M.J.
What medical condition are you dealing with for the IEP? Is it ADHD? Our son was just as defiant before we started medication for his ADHD and I can easily see him doing exactly the same thing as your son. He was just as strong-willed and didn't respond to punishments or positive reinforcement.
Is your child seeing a behavioral therapist at all? Ours is a great resource in situations like this. Definitely call your son's therapist if he has one. You might also contact the district psychologist who authorized the IEP for advice.
The only other thought I have is perhaps trying a different way of him apologizing. Our son was not good at doing this on a verbal level, but could in other ways, like drawing a nice picture to the people involved instead. I think keeping your son in the office indefinitely isn't accomplishing anything, so it's time to rethink strategies (on the part of the school). You might contact the principal and ask if you can help your son apologize in a different way, given his medical condition (whatever it is).
Best of luck to you!