Is Justice Dept. Covering Short-Seller Tracks in For-Profit College Scheme?

Holder photoBeginning in 2009, the Department of Education — mightily aided by Senator Tom Harkin’s HELP Committee and a coterie of Wall Street short sellers — laid siege to the for-profit college sector in a knock-down, drag-out battle to the finish. Their strategic objective was to seriously hobble the profitability of career schools that had devised a competitive, career pathway for predominantly at-risk, low-income, non-traditional and minority students. On June 2, in the infamous Battle of the Beltway, the Department issued its (you should excuse the expression) ‘Gainful Employment’ rule, which was heralded as a major blow to career schools, whose recruitment rates have since dropped precipitously.

For anyone who viewed ‘Gainful Employment’ as an honest effort to address the educational needs of students preparing to enter the workforce at the worst moment since 1930, the latest salvo by the Justice Department will dispel that wishful thinking.

With a one-two punch, the Justice Department has opened a new battlefront against for-profit colleges by joining onto a whistleblower (qui tam) lawsuit, which seeks $11 billion in damages and claims that these schools broke federal laws in their admissions practices, a charge which the schools vigorously deny.

The Wall Street Journal offered a stinging editorial, pointing to the hypocrisy and abuse of power exhibited by the Justice Department and the dubious motives of trial lawyers now piling onto the lawsuit from their respective states:

“…the new activism comes in the wake of other Administration broadsides against the for-profit industry….David Hickton, the U.S. Attorney for the Western District of PA, who is handling the suit,…offered a tutorial on the basics of filing qui tam lawsuits. The event included helpful illustrations of chests full of gold. Under a section headlined “Victori Spolia,” the materials informed lawyers that plaintiffs take 15% to 30% of any money recovered while the lawyers work on contingency fees. In 2010, those legal fees worked out to $385,167,574, up from $258,790,518 in 2009.Yeehaw, boys.”

Victoria Spolia, indeed! We must seriously question an administration that has waged war on (among other things) for-profit schools in the guise of a “new activism.” The assualt on for-profit education was planned and financed by Wall Street short sellers. Instead of doing its job and investigating who inside the Education Department was part of the scheme, Eric Holder’s Justice Department is now covering tracks for the shorts.