Washington, D.C. – Today, Citizens for Responsibility and Ethics in Washington (CREW) sent a letter to Sen. Tom Harkin (D-IA), Chairman of the Committee on Health, Education, Labor and Pensions (“HELP”), asking the committee to consider the financial motives of critics of the for-profit education industry.
On July 9th, ProPublica reported efforts by Johnette McConnell Early, employed by an unnamed financial firm, to fuel anger over the for-profit educational industry and to seek greater regulation of it. Without disclosing this, Ms. Early solicited 19 executives from homeless shelters and service agencies to sign a letter to Secretary of Education Arne Duncan expressing concern that for-profit trade schools and career colleges prey upon vulnerable individuals and pledging support for efforts to strengthen regulations of that industry. Some of signatories later admitted having no first-hand knowledge of the facts set out in the letter. Ms. Early claimed not to know whether the firm employing her is betting against the for-profit higher education industry. She did say, however, “Clearly an investment firm is not going to look into something unless they’re thinking about whether it’s a good or bad investment.”
In addition, a non-profit group associated with another high-profile investor, Manuel P. Asensio, has written five letters to members of Congress and regulators since April criticizing the for-profit college industry and calling for stricter regulation. At least one short-sales analyst has noted the “increasing interest” of short sellers in for-profit schools.
CREW Executive Director Melanie Sloan stated, “Critics allege the for-profit education industry is not at all about education and is all about profit. Now it turns out the criticism may be all about profit too. How are Americans supposed to know what to believe?” CREW suggested the committee ask Ms. Early to identify the financial firm employing her.
On July 1st, CREW sent a letter to Sen. Harkin criticizing the committee’s decision to allow Steven Eisman, a well-known short seller, to testify before the committee given that Mr. Eisman has made money by short-selling for-profit education companies’ stock. On July 2nd, Sen. Harkin responded, noting Mr. Eisman’s prescience in accurately predicting the subprime mortgage bubble and the parallels between that industry and the for-profit education industry. He explained that Mr. Eisman had an “important perspective to share” and that Mr. Eisman had admitted to having a financial stake in the success or failure of for-profit education companies.
Sloan stated, “The evidence suggests individuals who stand to gain financially are making a concerted effort to drive down the stock price of for-profit schools. They are trying to manipulate the federal regulatory process for personal financial gain.” She continued, “While the for-profit education industry certainly merits congressional scrutiny, Congress must also examine the tactics and motives of the industry’s critics. Americans need to have confidence that legislative and regulatory processes are not being manipulated for private financial gain.”
Click here to read CREW’s letter to the HELP Committee.