Short-seller talked to Education Department about "gainful employment" rule

"Think about it. Over the next ten years, nearly half of all new jobs will require education that goes beyond a high school degree." Barack Obama, 2011 State of the Union address.

While President Obama touts the importance of advanced learning, his administration, specifically the Department of Education, is attacking career colleges. The Department is proposing hamstringing for-profit schools with a "gainful employment" rule that does not apply to not-for-profit colleges. But career colleges produce many graduates in technology fields that are crucial to our transforming economy.

The attacks are multi-faceted. Here is one example: Short-seller and career-college opponent Stuart Eisman of FrontPoint met with DOE officials while it was began considering these new rules.

Pretty underhanded. Which is why the Student Access Student Choice Coalition (SASC) wants some answers from Education Secretary Arne Duncan.

Below is the letter it sent to him.

January 26, 2011

The Honorable Arne Duncan
Secretary
United States Department of Education
400 Maryland Avenue, SW
Washington, DC 20202

Dear Secretary Duncan,

In light of news reports that detail specific efforts by short sellers to influence Department of Education policy, we are writing to ask that you order the Department to release any and all correspondence its officials had with officials from FrontPoint Financial Services and other investments firms.

FrontPoint has a reputation for making bets on specific industries and appears to have exerted a significant effort in its attempts to use the Department of Education to impact the stock price of publicly traded career colleges and universities.

We are concerned that Mr. Eisman’s efforts and influence will result in Department policies that could force these schools as well as those that are privately held to close their doors. Indeed, one school in Pittsburgh cited a draft proposal that Mr. Eisman has championed as one of the reasons it is ceasing enrollment of new students and going out of business.

The new revelations about Mr. Eisman’s efforts to influence the Department follow last month’s news that the Government Accountability Office (GAO) analysis that is fueling the drive for the Department of Education to strengthen its oversight of career schools had to be significantly altered. The revisions to the GAO report are now prompting scrutiny from the new Chairman of the House Committee on Oversight and Government Reform.

There are now more questions about the effort to reform Federal oversight of career colleges and universities than there are about the industry itself.

In the interest of ensuring that the rulemaking process is being conducted appropriately, we ask that you release any and all communications between the Department of Education and investors such as Mr. Eisman, including phone calls, meeting minutes, correspondence and e-mails. By releasing this information to the public, you will be providing needed sunlight to a process that appears to raise serious questions.

Lastly, this letter is submitted to you the day after President Obama delivered his State of the Union address to the nation. One year ago, President Obama bemoaned the influence of special interests and those who attempt to affect public policy despite having competing interests. We would respectfully ask that your office review Mr. Obama's words as it considers the request made in this correspondence.

Sincerely,

Henry Herzing
Chancellor and Founder
Herzing University

Robert Herzog
Chief Financial Officer
Harrison College

Eisman admits meeting the the DOE, the Wall Street Journal (paid registration required) reported on Tuesday:

Mr. Eisman has been open about his negative view of for-profit education companies. He also acknowledges communicating with U.S. Education officials about the sector, but not about how to oversee it. "No regulation was discussed in any way," he said in an interview.

Business Week concurs, and it recounts his contacts with the staff of Sen. Tom Harkin (D-IA), another opponent of career colleges.

Eisman informed the Education Department and Harkin’s staff that he had a short position, he said in a telephone conversation. In an e-mailed statement, Eisman said there was nothing wrong with his contact with the Education Department. "I have never had communications with the DOE of any kind with respect to any existing or pending regulations," Eisman wrote, declining to disclose his current short position or comment further.

The same publication tells us that David Bergeron, the acting deputy assistant education secretary, says Eisman shared a PowerPoint presentation he planned to use for a speech.

"He shared a PowerPoint that he intended to use for a speech he was planning to give in May," Bergeron, the acting deputy assistant education secretary, said in a telephone interview. "It would have been inappropriate for us not to meet with someone that indicated that he had done serious research on the industry."

Information obtained by Marathon Pundit shows that "Gainful Employment," which of course is a pending regulation, was part of Eisman's presentation.

Time for transparency, Mr. President.

Related posts:

Washington Post Co. CEO: Proposed Dept of Ed rules on for-profit schools will harm low income students
Vet and student speaks up for career colleges
Campus Progress reports on career college issue--while fighting for-profit schools
War on for-profit colleges' Jayson Blair exposed by Gawker
Sun-Times: Feds shouldn't punish career colleges
Don't punish career colleges
Issa's oversight committee to look at GAO report on career colleges
Tom Harkin attacks career colleges
GAO revises its negative report about for-profit schools
The Department of Education's war on career colleges
Idiotic edu-crats attacking for-profit colleges

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