Coalition for Educational Success Sues U.S. Department of Education for Stonewalling FOIA Request Regarding GAO Report; Contacts with Short-Sellers

- Following-up on Startling Revelation of Significantly Amended GAO Report, Group Seeks to Uncover Bias; Improper Influence of Short-Sellers on “Gainful Employment” Regulations -

WASHINGTON--()--Today, The Coalition for Educational Success filed a lawsuit against the U.S. Department of Education for wrongfully withholding records by failing to respond to a Freedom of Information Act (FOIA) request. The Coalition filed a FOIA request for documents related to the development of a U.S. Government Accountability Office (GAO) report about the profit college sector; a report that has since been substantially discredited.

Also requested were documents related to dealings between DOE and investors who may have “shorted” stocks of for-profit colleges, and others who are employed by the not-for-profit sector.

“We are entitled to receive these documents and so far the Department of Education has breached its obligations under federal law to provide them in a timely manner,” said Lanny J. Davis, counsel and public spokesperson for the Coalition for Educational Success. “The revised GAO report validates the Coalition’s concerns and may be just the tip of the iceberg in revealing a coordinated effort to demonize an industry in advance of Congressional hearings and in support of the DOE’s proposed regulations.”

Questionable Motives and Methodology Behind Error-Ridden GAO Report

The GAO Report in question was commissioned by the Senate Health, Education, Labor and Pension Committee, which is chaired by Senator Tom Harkin, a prominent critic of for-profit colleges. On November 30, 2010, the GAO released an amended version of the report that has revised language in 16 of the 28 “scenarios” used as examples in its original report. In all cases, the original language used in the scenarios was inaccurate and biased against the colleges.

Similar to DOE's singular, biased focus on one sector, it is extremely troubling that the GAO was narrowly asked only to investigate career colleges, rather than looking at abuses across the higher education sector. Nor did the GAO ever explain how or why it chose the schools to investigate.

Despite repeated requests, the GAO has refused to disclose the documents, including tapes, videos, and notes underlying its report, which would provide the full context for the agency’s findings.

“The GAO report has been used by the leading critics of career colleges – including competitors – to tarnish the reputations of all schools in the sector,” said Davis. “This conduct and resistance by the DOE to respond properly to a standard FOIA request is surprising and contrary to the spirit and letter of President Obama’s theme of transparency in his administration.”

Despite the GAO report’s focus on a non-representative sample of the for-profit sector, the report has damaged the reputation of the entire sector, consisting of more than 2,500 schools.

Improper Communications Between DOE and Investors

The Coalition also seeks agency records related to communications with investors who may have “shorted” the stocks of for-profit schools. Short-sellers who bet against the performance of the for-profit education sector have a significant financial stake in regulation that would harm the impacted schools. In the few days following the release of the GAO Report, the market capitalization of the 15 publicly traded organizations that own and operate career colleges dropped nearly $4.4 billion. The drop in share price of the publicly traded for-profit colleges would financially benefit any individual or company that was “shorting” stocks of the for-profit schools.

It has become publicly known that high-ranking DOE officials, as well as members of the not-for-profit sector who were involved in the negotiated rule-making, communicated with investors in advance of DOE’s release of its Notice of Proposed Rulemaking concerning “gainful employment.”

According to Davis, these activities continue a theme of targeting only those schools where minorities and lower income people predominantly attend – even though an abuse is an abuse regardless of the tax status of the school.

The Coalition filed a FOIA request with DOE on October 15, 2010. On October 27, 2010, DOE acknowledged receiving the Coalition’s FOIA request. Under federal law, the DOE had 20 working days to respond, and therefore needed to comply by November 26, 2010. The Coalition has yet to receive the materials as required by law.

The Coalition expects DOE to comply with the FOIA request and provide all requested materials in a timely fashion.

About the Coalition for Educational Success

The Coalition for Educational Success includes many of the nation's leading career colleges, serving more than 350,000 students at 478 campuses in 41 states. Career colleges provide training for students in 17 of the 20 fastest growing fields. The Coalition advocates for policies that support wider access to higher education, particularly for non-traditional students including full-time workers, workforce returners, working parents, minorities and veterans.


For the Coalition for Educational Success
Noah Black, 202-295-8797


For the Coalition for Educational Success
Noah Black, 202-295-8797