Dec. 29 (Bloomberg) -- As a humanities professor at San Jose State University from 1961 to 1973, John Sperling pioneered remedial reading classes for Mexican Americans and courses in social problems for police officers.

Defying the education establishment, he expanded such programs into the for-profit University of Phoenix, now largely online and the biggest U.S. university, with almost 500,000 students. Sperling and his proteges transformed a backwater of mom-and-pop trade schools into a $30 billion industry attracting Washington Post Co. and Goldman Sachs Group Inc. as investors. For-profit colleges enroll 12 percent of U.S. undergraduates and consume 24 percent of U.S. Pell grants for low-income students.

Now those colleges, after flourishing under loosened regulations during George W. Bush's presidency, are under attack from President Barack Obama's administration, which wants to tighten the rules. Stock prices for the parent companies of for- profit colleges have plunged.

The colleges use deceptive practices to lure homeless people, veterans and individuals who aren't prepared for college into unsuitable courses in order to obtain tuition funded by grants and also by federal loans that students have trouble repaying, according to advocates for the homeless, veterans' groups and current and former students. Almost 90 percent of Phoenix's students use federal grants or loans to pay tuition.

The 89-year-old Sperling, whose fortune peaked at $1.9 billion in 2005, and who had until recently been tending to non- educational interests ranging from cloning to longevity, has plunged back into the fight to defend his creation. As the value of his Apollo common stock plummeted by about $300 million this year, he traveled at least twice to Washington, drawing on his history of donations to Democrats to see Senate Majority Leader Harry Reid and other legislative leaders.

In one meeting with Congressional staff members, Sperling, leaning on a cane, railed against the Obama administration, saying it was manipulated by investors betting against higher- education stocks, according to an aide who attended. This person requested anonymity because the meeting was private.

Anticipating that Apollo's growth would decelerate, investors stepped up short sales of Apollo stock early in 2008, to a level that was almost reached again in 2009 as the Obama administration embarked on tighter regulation, Trace Urdan, a Signal Hill analyst, said in an e-mail.

Apollo peaked at $97.93 in Nasdaq Stock Market composite trading in June 2004 as the company reaped more federal financial aid from the Bush administration's easing of restrictions on the industry's growth.

The shares traded as high as $89.22 in January 2009, days before Obama's inauguration. Apollo has since declined 57 percent before today, compared with a 48 percent rise in the Standard & Poor's 500 index, because of Obama administration proposals to limit recruiting and access to federal financial aid -- linchpins of the company's strategy in the past decade.

In September, Sperling sent every member of Congress a 74- page PowerPoint presentation making the case that, while four- year public and private nonprofit colleges cost taxpayers $9,709 and $6,379 a student respectively, for-profit colleges pay taxes and save the government money.

He personally made almost $100,000 in campaign donations for the 2010 elections, while Apollo Group's political-action committee gave $92,100 to federal candidates, including $15,000 to George Miller, the outgoing chair of the House education committee, and $14,000 to John Boehner, the incoming House speaker. Starting with the 2002 campaign, Apollo Group's PAC has given Boehner $36,600, more than any other member of Congress.

"This is his legacy at stake," Suzanne Helburn, an economist who is a longtime friend of Sperling, said in a telephone interview. "The thought of it being dismantled by some arbitrary government policy infuriates him."