause them to lose their eligibility to participate in Title IV COMPLAINT FOR VIOLATION OF THE - - DOCS\v

8 Case :-cv-0-dms-rbb Document Filed 0// Page of 0 I ' programs, which would have a material adverse effect on our enrollment, revenues and results of operations." Form 0-K, at. 0. Ashford University and the University of the Rockies have been institutionally accredited since 0 and 0, respectively, by the HLC, one of six regional accrediting agencies that accredits colleges and universities in the United States. The HLC accredits degreegranting post-secondary educational institutions in the North Central region, which encompasses Arkansas, Arizona, Colorado, Iowa, Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri, North Dakota, Nebraska, Ohio, Oklahoma, New Mexico, South Dakota, Wisconsin, West Virginia and Wyoming.. An accredited institution is subject to periodic review by its accrediting agency to determine whether it continues to meet the performance, integrity, quality and other standards required for accreditation. An institution that is determined not to meet the standards of accreditation may have its accreditation revoked or not renewed.. In November 0, as a result of Bridgepoint's initial public offering, the BPI Institutions participated in a "change of control" accreditation visit from the HLC. At that time, the HLC renewed the BPI Institutions' accreditation status and stated that their next comprehensive evaluations would take place in -.. In June 0, the HLC revised its bylaws to provide that institutions must have a "substantial presence" in the North Central region. Institutions would be required to satisfy this jurisdictional requirement as of the time of their next comprehensive evaluation, "except where the commission has information to indicate that an institution does not meet this requirement and initiates, subsequent to July,, an inquiry to review jurisdiction." Form 0-K at.. In its Form 0-K, Bridgepoint stated that because the BPI Institutions have business operations, administration and leadership located outside of the North Central region, BPI was uncertain whether the HLC would determine that the BPI Institutions have a "substantial presence" in the North Central region under the definition in the adopted new policy. Form 0-K at. COMPLAINT FOR VIOLATION OF THE - - DOCS\v

9 Case :-cv-0-dms-rbb Document Filed 0// Page of ' 0. As such, Bridgepoint sought to change its primary accreditor from HLC to WASC. WASC provides accreditation for colleges and universities offering the baccalaureate degree and above in California, Hawaii, Guam and the Pacific Basin.. WASC's process of accreditation is comprised of two stages. The first stage is "eligibility," a preliminary screening to determine whether an institution should proceed to the second stage, the more rigorous and formal process of "candidacy" for accreditation. WASC, How to Become Accredited: Procedures Manual for Eligibility, Candidacy, and Initial Accreditation, at (hereinafter"htba").. During the eligibility stage, WASC screens each institution "to determine whether it is ready to begin the formal process of data collection and institutional reflection required for an accreditation review." HTBA, at. The process entails the institution's submission of an Eligibility Report which addresses each of the WASC Eligibility Criterion. HTBA, at.. After WASC staff completes its review of the eligibility application, the "staff will prepare an action letter (the formal document WASC uses to communicate its actions), detailing the panel's findings regarding the institution's standing on each of the Criteria. There are three possible outcomes following a review by the ERC: approval, deferral, or denial." HTBA, at.. A determination of eligibility is not an assurance that the institution will be ~ accredited: ~ HTBA, at. A determination of Eligibility is not an official status with the [WASC] Commission but only the outcome of a preliminary review that enables an institution to proceed with the planning, data collection, institutional selfreflection, and evaluation required for Candidacy and Initial Accreditation reviews. By granting Eligibility, no assurance is made that an institution will eventually be granted either Candidacy or Initial Accreditation. These judgments will be made in light of additional institutional presentations and on-site reviews to assess the institution's alignment with the WASC Standards of Accreditation. 0. In September 0, Bridgepoint announced that Ashford had initiated the process of seeking accreditation from WASC.. Ashford submitted its eligibility application to WASC in January. COMPLAINT FOR VIOLATION OF THE - - DOCS\v

10 Case :-cv-0-dms-rbb Document Filed 0// Page 0 of! 0 ''. On or about May,, Ashford received formal notice from WASC stating that Ashford met the eligibility criteria and could proceed to the second stage, assessment of Ashford's candidacy for accreditation.. Undisclosed to investors until July,, however, WASC also "identified several areas for attention" at the time it granted eligibility, and informed BPI in letters dated May, and June, that it had "concerns" regarding Ashford's potential accreditation. It further warned that certain "areas for attention" would need to be addressed in Ashford's candidacy for accreditation. These areas included: the role of the governing board and the relationship of Ashford with BPI; the sufficiency of the full-time faculty, and faculty policies and governance; the adequacy of staffing.and support to promote student success; detailed data on, and analyses of, student retention and graduation; detailed information on recruitment and admissions practices; and financial and strategic plans.. As later stated in the WASC letter denying accreditation, dated July, (the "WASC Denial Letter"), WASC gave Ashford "early notice" about concerns WASC had with Ashford's ability to satisfy certain accreditation criteria: Notably, Ashford was notified about WASC concerns in each of these areas by WASC and its Eligibility Review Committee in letters to Ashford dated May and June,, providing Ashford with early notice about these concerns.... In granting eligibility to apply for accreditation, the WASC Eligibility Review Committee and staff identified several areas for attention prior to the site visit under the WASC Standards and asked that these areas be addressed in the Ashford self-study report. These areas included the role of the governing board and the relationship of Ashford and its owner Bridgepoint Education, Inc.; the sufficiency of the full-time faculty, and faculty policies and governance; the adequacy of staffing and support to promote student success; detailed data on, and analyses of, student retention and graduation; detailed information on recruitment and admissions practices; and financial and strategic plans. Following Ashford's eligibility review, and leading up to the site team visit, WASC staff was in frequent communication with University representatives about the revlew process. '~ WASC Denial Letter, at -. In addition, a report later issued by the WASC team that performed the on-site visit at Ashford as part of the accreditation process ("WASC Team ReporY') noted that WASC's letter of June, gave Ashford further notice of areas needing "close attention" in order to demonstrate compliance with accreditation standards: COMPLAINT FOR VIOLATION OF THE - - DOCS\v

11 Case :-cv-0-dms-rbb Document Filed 0// Page of 0 In its letter accepting the Ashford University Application for Initial Accreditation, WASC's Executive Vice President outlined the specific areas of focus that would need close attention during the Spring accreditation visit in order to demonstrate substantial compliance with all standards. The visiting team considered these items in the WASC letter of June, as "prior issues raised" in this Initial Accreditation Plan B Report: BPPE: Documentation of exemption from California's Bureau of Private Postsecondary Education. Governing Board: Legal documents ensuring conformity with WASC standards for an independent governing board. Student Services and Administrative Staffing: Ashford must demonstrate sufficient personnel to provide administrative and staff support and to ensure that students have effective academic and cocurricular support for the adult "higher-risk" student population in the online division. WASC will expect a high level of support for these online students to promote completion and learning. Faculty Sufficiency and Policies Sufficiency of full-time faculty for online division including a staffing plan with ratios to ensure adequacy of oversight during plans for growth A systematic method for integrating adjunct faculty into faculty roles beyond teaching Policies and processes regarding faculty support and participation regarding professional development, scholarship, workload, decisionmaking and commitment to the University Faculty Governance: Evidence that the faculty has a defined and robust role in overseeing the quality of programs, assessing student learning, advising students, and setting academic policy. Library and Information Resources: Student access and use of information and library resources as well as qualified and sufficient library staffing to support online students Financial Resources and Accountability: Detailed information for both Bridgepoint and Ashford related to financial sufficiency, management and annual independent audits. Strategic Planning: Detailed plans and projections for achievement of goals and growth. Student Learning and Achievement: Clear demonstration of systems, processes, methods, tools, plans, results, and findings regarding student learning outcomes at ali levels. Graduation and Retention Rates: Disaggregated information on retention, persistence and graduation compared with other institutions to analyze the adequacy of the rates. COMPLAINT FOR VIOLATION OF THE - O - DOCS\v

12 Case :-cv-0-dms-rbb Document Filed 0// Page of 0 Admissions and Recruitment: Detailed information regarding personnel, scripts, compensation plans, training and oversight, and branding for both on-ground and online divisions. Lawsuits and Investigations: Acomprehensive listing of all legal actions and investigations by governmental or licensing agencies that have recently been completed or on-going.. In December, Ashford submitted its application for candidacy for accreditation, which included an institutional self-study and related materials. WASC performed a site visit in March.. On July,, Bridgepoint filed a Form -K stating that on July,, Ashford received official notice from WASC that its application for initial accreditation was denied.. According to the WASC Denial Letter, it did so because Ashford had not "complied with multiple aspects of the Standards of Accreditation at a substantial level, which is the requisite degree of compliance for initial accreditation," particularly in the following areas: (a) Student retention and completion, methods of tracking student progress, and support for student success; objectives; (b) Alignment of resource allocations with educational purposes and (c) A sufficient core of full-time faculty members, and a faculty model that provides for faculty development and oversight of academic policies and ensures the integrity and continuity of academic programs; (d) An effective system of program review; assuring academic rigor; and (e) An effective system for assessing and monitoring student learning and (~ An empowered and independent governing board and a clear and acceptable relationship with the parent company.. In its July, Form -K, BPI also disclosed that on June,, the HLC informed Ashford that the institution must demonstrate, no later than December,, that it COMPLAINT FOR VIOLATION OF THE - - DOCS\v

13 Case :-cv-0-dms-rbb Document Filed 0// Page of 0 has a "substantial presence," as defined by commission policy, in the North Central region and accordingly is within the HLC's jurisdiction. 0. Upon disclosure of the WASC accreditation denial, Bridgepoint's stock price dropped $. per share to close at $. per share on July,, a decline of nearly %.. Following WASC's denial of accreditation, the HLC acted to review Ashford's accreditation. On July,, the Company disclosed that Ashford had received a letter from the HLC requiring Ashford "to provide certain information and evidence of compliance with HLC accreditation standards" in light of the recent determination by WASC.. On this news, Bridgepoint's stock declined an additional $. per share or nearly %, to close at $. per share on July,._ DEFENDANTS' FALSE AND MISLEADING STATEMENTS ISSUED DURING THE CLASS PERIOD. Ashford, and by extension Bridgepoint, rely heavily on federal Title IV financial aid programs as a major source of revenue. As a prerequisite for their participation in Title IV programs, accreditation is crucial to the viability of Ashford and Bridgepoint.. Bridgepoint confirmed the importance of its institutions' accreditations in its Form 0-K, stating that "[]oss of accreditation would denigrate the value of our institutions' educational programs and would cause them to lose their eligibility to participate in Title IV programs, which would have a material adverse effect on our enrollment, revenues and results of operations." Form 0-K, at.. In November 0, as a result of Bridgepoint's initial public offering, the BPI Institutions participated in a "change of control" accreditation visit from the HLC. At that time, the HLC renewed the BPI Institutions' accreditation status and stated that their next comprehensive evaluations would take place in -.. On May,, the beginning of the Class Period, Bridgepoint held a conference call with analysts to discuss financial results for its first quarter ended March,. As part of that call, Defendant McAuliffe stated that WASC had approved Ashford's eligibility application: COMPLAINT FOR VIOLATION OF THE - - DOCS\v

14 Case :-cv-0-dms-rbb Document Filed 0// Page of 0 ~~~ I would also like to update you on the status of Ashford University's migration to WASC accreditation. As you know, Ashford University has applied for eligibility, which is a preliminary review of an institution to determine that an institution is potentially accreditable. WASC has reviewed~the application and determined that Ashford University is eligible to proceed with an application for candidacy for accreditation. This is a preliminary finding that indicates that the University can proceed to the next step, which includes writing aself-study in preparation for a site visit. The team is very excited to be moving forward in the process.. On May,, Bridgepoint filed a Form -K stating that WASC had approved ~ its eligibility application: On May,, Ashford University received a letter from WASC stating that the WASC Eligibility Review Committee has reviewed the application and determined that the university meets all of the WASC eligibility criteria and may proceed with an application for initial accreditation. Additionally, the letter confirmed that Ashford University is authorized to pursue WASC accreditation under Pathway B, the process for institutions that currently hold accreditation with an institutional accreditor recognized by the US Department of Education.. Neither the May, conference call nor the Form -K filed May, revealed that WASC had notified Ashford of concerns it had about certain accreditation criteria.. Specifically, as later disclosed by WASC in its July, Denial Letter, at, III, ~ WASC had "concerns" about which it informed Ashford in May and June : '' Notably, Ashford was notified about WASC concerns in each of these areas by WASC and its Eligibility Review Committee in letters to Ashford dated May and June,, providing Ashford with early notice about these concerns.... In granting eligibility to apply for accreditation, the WASC Eligibility Review Committee and staff identified several areas for attention prior to the site visit under the WASC Standards and asked that these areas be addressed in the Ashfcsrd self-study report. These areas included the role of the governing board and the relationship of Ashford and its owner Bridgepoint Education, Inc.; the sufficiency of the full-time faculty, and faculty policies and governance; the adequacy of staffing and support to promote student success; detailed data on, and analyses of, student retention and graduation; detailed information on recruitment and admissions practices; and financial and strategic plans. Following Ashford's eligibility review, and leading up to the site team visit, WASC staff was in frequent communication with University representatives about the review process. 0. In a Form 0-Q filed August,, Bridgepoint repeated that it had received in May notification from WASC that Ashford was eligible to proceed with an application for accreditation, without disclosing that WASC had raised concerns about Ashford's ability to satisfy the relevant accreditation criteria: Recent Developments WASC determination of eligibility for Ashford University. In September 0, Ashford University applied for eligibility from the Accrediting Commission for COMPLAINT FOR VIOLATION OF THE - -, DOCS\v I

15 Case :-cv-0-dms-rbb Document Filed 0// Page of I 0 ~', '! ' ' Senior Colleges and Universities of the Western Association of Schools and Colleges ("WASC"). On May,, Ashford University received a letter from WASC stating that the WASC Eligibility Review Committee has reviewed the application and determined that the university meets all of the WASC eligibility criteria and may proceed with an application for initial accreditation. Additionally, the letter confirmed that Ashford University is authorized to pursue WASC accreditation under Pathway B, the process for institutions that currently hold accreditation with an institutional accreditor recognized by the Department. A determination of eligibility is not a formal status with WASC, nor does it ensure eventual accreditation; it is a preliminary finding that Ashford University is potentially accreditable and can proceed within four years of its eligibility determination to be reviewed for initial accreditation status with WASC. Questions about eligibility may be directed to Ashford University or to WASC at wascsr@wascsenior.org or (0) -00. Ashford University has applied for accreditation by the Western Association of Schools and Colleges ("WASC") with the intention of relinquishing its HLC accreditation and designating WASC as its primary accreditor for Title IV purposes upon the completion of that process.. In its Form 0-K, filed March,, Bridgepoint repeated that it had received in May notification from WASC that Ashford was eligible to proceed with an application for accreditation. Although the disclosure also provided detail that Ashford would be permitted to pursue accreditation using the process for currently accredited institutions, it ~ omitted the fact that WASC had raised concerns about Ashford's ability to satisfy the accreditation criteria, or what those concerns were: Ashford University is accredited by the Higher Learning Commission and a member of the North Central Association of Colleges and Schools ( ("Higher Learning Commission"). Ashford University received its most recent 0-year reaccreditation in 0. In September 0, Ashford University applied for eligibility from the Accrediting Commission for Senior Colleges and Universities of the Western Association of Schools and Colleges ("WASC"). In May, Ashford University received a letter from WASC stating that the WASC Eligibility Review Committee has reviewed the application and determined that the university meets all of the WASC eligibility criteria and may proceed with an application for initial accreditation. For more information about Ashford University's accreditation, see "Regulation-Accreditation" below. Ashford University maintains a website at the contents of which are not part of this report.. The statements referenced in ~ - above were materially false and/or misleading because they misrepresented and failed to disclose that Ashford's prospects for accreditation with WASC were at risk as of May, which was known to or recklessly disregarded by Defendants. COMPLAINT FOR VIOLATION OF THE - - DOCS\v

16 Case :-cv-0-dms-rbb Document Filed 0// Page of 0 THE TRUTH EMERGES. On July,, Bridgepoint filed a Form -K with the SEC stating that on July, Ashford received official notice from WASC that it had been denied accreditation. The Form -K stated that "WASC found that Ashford University had not yet demonstrated substantial compliance with certain of the WASC Standards for Accreditation." The Form -K noted Ashford's intention to appeal the WASC denial.. The July, Form -K directed readers to the WASC website for additional materials regarding the accreditation denial. Team Report.. Posted on the WASC website was the WASC Denial Letter as well as the WASC. According to the WASC Denial Letter, WASC denied Ashford's application for initial accreditation because Ashford had not "complied with multiple aspects of the Standards of Accreditation at a substantial level, which is the requisite degree of compliance for initial accreditation," particularly in the following areas: (a) Student retention and completion, methods of tracking student progress, and support for student success; objectives; (b) Alignment of resource allocations with educational purposes and (c) A sufficient core of full-time faculty members, and a faculty model that provides for faculty development and oversight of academic policies and ensures the integrity and continuity of academic programs; assuring academic rigor; and (d) An effective system of program review; (e) An effective system for assessing and monitoring student learning and (f j An empowered and independent governing board and a clear and acceptable relationship with the parent company.. On news of the WASC accreditation denial, Bridgepoint stock price dropped $. per share to close at $. per share on July,, a decline of nearly %. COMPLAINT FOR VIOLATION OF THE - - DOCS\v

17 Case :-cv-0-dms-rbb Document Filed 0// Page of. On July,, Bridgepoint filed a Form -K with the SEC stating that on July, Ashford received a letter from the HLC requiring Ashford to submit, by no later than August 0,, a report demonstrating compliance with HLC's criteria for accreditation in the same ~ areas that WASC had deemed lacking days before: 0 (i) evidence that Ashford University meets the HLC Criteria for Accreditation relating to the role and autonomy of the University's governing board and its relationship with Bridgepoint Education, including the role of faculty in overseeing academic policies and the integrity and continuity of academic programs, (ii) evidence that Ashford University's resource allocations are sufficiently aligned with educational purposes and objectives in the areas of student completion and retention, the sufficiency of full-time faculty and model for faculty development, and plans for increasing enrollments, and (iii) evidence demonstrating that Ashford University has an effective system for assessing and monitoring student learning and assuring academic vigor.. On this news, Bridgepoint stock declined an additional $. per share, or nearly ~ %, to close at $. per share on July,. LOSS CAUSATION 0. Defendants made widely-disseminated false and misleading statements and engaged in a scheme to deceive the market and a course of conduct that artificially inflated the price of Bridgepoint common stock. Later, when Defendants' prior misrepresentations and fraudulent conduct became apparent to the market on July and July,, the price of Bridgepoint common stock fell precipitously.. As a result of their purchases of Bridgepoint common stock during the Class Period at artificially inflated prices, Plaintiff and other members of the Class suffered economic loss, i.e., damages, under the federal securities laws. ADDITIONAL ALLEGATIONS OF SCIENTER. As illustrated by the Individual Defendants' positions with the Company, they had, and used their influence and control to further the scheme alleged herein. The Individual Defendants had broad responsibilities which included communicating with the financial markets and providing the markets with information about Bridgepoint's business conditions and financial results. The Individual Defendants were privy to and directed the making of the financial disclosures. By making the misleading statements contained herein the Individual COMPLAINT FOR VIOLATION OF THE - - DOCS\v

18 Case :-cv-0-dms-rbb Document Filed 0// Page of 0! ' ' Defendants knew that they would artificially inflate the value of the Company's common stock. Defendants' actions in doing so resulted in damage to Plaintiff and the Class.. The Individual Defendants were further motivated to artificially inflate the Company's stock price in order to enhance the value of their substantial personal holdings of Bridgepoint stock and options, and to sell those holdings for substantial personal profit. During the Class Period, the Individual Defendants sold more than $ million of stock while knowing or recklessly disregarding that a substantial risk existed that Ashford would not be accredited by WASC and that its continued accreditation by the HLC would thereby be placed in jeopardy. COUNTI For Violations of 0(b) of the Exchange Act and Rule lob- (Against All Defendants). Plaintiff incorporates - by reference.. Throughout the Class Period, Defendants, individually and in concert, directly or indirectly made various false statements of material facts and omitted to state material facts to make the statements made not misleading to Plaintiff and the other members of the Class.. Defendants violated 0(b) of the Exchange Act and Rule l Ob- in that they: (a) employed devices, schemes and artifices to defraud; (b) made untrue statements of material facts or omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or (c) engaged in acts, practices and a course of business that operated as a fraud or deceit upon plaintiff and others similarly situated in connection with their purchases of Bridgepoint common stock during the Class Period.. Defendants, who are the senior officers of the Company, had actual knowledge of the material omissions and/or the falsity of the material statements set forth above, and intended to deceive Plaintiff and the other members of the Class, or, in the alternative, acted with reckless disregard for the truth when they failed to ascertain and disclose the true facts in the statements made by them or other Bridgepoint personnel to members of the investing public, including Plaintiff and the Class. COMPLAINT FOR VIOLATION OF THE - - DOCS\v

19 Case :-cv-0-dms-rbb Document Filed 0// Page of 0 ''!,. As a result of the foregoing, the market price of Bridgepoint common stock was artificially inflated during the Class Period. In ignorance of the falsity of Defendants' statements, Plaintiff and the other members of the Class relied on the statements described above and/or the integrity of the market price of Bridgepoint securities during the Class Period in purchasing Bridgepoint common stock at prices that were artificially inflated as a result of Defendants' false and misleading statements.. Had Plaintiff and the other members of the Class been aware that the market price of Bridgepoint common stock had been artificially and falsely inflated by Defendants' misleading statements and by the material adverse information which Defendants did not disclose, they would not have purchased Bridgepoint common stock at the artificially inflated prices that they did, or at all. 0. As a result of the wrongful conduct alleged herein, Plaintiff and other members of the Class have suffered damages in an amount to be established at trial.. By reason of the foregoing, Defendants have violated Section 0(b) of the Exchange Act and Rule l Ob- promulgated thereunder and are liable to the plaintiff and the other members of the Class for substantial damages which they suffered in connection with their purchase of Bridgepoint common stock during the Class Period. COUNT II For Violation of (a) of the Exchange Act (Against the Individual Defendants). Plaintiff incorporates ~ - by reference.. The Individual Defendants acted as controlling persons of Bridgepoint within the meaning of (a) of the Exchange Act. By reason of their positions of control and authority as senior officers, the Individual Defendants were able to, and did, control the contents of the various reports, press releases and public filings that Bridgepoint disseminated in the marketplace during the Class Period concerning Ashford's prospects for WASC accreditation.. Throughout the Class Period, the Individual Defendants exercised their power and authority to cause Bridgepoint to engage in the wrongful acts complained of herein. By reason of such conduct, Defendants are liable pursuant to (a) of the Exchange Act. COMPLAINT FOR VIOLATION OF THE - - DOCS\v

20 Case :-cv-0-dms-rbb Document Filed 0// Page of 0 PRAYER FOR RELIEF WHEREFORE, Plaintiff prays for judgment as follows: A. Declaring this action to be a proper class action pursuant to Fed. R. Civ. P., and certifying Plaintiff as the Class representative; costs; B. Awarding plaintiff and the members of the Class damages, including interest; C. Awarding plaintiffs reasonable costs and attorneys fees, expert fees and other D. Awarding such other relief as the Court may deem just and proper. E. Declaring this action to be a proper class action pursuant to Fed. R. Civ. P., and certifying Plaintiff as the Class representative; costs; and F. Awarding plaintiff and the members of the Class damages, including interest; G. Awarding plaintiffs reasonable costs and attorneys fees, expert fees and other H. Awarding such other relief as the Court may deem just and proper. Plaintiff hereby demands a jury trial. DEMAND FOR TRIAL BY JURY DATED: July, MILBERG LLP JEFF S. WESTERMAN s/ Jeff S. Westerman JEFF S. WESTERMAN 00 South Grand Avenue, Suite 00 Los Angeles, California 00 Telephone: ().0 Facsimile: () - jwesterman@milberg.com COMPLAINT FOR VIOLATION OF THE DOCS\v - - WOHL & FRUCHTER LLP ETHAN D. WOHL J. ELAZAR FRUCHTER KRISTA T. ROSEN 0 Lexington Avenue, th Floor New York, New York 00 Telephone: () -000 Facsimile: () -00

21 Attorneys for Plaintiff Case :-cv-0-dms-rbb Document Filed 0// Page of com j fruchter@wohlfruchter.com kronen@wohlfruchter. com 0 COMPLAINT FOR VIOLATION OF THE - - FEDERALSECURITIES LAW DOCS\v