University of Phoenix under investigation - East Valley Tribune: Business

University of Phoenix under investigation

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Posted: Tuesday, July 22, 2003 7:16 am

The FBI is investigating allegations that the nation’s largest for-profit university stole trade secrets from its former software provider and gave privileged access to a competing software company.

Chariot Software Group alleges that top-level administrators at The University of Phoenix, a subsidiary of Phoenix-based Apollo Group, supplied passwords for Chariot’s software to another company, which then mimicked Chariot’s designs and used their servers to maintain the university’s online testing system.

No charges had been filed as of Monday, said Jan Caldwell, a special agent with the FBI’s San Diego office.

Caldwell said that the investigation is ‘‘pretty much concluded’’ but declined to speculate what, if any, action would be taken.

Chariot, a San Diegobased company, began contracting with the university in 1997.

In June 2001, the company redesigned a software program that administered placement and end-ofprogram tests, as well as tutorials.

‘‘We had such a great relationship up until this. They were a dream client,’’ Chariot’s chief operating officer, George Madden, said of the $120,000 annual contract.

‘‘But something like this makes you wonder.’’

Because of the high volume of students using the programs, Madden said he offered to end the contract in an attempt to renegotiate.

The university declined to renew it in August 2002. In an e-mail to Madden, which Madden provided to The Associated Press, administrator Elizabeth Tice said the university was ‘‘moving the entire system back in house.’’ Tice didn’t immediately return a call for comment Monday.

The university then hired Momentum Technologies to maintain the testing system.

Madden became suspicious.

He says computer system logs show that beginning in April 2002 — before the contract ended — Momentum Technologies’ computers accessed Chariot’s server. He said the system was not hacked, but rather accessed through secure passwords granted to three top-level university administrators.

Chariot alleges that when Momentum workers implemented a replacement system on University of Phoenix servers, they copied computer code directing University of Phoenix students to Chariot’s servers in order to access test items.

‘‘We were dumbfounded,’’ Madden said of the discovery.

He likened the logs to ‘‘digital DNA’’ — irrefutable evidence that trade secrets were being passed.

Phoenix-based Momentum Technologies, renamed Veleo, did not return calls Monday seeking comment.

Apollo’s chief financial officer, Kenda Gonzales, said Apollo has not been contacted by the FBI. She denied that Apollo or the university had any access to Chariot’s source code, the instructions that drive the program.

Gonzales acknowledged Monday that Chariot’s servers were accessed after the contract expired, but only for 15 days — not the five months that Madden contends. She said the university offered to compensate Chariot for that extended use.

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