CREW Criticizes Witness Profiting From Senate Testimony
Washington, D.C. - Today, Citizens for Responsibility and Ethics in Washington (CREW) sent a letter to the Senate Committee on Health, Education, Labor and Pensions, asking the Committee to consider changes to its rules and practices regarding witnesses invited to testify at committee hearings. On June 24th, Steven Eisman, a portfolio manager of a hedge fund known to short-sale stocks in for-profit education companies, testified before the committee. In the past, Mr. Eisman was able to manipulate the market reaction in the for-profit education industry and profit handsomely through short-sales based on his dire public forecasts for companies in that industry. Mr. Eisman’s recent congressional testimony, during which he decried the for-profit education industry as “socially destructive as the subprime mortgage industry,” appears designed to accomplish this same end.
After a May 26, 2010 speech by Mr. Eisman before the Ira Sohn Research Conference in which he characterized specifically identified for-profit education institutions as on financially shaky ground, share values of the named companies plummeted and Mr. Eisman reaped huge profits from short-sales in those companies. Mr. Eisman likely expected to profit similarly for his congressional testimony last week.
CREW Executive Director Melanie Sloan said, “While many who testify before Congress have a financial interest at stake, few profit directly from their testimony alone. Congress should not be in the business of helping hedge fund managers like Mr. Eisman make even more money.” Sloan continued, “Congressional hearings are intended to air issues of national significance – not line witnesses’ pockets.”
CREW’s letter asks the committee to put safeguards in place to ensure that future witnesses cannot use an appearance before a congressional committee for private financial gain.
Click here to read CREW’s letter.
Citizens for Responsibility and Ethics in Washington (CREW) is a non-profit legal watchdog group dedicated to holding public officials accountable for their actions. For more information, please visit www.citizensforethics.org or contact Derrick Crowe at 202.408.5565 or firstname.lastname@example.org.