In the days after the Obama administration issued a set of watered-down regulations governing the for-profit college industry earlier this month, Washington Post Company Chairman and Chief Executive Donald Graham, one of the top executives in the for-profit college industry, sold off millions of dollars in stocks held in trusts benefiting family members.
The Washington Post Company, which owns Kaplan University, one of the major players in the for-profit higher education sector, has seen its stock price rise higher than in the months before the regulations were issued.
As the trustee for his siblings, Graham has sold more than 24,000 shares over the past month totaling $10 million, the most significant sale of company stock on the open market in the past three years. The stock gains and subsequent sales show just one way the administration’s rules have led to a windfall for those connected to the industry.
Graham has served as a chief advocate for the industry, which has faced unprecedented government scrutiny in recent years amid evidence that some for-profit colleges are leaving students with unsustainable student debts and little in the way of job prospects. Kaplan University has been at the center of the controversy for its aggressive recruiting practices.
Industry lobbyists and executives, including Graham, have waged a major battle for influence in Washington over the past year to lobby against the Obama administration’s attempts to bring accountability to outsized student loan defaults in the for-profit sector. Just weeks before the pared-down rules were issued, Graham attended a meeting to discuss the proposals with Obama’s top regulatory czar, Cass Sunstein.
A spokesman for the Washington Post Company, Rima Calderon, said Graham has not personally benefited from any of the recent sales because the trusts are for Graham’s siblings, not himself.
“He is a trustee; he gains nothing from these sales,” Calderon said. “He has not sold any of his own shares. He is selling for others, and he gets nothing.”
The stock sales began June 6, two business days after the Obama administration’s “gainful employment” regulations were announced. Although the Washington Post Company stock has settled back to near average prices since then, it soared in the initial days after the administration issued the rules.
The rules were pared back from an original draft released last summer, giving for-profit colleges and other vocational college programs an additional three years before they could be cut off from federal student aid programs. In addition, programs would have to fail certain student debt measurements three out of four years in order to be cut off, as opposed to a one-strike rule in the original draft.
A company spokesman did not make Graham available to explain the specifics of the stock transactions, and the spokesman declined to comment on the connection between the sales and the government regulations on for-profit colleges.
It's unclear why the family wanted to sell the stocks immediately after the regulations were announced. While the rules give for-profit schools such as Kaplan a three-year cushion before being shut out of lucrative federal student aid programs, poorly performing schools could still be required to make disclosures to students about debt levels before that time.
Disclosures could eventually affect enrollment growth, which has been a major reason for the success of for-profit college stocks on Wall Street.