BusinessWire: U.S. Department of Education Withholds 37,000 Documents in Response to Coalition FOIA Request

U.S. Department of Education Withholds 37,000 Documents in Response to Coalition FOIA Request

March 24, 2011

By Noah Black
Posted on March 28, 2011 by CAPPS

In response to a routine FOIA request from the Coalition for Educational Success, the Department of Education released 1,900 pages to the Coalition, while denying over 37,000 additional pages. The FOIA request sought 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 as well as documents related to the creation of the now-discredited Government Accountability Office report critical of career colleges.

“Last week, in the middle of the Administration’s ‘sunshine week’, a week purported to be dedicated to the open functioning of government, the Department of Education chose to hide in the shadows rather than bring anything to light,” said Penny Lee, managing director for the Coalition for Educational Success. “This denial of tens of thousands of pages only exacerbates longstanding concerns that the Department colluded with short-sellers during the formulation of the gainful employment regulation.”

A small percentage of the requested documents that were released by the Department, revealed further collaboration between senior Department officials and known short-sellers:

Ann Manheimer, Director, Workforce Development at the U.S. Department of Education emailed Antal Desai, a known short-seller at CPMG, requesting his views on gainful employment and providing timing for the Department’s Notice of Proposed Rulemaking (NPRM).

David Bergeron, Director of Policy and Budget Development for the Office of Postsecondary Education, met with short seller Desai, of CPMG, on April 19th to discuss the gainful employment proposal. Bergeron previously claimed that gainful employment was not discussed in his meetings with short sellers. The FOIA documents directly contradict his claim.

James Kvaal, Deputy Undersecretary of Education at the U.S. Department of Education, received and circulated to Martha Kanter, Undersecretary of Education, testimony and an interview with a former career college recruiter that was provided to him by a short-seller. Kvaal explicitly states that a “short-seller” sent him the testimony and interview.

On multiple occasions short-seller Desai forwarded negative media coverage of career colleges recruiting from homeless shelters. It was later revealed that his firm, CPMG, hired a researcher, who did not disclose her ties to short-sellers, to gather signatures from homeless shelter directors to sign a letter detailing recruiting abuses at the shelters that was sent to Secretary Duncan. Also included were a copy of his presentation on the abuses as well as names and contact information for individuals referenced in the presentation. Previous documents obtained under FOIA requests show that other proponents of the gainful employment rule could find no evidence of recruiting abuses at homeless shelters.

Notorious short-seller Manuel Asensio communicated with the Department requesting that a letter, which specifically targeted Bridgepoint Education, sent by a representative of his firm, be reviewed by senior Department officials. Department staff forwarded the letter to Alejandra Ceja, Chief of Staff for the Undersecretary of Education, for review.

Short-seller Antal Desai of CPMG, emailed David Bergeron, then Deputy Undersecretary of Education, and Ann Manheimer with specific responses to the talking points of opponents of the gainful employment regulation. Bergeron thanks Desai for his feedback and notes they are making his recommended points.

Robert Shireman, then Deputy Undersecretary of Education, set-up a meeting with Robert MacArthur, an employee of Alternative Research Service, a firm known for providing research to short-sellers. MacArthur requested that a representative of the SEC and/or DOJ attend. He also offers to bring an extensive collection of documents related to career colleges, including: DoE reports, IG reports, OMB/GAO reports, lawsuits against career colleges going back a decade and transcripts of enrollment representatives allegedly making misleading statements.

The Coalition’s FOIA request, originally filed on October 15, 2010, sought documents that would illuminate the influence investors – who “shorted” stocks of for-profit colleges and were known critics of the for-profit college industry — may have had on the creation of the Department’s gainful employment regulation. The FOIA request also sought documents related to the development of a GAO report about the for-profit college sector, a report that has since been substantially discredited.

Again and again, the Department repeatedly failed to comply with the law and produce the documents requested in the Coalition’s FOIA requests. Under the law, the Department has 20 days to respond to a FOIA request. Documents responding to the October 15, 2010, request didn’t start arriving until January 24, 2011, and now, nearly 6 months after the original request, the Department has released only a small fraction of the requested documents.

“Instead of shielding Department officials and Wall Street short-sellers, the Department needs to shine a light on how the Department’s policy making process was heavily influenced by those who ‘bet short’ on career college stocks, brought little to the table, but stood to gain billions of dollars financially from greater regulation of career colleges,” Lee added.

Previous documents released to the Coalition expose multiple contradictions between the Department’s actions and public statements. The documents reveal that high-ranking Department officials involved these short-sellers and critics in crucial discussions prior to the release of the NPRM and point to a compromised rulemaking process due in part to the process being orchestrated and driven by short-sellers who stood to gain billions of dollars financially from greater regulation of career colleges. These documents also wholly contradict statements made on February 10, 2011, by Deputy Assistant Secretary of Education David Bergeron, who said that the agency wasn’t aware of the dubious financial interests of short-seller Antal Desai.

These troubling contradictions only underscore the importance that the Department operate in a fully transparent and open manner. “It’s clear there’s more information being withheld by the Department. The Department of Education needs to adjusts its approach to meet the President’s commitment to transparent government rather than persist in its current course of delay, stonewalling and obfuscation,” said Penny Lee.

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