UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

Transcription

1 Case 3:-cv-0-LAB-MDD Document Filed 0// Page of LIONEL Z. GLANCY (#0) MICHAEL GOLDBERG (#) GLANCY BINKOW & GOLDBERG LLP 2 Century Park East, Suite 20 Los Angeles, CA 00 Telephone: (3) 20-0 Facsimile: (3) info@glancylaw.com Marc I. Gross Jeremy A. Lieberman POMERANTZ HAUDEK GROSSMAN & GROSS, LLP 0 Park Avenue - 2 th Floor New York, New York 0- Telephone: (2) -0 Facsimile: (2) - Attorneys for Plaintiff [Additional Counsel on Signature Page] UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA LUKE SACHARCZYK, Individually and Case No. If. to On Behalf of All Others Similarly Situated, Plaintiff, A' # ' V LA CLASS ACTION MDD v. FOR VIOLATION OF THE FEDERAL SECURITIES LAWS BRIDGEPOINT EDUCATION, INC., ANDREW S. CLARK, and DANIEL J. DEMAND FOR JURY TRIAL DEVINE, Defendants. 2

2 Case 3:-cv-0-LAB-MDD Document Filed 0// Page 2 of Plaintiff Luke Sacharczyk ( Plaintiff ), individually and on behalf of all other persons 2 similarly situated, by his undersigned attorneys, for his complaint against defendants, alleges 3 the following based upon personal knowledge as to himself and his own acts, and information and belief as to all other matters, based upon, inter alia, the investigation conducted by and through his attorneys, which included, among other things, a review of the defendants public documents, conference calls and announcements made by defendants, United States Securities and Exchange Commission ( SEC ) filings, wire and press releases published by and regarding Bridgepoint Education, Inc. ( Bridgepoint or the Company ), analysts reports and advisories about the Company, and information readily obtainable on the Internet. Plaintiff believes that substantial evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. NATURE OF THE ACTION. This is a federal securities class action on behalf of a class consisting of all persons other than defendants who purchased or otherwise acquired Bridgepoint securities between May 3, 20 and July, 20, both dates inclusive (the Class Period ), seeking to recover damages caused by defendants violations of the federal securities laws and to pursue remedies under (b) of the Securities Exchange Act of (the Exchange Act ) and Rule b- promulgated thereunder against the Company and certain of its top officials Bridgepoint is a regionally accredited provider of postsecondary education services. The Company offers associate, bachelors, masters and doctoral programs in the disciplines of business, education, psychology, social sciences, and health sciences. 3. Throughout the Class Period, Defendants made materially false and misleading statements regarding the Company s business, operational and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) the Company failed to implement adequate plans, procedures and practices to assist students in completing the academic programs in which they had enrolled; (ii) the Company failed to align resources with educational requirements, hampering its students ability to - -

3 Case 3:-cv-0-LAB-MDD Document Filed 0// Page 3 of progress to acceptable levels; (iii) the Company s Ashford University failed to maintain an 2 adequate core of faculty and programs, resulting in poor instruction and low completion rates 3 by students; (iv) the Company had inadequate review procedures such that shortfalls in completion rates were not timely identified and remedied; (v) the Company s Ashford University failed to maintain an empowered and independent governing board; and (vi) as a result of the above, the Company s financial statements were materially false and misleading at all relevant times.. On July, 20, the Company disclosed that one of its schools, Ashford University was denied initial accreditation by the Accrediting Commission for Senior Colleges and Universities of the Western Association of Schools and Colleges, as it failed to demonstrate substantial compliance with certain of the WASC Standards for Accreditation.. On this news, Bridgepoint securities fell $.2 per share or more than 33%, to close at $.2 per share on July, 20.. On July, 20, the Company disclosed that Ashford received a letter from the Higher Learning Commission of the North Central Association of Schools and Colleges requiring Ashford to provide certain information and evidence of compliance with HLC accreditation standards.. On this news, Bridgepoint stock declined an additional $3.20 per share or 20 nearly 2%, to close at $. per share on July, 20.. As a result of defendants' wrongful acts and omissions, and the precipitous decline in the market value of the Company's securities, Plaintiff and other Class members have suffered significant losses and damages JURISDICTION AND VENUE. The claims asserted herein arise under and pursuant to Sections (b) and 20(a) of the Exchange Act ( U.S.C. j(b) and t(a)) and Rule b- promulgated thereunder ( C.F.R. 0.b-).. This Court has jurisdiction over the subject matter of this action pursuant to - 2 -

4 Case 3:-cv-0-LAB-MDD Document Filed 0// Page of 2 of the Exchange Act ( U.S.C. aa) and U.S.C Venue is proper in this District pursuant to 2 of the Exchange Act, U.S.C. 3 aa and U.S.C. (b), as Bridgepoint s principal place of business is located within this District.. In connection with the acts, conduct and other wrongs alleged in this Complaint, defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including but not limited to, the United States mail, interstate telephone communications and the facilities of the national securities exchange. PARTIES. Plaintiff as set forth in the attached Certification, acquired Bridgepoint securities at artificially inflated prices during the Class Period and has been damaged thereby.. Defendant Bridgepoint is a Delaware corporation with principal executive offices located at 00 Evening Creek Drive, Suite 00, San Diego, CA. Bridgepoint s common stock trades on the New York Stock Exchange ( NYSE ) under the ticker symbol BPI.. Defendant Andrew S. Clark ( Clark ) was, at all relevant times, the Company s President, Chief Executive Officer and a director of Bridgepoint.. Defendant Daniel J. Devine ( Devine ) was, at all relevant times, the 20 Company s the Chief Financial Officer.. The defendants referenced above in and are sometimes referred to herein as the Individual Defendants. SUBSTANTIVE ALLEGATIONS Background. Bridgepoint is a provider of postsecondary education services. The Company s two regionally accredited academic institutions, Ashford University ( Ashford ) and University of the Rockies deliver programs primarily online, as well as at their traditional campuses. As of December 3, 20, the Company had,2 students enrolled in its - 3 -

5 Case 3:-cv-0-LAB-MDD Document Filed 0// Page of I institutions. 2 3 Materially False and Misleading Statements Issued During the Class Period. On May 3, 20, Bridgepoint issued a press release announcing its financial and operating results for the first quarter ended March 3, 20. For the quarter, the Company reported net income of $ million, or $0.2 diluted earnings per share ( EPS ) and revenue of $ million, as compared to net income of $2. million, or $0. diluted EPS and revenue of $ million for the same period a year ago. 20. On May 3, 20, the Company filed a quarterly report for the period ended March 3, 20 on Form -Q with the SEC, which was signed by Defendant Devine, and reiterated the Company s previously announced quarterly financial results and financial position. In addition, the Form -Q contained signed certifications pursuant to the Sarbanes- Oxley Act of 2002 ( SOX ) by Defendants Clark and Devine, stating that the financial information contained in the Form -Q was accurate and that they disclosed any material changes to the Company s internal control over financial reporting.. On August 2, 20, Bridgepoint issued a press release announcing its financial and operating results for the second quarter ended June 30, 20. For the quarter, the Company reported net income of $2 million, or $0.0 diluted EPS and revenue of $0 million, as compared to net income of $3.3 million, or $0. diluted EPS and revenue of 20 $ million for the same period a year ago On August 2, 20, the Company filed a quarterly report for the period ended June 30, 20 on Form -Q with the SEC, which was signed by, Defendant Devine, and reiterated the Company s previously announced quarterly financial results and financial position. In addition, the Form -Q contained signed certifications pursuant to SOX by Defendants Clark and Devine, stating that the financial information contained in the Form - Q was accurate and that they disclosed any material changes to the Company s internal control over financial reporting. - -

6 Case 3:-cv-0-LAB-MDD Document Filed 0// Page of. On November, 20, Bridgepoint issued a press release announcing its 2 financial and operating results for the third quarter ended September 30, 20. For the quarter, 3 the Company reported net income of $3. million, or $0. diluted EPS and revenue of $3 million, as compared to net income of $3 million, or $0. diluted EPS and revenue of $ million for the same period a year ago.. On November, 20, the Company filed a quarterly report for the period ended September 30, 20 on Form -Q with the SEC, which was signed by, Defendant Devine, and reiterated the Company s previously announced quarterly financial results and financial position. In addition, the Form -Q contained signed certifications pursuant to SOX by Defendants Clark and Devine, stating that the financial information contained in the Form -Q was accurate and that they disclosed any material changes to the Company s internal control over financial reporting. 2. On March, 20, Bridgepoint issued a press release announcing its financial and operating results for the fourth quarter and year ended December 3, 20. For the quarter, the Company reported net income of $ million, or $0. diluted EPS and revenue of $.3 million, as compared to net income of $2 million or $0. diluted EPS and revenue of $2 million for the same period a year ago. For the fiscal year, the Company reported net income of $ million, or $3.02 diluted EPS and revenue of $33 million, as compared to net 20 income of $. million, or $2. diluted EPS and revenue of $ million for the same period a year ago. 2. On March, 20, the Company filed an annual report for the period ended December 3, 20 on Form -K with the SEC, which was signed by, among others, Defendants Clark and Devine, and reiterated the Company s previously announced annual financial results and financial position. In addition, the Form -K contained signed certifications pursuant to SOX by Defendants Clark and Devine, stating that the financial information contained in the Form -K was accurate and that they disclosed any material changes to the Company s internal control over financial reporting. - -

7 Case 3:-cv-0-LAB-MDD Document Filed 0// Page of The -K represented the following in relevant part concerning the status of seeking regional accreditation from WASC: In September 20, we announced that Ashford University had initiated the process of seeking regional accreditation from the Accrediting Commission for Senior Colleges and Universities of the Western Association of Schools and Colleges ( WASC ). Ashford University is working collaboratively with both WASC and the Higher Learning Commission to facilitate the change in the University's institutional accrediting body. During the process, Ashford University will continue to maintain its current regional accreditation with the Higher Learning Commission. Prior to initiating the accreditation process with WASC, Ashford University notified the Department of its intention to change its primary accreditor. The decision to seek WASC accreditation reflects careful analysis performed by the institution's faculty and administration, taking into account the dynamics of its student enrollment, its faculty and staff profile, and the development of its programmatic offerings. Based on this analysis, and taking into account how the institution's academic and administrative activity is becoming concentrated in California, Ashford University's governing board concluded that it is appropriate for the institution to operate under the auspices of WASC, which is the regional accrediting body having jurisdiction over California institutions. *** Upon receiving the application for accreditation and related materials, including an institutional self-study, WASC then appointed a site visit team and scheduled visits for March 20, the purpose of which is to validate the information provided in the institution's application, particularly its compliance with WASC standards. Prior to the submission of the final team report to WASC, Ashford University will be given an opportunity to review the report for correction of errors of fact and to prepare a written response to the final team report, which will be provided to WASC for consideration along with the report. If upon review of the application and supporting documentation, including the team report and the institution's response, Ashford University is found to be in substantial compliance with all of WASC's standards, WASC may grant initial accreditation, typically with a comprehensive review cycle of five years. Depending on the circumstances, WASC may also grant initial accreditation with requirements for interim reports, special visits or both. If initial accreditation from WASC is secured, then Ashford University will commence the process of redesignating its primary institutional accreditor from the Higher Learning Commission to WASC. - -

8 Case 3:-cv-0-LAB-MDD Document Filed 0// Page of. On May, 20, Bridgepoint issued a press release announcing its financial 2 and operating results for the first quarter ended March 3, 20. For the quarter, the Company 3 reported net income of $33 million, or $0. diluted EPS and revenue of $20 million, as compared to net income of $3. million, or $0.2 diluted EPS and revenue of $ million for the same period a year ago. 2. That same day, the Company filed a quarterly report for the period ended March 3, 20 on Form -Q with the SEC, which was signed by, Defendant Devine, and reiterated the Company s previously announced quarterly financial results and financial position. In addition, the Form -Q contained signed certifications pursuant to SOX by Defendants Clark and Devine, stating that the financial information contained in the Form - Q was accurate and that they disclosed any material changes to the Company s internal control over financial reporting. 30. The statements referenced in -2 above were materially false and/or misleading because they misrepresented and failed to disclose the following adverse facts, which were known to defendants or recklessly disregarded by them, including that: (i) the Company had failed to implement plans, procedures and practices to sufficiently assist students in completing the academic programs in which they had enrolled; (ii) the Company failed to align resources with educational requirements, causing students to fail to progress to 20 acceptable levels; (iii) the Company s Ashford University failed to maintain a sufficient core of faculty and programs resulting in poor teaching and low completion rates by students; (iv) the Company had inadequate review procedures such that shortfalls in completion rates were not timely identified and remedied; (v) the Company s Ashford University failed to maintain an empowered and independent governing board; and (vi) as a result of the above, the Company s financial statements were materially false and misleading at all relevant times. THE TRUTH BEGINS TO EMERGE 3. On July, 20, the Company filed a Form -K with the SEC disclosing that on July, 20, Ashford received official notice from WASC that it denied Ashford s - -

9 Case 3:-cv-0-LAB-MDD Document Filed 0// Page of application for initial accreditation, after finding that Ashford University had not yet demonstrated substantial compliance with certain of the WASC Standards for Accreditation, as would be required for initial accreditation. The Form -K also disclosed the following: Ashford University remains regionally accredited by the Higher Learning Commission of the North Central Association of Colleges and Schools ( Higher Learning Commission ), with the next comprehensive evaluation scheduled for 20-. Ashford University intends to work collaboratively with both WASC and the Higher Learning Commission to ensure it continues to satisfy the Higher Learning Commission s accreditation requirements while it seeks accreditation with WASC. *** On June 2, 20, the Higher Learning Commission informed Ashford University that the institution must demonstrate, no later than December, 20, that it has a "substantial presence," as defined by commission policy, in the -state north central region and accordingly is within the Higher Learning Commission's jurisdiction under new requirements which became effective on July, 20. Ashford University is communicating with the Higher Learning Commission regarding the timing and components of becoming compliant with the commission's jurisdictional requirements in light of the institution's plans to reapply for initial accreditation with WASC. If Ashford University is required to comply with the Higher Learning Commission's jurisdictional requirements, it is expected that the institution would need to consolidate a significant portion of its educational administration and activity, business operations and executive and administrative leadership in the -state north central region. Additionally, if Ashford University is unable to demonstrate in a timely manner that it has a substantial presence in the north central region, the Higher Learning Commission has stated that it will begin a process of reconsidering the institution's accreditation. Ashford University intends to maintain its accreditation with the Higher Learning Commission until such time as it can transfer its accreditation to WASC. 32. That same day, WASC issued a public statement with a visiting team report and an action letter dated July 3, 20 regarding Ashford. The action letter concluded that Ashford had not demonstrated at this time that it complied with multiple aspects of the - -

10 Case 3:-cv-0-LAB-MDD Document Filed 0// Page of Standards of Accreditation at a substantial level, which is the requisite degree of compliance for initial accreditation. The action letter further stated the following in relevant part: 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 3, 20, providing Ashford with early notice about these concerns. Given that there were multiple areas in which substantial compliance could not be demonstrated and that these areas fell into several aspects of the Standards of Accreditation, the Commission determined that a denial of initial accreditation of Ashford was the appropriate action. *** Attrition, support for student achievement, and adequate levels of degree completion. The WASC Standards of Accreditation place great emphasis on student achievement and success. Retention of students, their persistence toward a degree, and completion of their desired degree within a reasonable amount of time are of critical importance. The Commission evaluated Ashford s effectiveness in this area in the context of the University s mission, the nature and qualifications of the students that the University serves, the programs it offers, and the modalities that it uses to deliver instruction. As detailed in the team report, a large proportion of students who enter the degree programs at Ashford withdraw, most within a short period of time nearly,000 students have withdrawn in the last five years, during which time 0,000 new students were enrolled. This level of attrition is, on its face, not acceptable. *** WASC Standards reflect the Commission expectation that [r]esources are aligned with educational purposes and objectives (CFR 3.) and that sufficient qualified staff and faculty are employed to achieve the institution s educational objectives, to establish and oversee academic policies, and to ensure the integrity and continuity of its academic programs... (CFRs 3., 3.2) Among the examples noted by the team are that Ashford employs only writing specialists and 3 instructional specialists for a faculty of 200 and a student body of 0,000. (CFRs 2.-2.) As noted below, the academic infrastructure of faculty and leadership for the size and complexity of the institution is also inadequate, with about 0 full-time faculty members, most recently hired, and small cadre of academic administrators to oversee the work of thousands of adjunct faculty members (CFRs 2., ) *** - -

11 Case 3:-cv-0-LAB-MDD Document Filed 0// Page of The Commission found that a core of about 0 full-time faculty members, most recently hired, for the entire online division of more than 0,000 students, is not sufficient to provide leadership and oversight of an academic enterprise of the size and complexity of Ashford. (CFRs 3., 3.2, 3.) Related is the lack of sound policies and practices about faculty, including the role of faculty in governance in the online division. At the time of the visit, Ashford had not established a clear role for the faculty to fulfill its responsibilities of oversight of the academic enterprise and had not set appropriate expectations about teaching load: advising and mentoring of students; and research, scholarship and creative activity of the faculty, especially in graduate-level programs where greater emphasis on these activities is expected. *** Serious concerns also exist about the rigor of coursework, which varied from course to course and was not always at the appropriate level for the course. In addition, there was variation in the quality and extent of discourse between faculty members and students in online courses, which is a key component of the Ashford instructional model. By way of example, the team noted that faculty responses to required student posts were often limited to a few words of encouragement and lacking in substantive exchange between student and teacher. (CFRs 2., 2.). 33. The public statement said the following in relevant part: The Commission found that Ashford University was not yet in substantial compliance with elements of Standard (Defining Institutional Purposes and Ensuring Educational Objectives), Standard 2 (Achieving Educational Objectives through Core Functions), Standard 3 (Developing and Applying Resources and Organizational Structures to Ensure Sustainability), and Standard (Creating an Organization Committed to Learning and Improvement), as required for initial accreditation. 3. On this news, Bridgepoint s stock price plunged more than 33.%, or $.2 per share, to close at $.2 per share on July, On July, 20, the Company filed a Form -K with the SEC disclosing that Ashford received a letter from the Higher Learning Commission of the North Central Association of Schools and Colleges ( HLC ) requiring Ashford to provide certain - -

12 Case 3:-cv-0-LAB-MDD Document Filed 0// Page of information and evidence of compliance with HLC accreditation standards. The Form -K further disclosed the following: The HLC letter relates to the recent visiting team report and action letter received by the University from the Accrediting Commission for Senior Colleges and Universities of the Western Association of Schools and Colleges ( WASC ) on July, 20. The letter requires that Ashford University submit a report to HLC no later than August, 20 that will be followed by an Advisory Visit that will occur no later than October, 20. The University's report must demonstrate that the University remains in compliance with the HLC's Criteria for Accreditation and include: (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. The letter states that HLC's President will present the report of the Advisory Visit team and the President's recommendation to the HLC Board for action at its February 20 meeting. At that meeting, the HLC Board may act to continue accreditation, with or without further monitoring, continue accreditation under sanction or Show Cause order, or withdraw accreditation. The letter further states that Ashford University would be scheduled for a HLC Board Committee Hearing prior to any Board action to withdraw accreditation. HLC policies also provide for a right to appeal any Board action to withdraw accreditation. Ashford University believes it is in substantial compliance with the HLC accreditation criteria and Bridgepoint Education and Ashford University intend to cooperate fully with HLC in this matter. 3. On this news, Bridgepoint stock declined an additional $3.20 per share or nearly 2%, to close at $. per share on July,

13 Case 3:-cv-0-LAB-MDD Document Filed 0// Page of PLAINTIFF S CLASS ACTION ALLEGATIONS 2 3. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil 3 Procedure (a) and (b)(3) on behalf of a Class, consisting of all those who purchased or otherwise acquired Bridgepoint securities during the Class Period (the Class ); and were damaged thereby. Excluded from the Class are defendants herein, the officers and directors of the Company, at all relevant times, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which defendants have or had a controlling interest. 3. The members of the Class are so numerous that joinder of all members is impracticable. Throughout the Class Period, Bridgepoint securities were actively traded on the NYSE. While the exact number of Class members is unknown to Plaintiff at this time and can be ascertained only through appropriate discovery, Plaintiff believes that there are hundreds or thousands of members in the proposed Class. Record owners and other members of the Class may be identified from records maintained by Bridgepoint or its transfer agent and may be notified of the pendency of this action by mail, using the form of notice similar to that customarily used in securities class actions. 3. 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 20 federal law that is complained of herein. 0. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class and securities litigation. Plaintiff has no interests antagonistic to or in 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: - -

14 Case 3:-cv-0-LAB-MDD Document Filed 0// Page of whether the federal securities laws were violated by defendants acts as alleged herein; whether statements made by defendants to the investing public during the Class Period misrepresented material facts about the business, operations and management of Bridgepoint; whether the Individual Defendants caused Bridgepoint to issue false and misleading financial statements during the Class Period; whether defendants acted knowingly or recklessly in issuing false and misleading financial statements; whether the prices of Bridgepoint securities during the Class Period were artificially inflated because of the defendants conduct complained of herein; and whether the members of the Class have sustained damages and, if so, what is the proper measure of damages. 2. 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. 3. Plaintiff will rely, in part, upon the presumption of reliance established by the fraud-on-the-market doctrine in that: defendants made public misrepresentations or failed to disclose material facts during the Class Period; the omissions and misrepresentations were material; Bridgepoint securities are traded in an efficient market; the Company s shares were liquid and traded with moderate to heavy volume during the Class Period; the Company traded on the NYSE and was covered by multiple analysts; - -

15 Case 3:-cv-0-LAB-MDD Document Filed 0// Page of the misrepresentations and omissions alleged would tend to induce a reasonable investor to misjudge the value of the Company s securities; and Plaintiff and members of the Class purchased, acquired and/or sold Bridgepoint securities between the time the defendants failed to disclose or misrepresented material facts and the time the true facts were disclosed, without knowledge of the omitted or misrepresented facts.. Based upon the foregoing, Plaintiff and the members of the Class are entitled to a presumption of reliance upon the integrity of the market. COUNT I (Against All Defendants For Violations of Section (b) And Rule b- Promulgated Thereunder). Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein.. This Count is asserted against defendants and is based upon Section (b) of the Exchange Act, U.S.C. j(b), and Rule b- promulgated thereunder by the SEC.. During the Class Period, defendants engaged in a plan, scheme, conspiracy and course of conduct, pursuant to which they knowingly or recklessly engaged in acts, transactions, practices and courses of business which operated as a fraud and deceit upon Plaintiff and the other members of the Class; made various untrue statements of material facts and 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; and employed devices, schemes and artifices to defraud in connection with the purchase and sale of securities. Such scheme was intended to, and, throughout the Class Period, did: (i) deceive the investing public, including Plaintiff and other Class members, as alleged herein; (ii) artificially inflate and maintain the market price of Bridgepoint securities; and (iii) cause Plaintiff and other members of the Class to purchase or otherwise acquire Bridgepoint securities and options at - -

16 Case 3:-cv-0-LAB-MDD Document Filed 0// Page of artificially inflated prices. In furtherance of this unlawful scheme, plan and course of 2 I conduct, defendants, and each of them, took the actions set forth herein. 3. Pursuant to the above plan, scheme, conspiracy and course of conduct, each of the defendants participated directly or indirectly in the preparation and/or issuance of the quarterly and annual reports, SEC filings, press releases and other statements and documents described above, including statements made to securities analysts and the media that were designed to influence the market for Bridgepoint securities. Such reports, filings, releases and statements were materially false and misleading in that they failed to disclose material adverse information and misrepresented the truth about Bridgepoint s finances and business prospects.. By virtue of their positions at Bridgepoint, defendants had actual knowledge of the materially false and misleading statements and material omissions alleged herein and intended thereby to deceive Plaintiff and the other members of the Class, or, in the alternative, defendants acted with reckless disregard for the truth in that they failed or refused to ascertain and disclose such facts as would reveal the materially false and misleading nature of the statements made, although such facts were readily available to defendants. Said acts and omissions of defendants were committed willfully or with reckless disregard for the truth. In 20 addition, each defendant knew or recklessly disregarded that material facts were being misrepresented or omitted as described above. 0. Defendants were personally motivated to make false statements and omit material information necessary to make the statements not misleading in order to personally 2 benefit from the sale of Bridgepoint securities from their personal portfolios. 2. Information showing that defendants acted knowingly or with reckless 2 disregard for the truth is peculiarly within defendants knowledge and control. As the senior - -

17 Case 3:-cv-0-LAB-MDD Document Filed 0// Page of managers and/or directors of Bridgepoint, the Individual Defendants had knowledge of the 2 I details of Bridgepoint s internal affairs The Individual Defendants are liable both directly and indirectly for the wrongs complained of herein. Because of their positions of control and authority, the Individual Defendants were able to and did, directly or indirectly, control the content of the statements of Bridgepoint. As officers and/or directors of a publicly-held company, the Individual Defendants had a duty to disseminate timely, accurate, and truthful information with respect to Bridgepoint s businesses, operations, future financial condition and future prospects. As a result of the dissemination of the aforementioned false and misleading reports, releases and public statements, the market price of Bridgepoint securities was artificially inflated throughout the Class Period. In ignorance of the adverse facts concerning Bridgepoint s business and financial condition which were concealed by defendants, Plaintiff and the other members of the Class purchased or otherwise acquired Bridgepoint securities at artificially inflated prices and relied upon the price of the securities, the integrity of the market for the securities and/or upon statements disseminated by defendants, and were damaged thereby. 3. During the Class Period, Bridgepoint securities were traded on an active and 20 efficient market. Plaintiff and the other members of the Class, relying on the materially false and misleading statements described herein, which the defendants made, issued or caused to be disseminated, or relying upon the integrity of the market, purchased or otherwise acquired shares of Bridgepoint securities at prices artificially inflated by defendants wrongful conduct. 2 Had Plaintiff and the other members of the Class known the truth, they would not have 2 purchased or otherwise acquired said securities, or would not have purchased or otherwise 2 acquired them at the inflated prices that were paid. At the time of the purchases and/or - -

18 Case 3:-cv-0-LAB-MDD Document Filed 0// Page of acquisitions by Plaintiff and the Class, the true value of Bridgepoint securities was 2 I substantially lower than the prices paid by Plaintiff and the other members of the Class. The 3 market price of Bridgepoint securities declined sharply upon public disclosure of the facts alleged herein to the injury of Plaintiff and Class members.. By reason of the conduct alleged herein, defendants knowingly or recklessly, directly or indirectly, have violated Section (b) of the Exchange Act and Rule b- promulgated thereunder.. As a direct and proximate result of defendants wrongful conduct, Plaintiff and the other members of the Class suffered damages in connection with their respective purchases, acquisitions and sales of the Company s securities during the Class Period, upon the disclosure that the Company had been disseminating misrepresented financial statements to the investing public. COUNT II (Violations of Section 20(a) of the Exchange Act Against The Individual Defendants). Plaintiff repeats and realleges each and every allegation contained in the 20 foregoing paragraphs as if fully set forth herein.. During the Class Period, the Individual Defendants participated in the operation and management of Bridgepoint, and conducted and participated, directly and indirectly, in the conduct of Bridgepoint s business affairs. Because of their senior positions, 2 they knew the adverse non-public information about Bridgepoint s misstatement of income 2 2 and expenses and false financial statements. - -

19 Case 3:-cv-0-LAB-MDD Document Filed 0// Page of. As officers and/or directors of a publicly owned company, the Individual 2 I Defendants had a duty to disseminate accurate and truthful information with respect to 3 Bridgepoint s financial condition and results of operations, and to correct promptly any public statements issued by Bridgepoint which had become materially false or misleading.. Because 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 which Bridgepoint disseminated in the marketplace during the Class Period concerning Bridgepoint s results of operations. Throughout the Class Period, the Individual Defendants exercised their power and authority to cause Bridgepoint to engage in the wrongful acts complained of herein. The Individual Defendants therefore, were controlling persons of Bridgepoint within the meaning of Section 20(a) of the Exchange Act. In this capacity, they participated in the unlawful conduct alleged which artificially inflated the market price of Bridgepoint securities. 0. Each of the Individual Defendants, therefore, acted as a controlling person of Bridgepoint. By reason of their senior management positions and/or being directors of Bridgepoint, each of the Individual Defendants had the power to direct the actions of, and 20 exercised the same to cause, Bridgepoint to engage in the unlawful acts and conduct complained of herein. Each of the Individual Defendants exercised control over the general operations of Bridgepoint and possessed the power to control the specific activities which comprise the primary violations about which Plaintiff and the other members of the Class 2 complain. 2. By reason of the above conduct, the Individual Defendants are liable pursuant 2 to Section 20(a) of the Exchange Act for the violations committed by Bridgepoint. - -

20 Case 3:-cv-0-LAB-MDD Document Filed 0// Page 20 of PRAYER FOR RELIEF 2 I WHEREFORE, Plaintiff demands judgment against defendants as follows: 3 A. Determining that the instant action may be maintained as a class action under Rule of the Federal Rules of Civil Procedure, and certifying Plaintiff as the Class representative; B. Requiring defendants to pay damages sustained by Plaintiff and the Class by reason of the acts and transactions alleged herein; C. Awarding Plaintiff and the other members of the Class prejudgment and post- judgment interest, as well as their reasonable attorneys fees, expert fees and other costs; and D. Awarding such other and further relief as this Court may deem just and proper. DEMAND FOR TRIAL BY JURY Plaintiff hereby demands a trial by jury Dated: July, 20 GLANCY BINKOW & GOLDBERG LLP By: s/ Lionel Z. Glancy Lionel Z. Glancy Michael Goldberg 2 Century Park East, Suite 20 Los Angeles, CA 00 Telephone: (3) 20-0 Facsimile: (3) info@glancylaw.com POMERANTZ HAUDEK GROSSMAN & GROSS, LLP Marc I. Gross Jeremy A. Lieberman 0 Park Avenue - 2 th Floor New York, New York 0- Telephone: (2) -0 Facsimile: (2) - - -

21 Case 3:-cv-0-LAB-MDD Document Filed 0// Page of 2 3 POMERANTZ HAUDEK GROSSMAN & GROSS, LLP Patrick V. Dahlstrom Ten South LaSalle Street - Suite 30 Chicago, Illinois 003 Telephone: (3) 3- Facsimile: (3) 3- pdahlstrom@pomlaw.com Attorneys for Plaintiff