Short Seller Connected Senator Continues Error-Ridden Attack on Private Sector Schools

Sep 22, 2011, 17:58 ET from Student Access Student Choice Coalition

SASC Research Shows the Real Story On Harkin & Career-Oriented Education

WASHINGTON, Sept. 22, 2011 /PRNewswire-USNewswire/ -- Student Access Student Choice Coalition is releasing the following research on Senator Harkin and Career-Oriented Education:

Internal Email Says GAO Was Put Under "Extreme Short Time Frames" By Harkin To Issue Report & Staffers Demanded Inclusion Of Certain Details. "A smoking gun document about an error-ridden GAO report puts the murder weapon in a top Democratic senator's hands.  GAO issued a slew of corrections in November to an undercover investigation into for-profit colleges requested by Sen. Tom Harkin, Iowa Democrat, who had unveiled the report at a hearing highly critical of the schools Aug. 4.  The email says GAO was put under 'extreme short time frames' by Harkin to issue the report and 'congressional staffers' demanded the inclusion of numerous details as it was being finalized.'" (Jonathan Strong, "Political Pressure Tainted Error-Ridden GAO Report," The Daily Caller, 5/17/11)

"The Criticism Is Another Blow To Harkin's Embattled Investigation Of The For-Profit Schools, Following Questions About An Error-Ridden Government Accountability Office (GAO) Report Commissioned By Harkin On The Same Subject ..." (Jonathan Strong, "Harkin Staff Collaborated With Interest Group," The Daily Caller, 7/26/11)

"Revised" GAO Report From Summer 2010 Led To Investigation. "House Oversight Committee Chairman Darrell Issa, R-Calif., is making trouble for the Government Accountability Office, the nonpartisan government watchdog.  Issa has started his own committee's investigation of GAO's Forensic Audit and Special Investigations Unit after GAO revised a report issued in the summer outlining alleged fraudulent recruiting practices at for-profit career colleges.  The GAO's revisions raise concerns about the investigative unit, Issa said in a letter to GAO Chief Quality Officer Timothy Bowling.  The for-profit college lobby has accused the GAO of fabricating information and misleading lawmakers in the report. GAO is undertaking its own review of the situation, including potential culpability of team members." (Fawn Johnson, "Issa Investigates GAO Investigators In Battle Over For-Profit Schools," National Journal, 1/18/11)

  • Factual Changes To 16 Of 28 Scenarios. "There also were some questions about the objectivity of a Government Accountability Office (GAO) report released on Aug. 4, 2010, that was highly critical of for-profit colleges.  The report criticized recruiting practices of for-profit colleges and universities based on the evidence of 28 key investigative 'scenarios.'  After congressional pressure, the GAO released revisions to its August report in November 2010.  The revisions released in November made factual changes to 16 of the 28 scenarios." (David Williams, "Two Scandals, One Lesson Learned," The Washington Times, 8/3/11)
  • NOTE: Coalition For Educational Success: "The Issuance Of A Revised GAO Report Is Extremely Rare.  Out Of Over 1,000 Reports Issued In The Past Year Only 16 Were Later Revised." (Coalition For Educational Success,, Accessed 8/10/11)
  • "On July 13, 2011, The House Appropriations Committee Found That The GAO's Report Included 'Significant Mistakes And Misstatements In Its Analysis Of The For-Profit College Sector.'"(Coalition For Educational Success,, 7/21/11)

Harkin Staff Engaged In Witness Tampering?

Top Aides To Sen. Harkin, Special Interest Group & Law Firm Edited Testimony Of Investigative Hearing Witness. "Top aides to Iowa Democratic Sen. Tom Harkin collaborated with a special interest group and a law firm with a financial stake in the matter to edit the written and oral testimony of a witness at a key investigative hearing last year, documents obtained by The Daily Caller show.  Officials from The Institute for College Access & Success (TICAS) and the James, Hoyer, Newcomer & Smiljanich law firm edited Josh Pruyn's testimony for a pivotal Aug. 4, 2010 hearing before the Senate Health, Education, Labor and Pensions Committee (HELP), as did Harkin aides … Pruyn, a disillusioned former employee of the for-profit Westwood College online, testified about high-pressure sales tactics used to enroll new students at the school.  But ethics experts say the involvement of outside groups undermines the credibility of his testimony." (Jonathan Strong, "Harkin Staff Collaborated With Interest Group," The Daily Caller, 7/26/11)

  • Ethics Lawyer & Professor Richard Painter: "That's not an investigation, that's just a charade ... Witnesses' testimony should be their own, not that of outside groups that 'edit' the testimony to say what they want it to say." (Jonathan Strong, "Harkin Staff Collaborated With Interest Group," The Daily Caller, 7/26/11)

Short Seller Met With Harkin Staff & Then DOE Official Bob Shireman Before Regulations & Major Speech; Served As Witness For Harkin Hearing:

UPDATED NOTE: Former Eisman Colleagues Recently Started Firm Without Him; Insider Says He Was "Becoming A More Public Person Than They Were Comfortable With ..." "Steve Eisman's top lieutenants at FrontPoint Partners have split with the celebrity stock picker and are now gearing up to launch their own hedge fund.  When word got out in June that Eisman would leave FrontPoint after liquidating his two funds, market players assumed he'd take three key investment staffers with him – head trader Danny Moses and analysts Porter Collins and Vincent Daniel.  As it turns out, the three have set up their own firm, Seawolf Capital, with plans to begin trading a financial-stock fund in January.  The team of Collins, Daniel and Moses had been working with Eisman since 2006.  Together, they ran two of FrontPoint's best-known vehicles: FrontPoint Financial Services Fund and FrontPoint Horizons Fund.  Eisman and his staff are best known for their early bet against subprime-mortgage bonds – a trade chronicled by Michael Lewis in 'The Big Short.'  In 2007, the financial-services fund delivered a 66.2% return ... There's no official word on why Eisman and his former partners decided to go their separate ways.  Some market players speculated it may have something to do with public comments Eisman made earlier this year hinting at his intention to eventually leave FrontPoint.  'He was becoming a more public person than they were comfortable with,' an insider said." ("Eisman's Team Plans New Fund, Sans Eisman," Hedge Fund Alert, 9/14/11)

Short Seller Steve Eisman Met With Senior Department Of Education Officials, Including Bob Shireman, Less Than Two Months Before The Department Issued Its First Batch Of Regulations Targeting Private Sector Schools. "On April 26, 2010, Steven Eisman, famed short-seller, met secretly with two senior DOE officials, Deputy Undersecretary of DOE Robert Shireman and Acting Deputy Assistant for Policy and Budget, David Bergeron.  Less than two months later, the Department issued its first batch of regulations targeting only for-profit colleges ..."(Lanny Davis, Op-Ed, "What Transparency By The Department of Education?" The Huffington Post, 11/26/10)

  • "The Department Didn't Disclose This Eisman Meeting With Such Top Officials – Only An Enterprising Reporter At Fortune Dug It Out And Wrote About It Last Month." (Lanny Davis, Op-Ed, "What Transparency By The Department Of Education?" The Huffington Post, 11/26/10)
  • According To Fortune Reporter, The Meeting Was To Discuss A Speech Eisman Was About To Make.  (David Kaplan, "Did Steve Eisman Unduly Influence The Education Dept.?" Fortune, 11/2/10)
  • "The DOE's Discussion With Eisman In April Had Involved Two DOE Officials: David Bergeron, An Acting Deputy Assistant Secretary For Policy And Budget, And Robert Shireman, At The Time A Deputy Undersecretary And The Key Critic Of For-Profit Abuses, Who Joined By Phone."(David Kaplan, "Did Steve Eisman Unduly Influence The Education Dept.?" Fortune, 11/2/10)
  • Days After Meeting, DOE Official Shireman Gave A Speech Comparing Private Sector Colleges & Universities To Financial Institutions That Caused 2008 Meltdown; Twice Using Word "Subprime." "Two days after that discussion with Eisman, on April 28, Shireman delivered a speech in St. Paul at the annual meeting of state regulators in which he likened for-profit colleges to the financial institutions that took excessive risks and caused the 2008 meltdown.  He twice mentioned 'subprime,' though his rebuke was less colorful than the one Eisman later offered at the Sohn conference and in congressional testimony." (David Kaplan, "Did Steve Eisman Unduly Influence The Education Dept.?" Fortune, 11/2/10)
    • NOTE: Shireman Was The President Of Anti For-Profit College Group, TICAS, Prior To Serving In Obama Administration. ("Q&A With Jeff Wendt, Today's Campus, 7/06)
    • NOTE: TICAS Sent Around Embargoed DOE Rules To Gainful Employment Group Almost Ten Hours Early. (Email, 6/15/10)

Eisman Also Had Numerous Connections With Harkin Staff; Conference Calls Held & Meetings Regarding Private Sector Schools. "Eisman also had an April 15 telephone conference with staffers from Harkin's Health, Education, Labor and Pensions committee, and met with Harkin staff in May, according to Justine Sessions, a spokeswoman for the Senator." (Kambiz Foroohar & Esme E. Deprez, "Big Short Eisman Vies With Goldman In Faceoff Over For-Profits," Bloomberg, 1/24/11)

Eisman Gave Highly-Publicized Speech In May 2010 Comparing Private Sector Colleges & Universities To Subprime Mortgage Industry. "The highly publicized speech at the Ira Sohn Investment Research Conference in Manhattan on May 26 was titled 'Subprime Goes to College.'  In it, Eisman compared for-profit schools to the subprime mortgage industry and warned of $275 billion of defaults by students at for-profits over the next decade – unless the DOE adopted new regulations.  After his speech, shares of for-profit education companies ITT Educational Services (ESI) and Corinthian Colleges (COCO) each declined 3%."(David Kaplan, "Did Steve Eisman Unduly Influence The Education Dept.?" Fortune, 11/2/10)

  • NOTE: During Presentation, Eisman Noted He Was Shorting Private Education Stocks. "CNBC's Herb Greenberg is reporting that hedge fund manager Steve Eisman has recently established a short position in Strayer Education.  On May 24th, Eisman revealed that he was shorting private education stocks in a presentation entitled 'Sub-prime Goes To College.'  Strayer (STRA), however, was not one of the names that he mentioned in that presentation." (Scott Rubin, "Steve Eisman Is Shorting Strayer,", 8/30/10)

"A Month Later, In June, Eisman Made The Same Remarks In Testimony Before [Harkin's] Senate Education Committee."(David Kaplan, "Did Steve Eisman Unduly Influence The Education Dept.?" Fortune, 11/2/10)


Private Sector Colleges & Universities Provide Quality Education For Veterans:

Milton Greenberg, Professor Emeritus Of Government At American University, Where He Has Also Served As Provost & Interim President: "Meanwhile, many veterans have tended to opt for community colleges and for-profit  institutions because of convenience and job-related curricula.  That trend reflects opportunities not readily available after World War II, when such institutions were not as ubiquitous.  Community colleges have represented a significant portion of higher-education enrollments for many years, with options for transfer to four-year institutions.  Traditional higher education is still trying to come to grips with the impact of the for-profit sector, but its growth suggests that the new GI Bill will prove helpful to for-profit institutions as well – and we should not ignore the contributions that they, too, can make to veterans and our society." (Milton Greenberg, "The New GI Bill Is No Match For The Original," The Chronicle Of Higher Education, 7/25/08)

Brigadier General John Castellaw: "For-profit schools are particularly valuable for veterans.  Unlike traditional college freshmen, veterans often return home to busy schedules dominated by work and family.  They require the flexible course schedules and online classes that are the hallmarks of for-profit schools.  As shown by my example, the needs of veterans often cannot be met by traditional nonprofit schools." (Brig. Gen. John Castellaw, "Castellaw: Let Veterans Decide What School Is Right; Obama Plan To Treat Heroes Like Scofflaws Is Insulting," The Washington Times, 9/15/10)

Senator John McCain: "On one of the most rare occasions in my political career I find myself in complete agreement with Lanny Davis.  Of course there needs to be action taken to stop the abuses that [Harkin] ad nauseum continues to point out ... but to kill off the for-profit institutions ... we'd be literally be doing away with every department of federal government." (Jennifer Epstein, "Senate Scrutiny Round 3," Inside Higher Education, 10/1/10)

Jon Soltz: Co-Founder Of Co-Founder: "It's not often you'll find me agreeing with an op-ed in the Washington Times, but this one from retired Brig. Gen. John Castellaw is spot on.  Since passage of the 21st Century GI Bill, which worked hard to pass, thousands of Iraq and Afghanistan veterans have taken advantage of their education benefit to take classes at online universities.  For many veterans, coming home doesn't mean staying put.  For those still in the service, it could mean moving around to new bases, or time away for drill throughout the year.  For many, this makes taking classes at a traditional on-campus college difficult, if not impossible.  Even for those who may be through with their service, they come home to families, jobs, and other responsibilities that makes picking up and moving to a college campus out of the realm of the possible.  For them, online universities offer a chance to get a higher education, while tending to their transition back to life in the states.  For many more, who may be based overseas, online colleges offer a vital service to those who served in war – a chance to gain the education often required for promotion within the military." (Jon Soltz, "Let Vets Have College Choice," The Huffington Post, 9/29/10)

Bill Kling, President Of The Broward County Veterans Council: "Private sector colleges and universities across America have stepped up to the challenge of helping provide essential post-secondary educational options to the men and women who have previously served or are currently serving this country.  Over the years, these schools have played a significant role in helping to further the skills of our service members so they can become even more effective both within and outside the military.  The fact is that private sector schools offer an effective means for attaining a post-secondary education in sectors of the economy that are hiring." (Press Release, "Veterans Group Criticizes Senate Committee's Unfair Position On Private Sector Colleges & Universities," Save Student Choice Website, Accessed 9/12/11)

SOURCE Student Access Student Choice Coalition