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Lanny Davis

Lanny Davis

Posted: November 26, 2010 12:00 PM

"[The Department of Education] has... operated with an unprecedented level of transparency and openness..." ~ Department of Education Spokesman Justin Hamilton, November 18 2010, speaking of the Department's proposed "gainful employment" (GE) regulations, aimed only at "for profit" career colleges -- and not public or not-for-profit colleges.


"Transparency and openness?" Oh really?

Check out the following examples of exactly the opposite -- conduct by a DOE that demonstrates a stacked-deck, an anti-private sector mind-set, and a non-transparent process throughout much of the GE regulatory process:

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 -- and stocks in ten-out-of-fourteen public companies in the for-profit sector and, presumably, Mr. Eisman made lots of money.

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. Nor has the Department stated it required Mr. Eisman to disclose his short positions before meeting with him.

Some weeks ago Ann Manheimer, DOE's Director of Work Force Development, who used to work for Mr. Shireman in the Undersecretary's office, met with well-known short-seller in the for-profits sector, Ansal Desai of Dallas, Texas. According to an email, Ms. Manheimer, supposed to be an objective public official writing a fair regulation, was asking the short-seller for anecdotes and examples of abuses in the for-profit, career-college sector only.

The writer of this email referring to this meeting, dated March 31, was Pauline Abernathy, Vice President of an anti-for-profit colleges lobbying group called "The Institute for College Access of Success." The founder and first president of this group, before he became DOE official was, you guessed it: the same Robert Shireman. Since Mr. Shireman left the Department, he was replaced by James Kvall. And guess where Kvall used to work and for whom? You guessed it again -- at TICAS for Robert Shireman.

Also copied by name on this and in many other secret emails, all of them about pressuring DOE to issue harsh, anti-for-profit GE regulations, were identified members and alternates of the DOE's "negotiating committee." Senators Richard Burr (R.-N.C.) and Tom Coburn (R-Okla.) last week wrote and asked the DOE's Inspector General to investigate not only the non-disclosed short-seller meetings, but also, possible violation of Department rules by these negotiating committee members, who were expressly prohibited from communicating with "the investment community" or any outside organizations other than "discussion of the overall objectives and progress of the negotiations."

That negotiating committee -- empowered, in practical effect where there is consensus to promulgate the final rule -- numbered 14. Only one was from the for-profit sector, which protested the imbalance but got nowhere. So much for "fair and balanced."

And how's this for an emblematic example of the DOE opting for non-transparency over transparency? To measure whether a for-profit college passed or failed a crucial test to regulate levels of student debt, the DOE chose non-transparent, non-accessible earnings data from the Internal Revenue Service and the Social Security Administration, rather than the data originally proposed -- the Internet-accessible Bureau of Labor Statistics data, making it difficult, if not impossible, for these colleges to avoid failing the test in many instances. No wonder Mr. Eisman was so interested in betting on the stocks going down after the regulations were published.

So what's going on here? If a Republican administration had issued a regulation at a time like this that disproportionately will hurt minorities and lower income people -- those who predominantly attend for-profit colleges -- can you imagine the cries of outrage from liberal Democrats like me?

As a liberal Democrat, I worry that something is very wrong here. This is bad policy, bad politics and bad process. With all three "p's" going south, you would think that President Obama and Secretary Duncan would be wise and hit the re-set button -- or, even better, let the new congress do the legislating rather than asking the DOE to do so much (and so poorly) by regulating.

Stay tuned.

Correction: In a previous version of this post, I inadvertently used the name Shireman in the last sentence of the fourth paragraph, and have since substituted the name Eisman. I regret the error.


Mr. Davis is attorney and public spokesperson for a coalition of for-profit colleges. He served as Special Counsel for President Clinton in 1996-98 and on President Bush's Privacy and Civil Liberties Oversight Board in 2006-07. He is the principal in a Washington D.C. legal/crisis communications/legislative strategies law firm, Lanny J. Davis & Associates.