foia request: crew: department of education: regarding for-profit education companies: 9/30/10

8/7/2019 FOIA Request: CREW: Department of Education: Regarding For-Profit Education Companies: 9/30/10

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CREW Icitizens for responsibilityand ethics in washingtonSeptember 30, 2010

By Email: [email protected] and First-Class MailU.S. Department of EducationOffice ofManagementRegulatory Information Management Services400 Maryland Avenue, S.W. , LBJ 2W220Washington, D.C. 20202-4536Attn: FOIA Public Liaison

Re: Freedom of Information Act RequestDear FOIA Public Liaison:

Citizens for Responsibility and Ethics in Washington (CREW) makes this request forrecords, regardless of format, medium, or physical characteristics, and including electronicrecords and information, pursuant to the Freedom ofInformation Act, (FOIA) , 5 U.S.C. 552,and U.S. Department of Education (Education) FOIA Regulations, 34 C.F.R. 5.1, et seq.

Specifically, CREW seeks any and all records from April 20, 2009 , to the presentpertaining to four for-profit companies: Corinthian Colleges, Inc., Kaplan, Higher Education(including Kaplan College and Kaplan University), Devry University, and the University ofPhoenix.

Please search for records regardless of format, medium, or physical characteristics. Weseek records of any kind, including electronic records, audiotapes, videotapes, photographs, andback-up tapes. Our request includes any telephone messages, voice mail messages, daily agendaand calendars, information about scheduled meetings and/or discussions, whether in-person orover the telephone, agendas for those meetings and/or discussions, participants included in thosemeetings and/or discussions, minutes of any such meetings and/or discussions, e-mail orfacsimiles sent as a result of those meetings and/or discussions, and transcripts and notes of anysuch meetings and/or discussions to the extent they relate to the aforementioned requestedinformation.

If it is you position that any portion of the requested records is exempt from disclosure,CREW requests that you provide an index of those documents as required by Vaughn v. Rosen,484 F.2d 820 (D.C . Cir. 1973) , cert. denied, 415 U.S. 977 (1972). As you are aware, a Vaughnindex must describe each document claimed as exempt with sufficient specificity "to permit areasoned judgment as to whether the material is actually exempt under FOIA. " FoundingChurch ofScientology v. Bell, 603 F.2d 945, 959 (D.C. Cir. 1979) . Moreover, the Vaughn index

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FOIA Public LiaisonSeptember 30,2010Page Twomust "describe each document or portion thereofwithheld, and for each withholding it mustdiscuss the consequences of supplying the sought-after-information." King v. Us. Dep 't ofJustice, 830 F.2d 210,223-24 (D.C. Cir. 1987) (emphasis added). Further, "the withholdingagency must supply'a relatively detailed justification, specifically identifying the reasons why aparticular exemption is relevant and correlating those claims with the particular part of awithheld document to which they apply.'" Id. at 224, citing Mead Data Central v. Us. Dep 't ofthe Air Force, 566 F.2d. 242,251 (D.C. Cir. 1977).

In the event some portions ofthe requested records are properly exempt from disclosure,please disclose any reasonably segregable non-exempt portions in accordance with 5 U.S.C. 552(b). If it is your position that a document contains non-exempt segments that are so dispersedthroughout the document as to make segregation impossible, please state what portion of thedocument is non-exempt and how the material is dispersed throughout the documents. MeadData Central, 566 F.2d at 261. Claims ofnon-segregability must be made with the same degreeof detail as required for claims of exemption in a Vaughn index. If a request is denied in whole,please state specifically that it is not reasonable to segregate portions of the record for release.

Finally, CREW welcomes the opportunity to discuss with you whether and the extent towhich this request can be narrowed or modified to better enable Education to process it withinthe FOIA's deadlines.Public Interest Fee Waiver Request

In accordance with 5 U.S.C. 552(a)(4)(A)(iii) and 34 C.F.R. 5.64, CREW requests awaiver of fees associated with processing this request for records. The subject of this requestconcerns the operations of the federal government and the disclosures likely will contribute to abetter understanding of relevant government procedures by CREW and the general public in asignificant way. Moreover, the request is primarily and fundamentally for non-commercialpurposes. 5 U.S.C. 552(a)(4)(A)(iii). See, e.g., McClellan Ecological v. Carlucci, 835 F.2d1282, 1285 (9th Cir. 1987).

Specifically the requested records will inform the public about Education's role in thecurrent controversy over the for-profit education industry and the extent to which Education'sproposed regulatory changes, intended to rein in perceived abuses in the federal financial aidprogram, have been influenced by individuals and entities in either the for-profit or non-profitindustry. Education recently announced it was taking more time to issue the new regulationsand, according to Secretary Duncan, this delay was to get "additional feedback" to "help thedepartment strike 'the right balance' between holding the programs accountable to protectstudents and taxpayers and 'making sure we keep whole those programs that are doing a goodjob.'" Eric Gorski. Govt. Delays Rule Opposed By For-Profit Colleges, Associated Press, Sept.24, 2010 (Enclosed as Exhibit 1). The public is entitled to access documents that would shed


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FOIA Public LiaisonSeptember 30, 2010Page Threelight on the critical role that the for-profit education industry has had on the development ofEducation's regulations and policies in this arena.

CREW is anon-profit corporation organized under section 501(c)(3) of the InternalRevenue Code. CREW is committed to transparency in government and protecting the citizen'sright to be aware of the activities of government officials and to ensuring the integrity of thoseofficials. CREW uses a combination of research, litigation, and advocacy to advance its mission.The release of information garnered through this request is not in CREW's financial interest.CREW will analyze the information responsive to this request, and will share its analysis withthe public, either through memoranda, reports, or press releases. In addition, CREW willdisseminate any documents it acquires from this request to the public through its website,www.citizensforethics.org., which also includes links to thousands of pages of documentsCREW has acquired through its multiple FOIA requests as well as documents related to CREW'slitigation and agency complaints, and through www.scribd.com.

Moreover, CREW has a demonstrated interest in the subject of this request and ademonstrated history of publicly disseminating information on the for-profit educationcontroversy to the public. On July 1,2010, CREW sent a letter to Chairman Tom Harkin of theU.S. Senate Committee on Health, Education, Labor and Pensions, expressing concerns about theCommittee allowing Steven Eisman to testify on the state of the for-profit education industry,given his apparent financial conflicts of interest. CREW sent a follow-up letter to ChairmanHarkin on July 14,2010, after reports surfaced of other efforts to manipulate the federalgovernment into increasing the regulation of for-profit colleges. 1 Advocating greatertransparency in the industry and efforts to regulate the industry, CREW stated in its July 14 letter:

those advocating greater regulation also must be transparentabout their tactics and motives. Otherwise, serious questionsarise as to exactly who is engaged in abusive conduct to maximizeprivate financial benefits: the for-profit educational industry, or thoseraising the alarm about the industry. Americans need to have confidencethat legislative and regulatory processes are not being manipulated forprivate financial gain.Under these circumstances, CREW satisfies fully the criteria for a fee waiver.

News Media Fee Waiver RequestCREW also asks that it not be charged search or review fees for this request becauseCREW qualifies as a "representatives ofthe news media" pursuant to the FOIA, 5 U.S.c. FOIA

1 These letters are enclosed as Exhibit 2.


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Public LiaisonSeptember 30, 2010Page Four552(a)(4)(A)(ii)(II). In Nat 'ISec. Archive v. Us. Dep'tofDefense, 880 F.2d 1381,1386 (D.C.Cir. 1989), the U.S. COUli ofAppeals for the D.C. Circuit found the National Security Archivewas a representative of the news media under the FOIA. As the court reasoned, the FOIA'slegislative history indicates the phrase "representative of the news media" is to be interpretedbroadly "if the act is work as expected . . . In fact, any person or organization which regularlypublishes or disseminates information to the public . . . should qualify for waivers as a'representative of the news media. '" Id., citing 132 Congo Rec. S14298 (daily ed. Sept. 30, 1986)(emphasis in original).

CREW routinely and systematically disseminates information to the public in severalways. First, CREWmaintains a frequently visited website, www.citizensforethics.org, thatreceived 75,629 visits in August 2010. In addition, CREW posts all ofthe documents it receives under the FOIA on www.scribd.com. and that site has received411,057 visits to CREW's documents since April 14, 2010.

Second, since May 2007, CREW has published an online newsletter, CREWCuts, thatcurrently has 15,731 subscribers. CREWCuts provides subscribers with regular updatesregarding CREW's activities and information the organization has received from governmententities. A complete archives of past CREWCuts is available athttp://www.citizensforethics.org/newsletter.

Third, CREW publishes a blog, Citizens bloggingfor responsibility and ethics inWashington that reports on and analyzes newsworthy developments regarding government ethicsand corruption. The blog, located at http://www.citizensforethics.org/blog. also provides linksthat direct readers to other news articles and commentary on these issues. CREW's blog had1,174 hits in August.

Finally, CREW has published numerous reports to educate the public about governmentethics and corruption. Examples include: The Revolving Door, a comprehensive look into thepost-government activities of24 former members of President Bush's cabinet; 2008 Top TenEthics Scandals; 2008 Most Embarrassing Re-Elected Members ofCongress; and Those WhoDared: 30 Officials Who Stood Up For Our Country. These and all other CREW reports areavailable at http://www.citizensforethics.org/reports.

Based on these extensive publication activities, CREW qualifies for a fee waiver as a"representative of the news media" under the FOIA.If you have any questions about this request or foresee any problems in releasing fully therequested records please contact me at (202) 408-5565. Also, if CREW's request for a fee

waiver is not granted in full, please contact me immediately upon making such a determination.


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The Associated PressSeptember 24,2010 Friday 08:42 PM GMT

Govt. delays rule opposed by for-profit collegesBYLINE: By ERIC GORSKI, AP Education WriterSECTION: BUSINESS NEWSLENGTH: 678 wordsThe U.S. Education Department said Friday it will take more time to finalize new regulations targeting for-profit collegejob-training programs, but emphasized it was intent on moving forward and holding the sector accountable.For-profit colleges have campaigned hard against the "gainful employment" rule, which would cut of f federal aid to collegevocational programs with high student debt levels and poor loan repayment rates. They've lobbied Congress, purchasednewspaper ads and helped students and others register complaints with the Education Department,The government was to publish the final rule by Nov. 1,but department officials announced a new timeline Friday, sayingsections of it would be ready by Nov. 1 and the remaining portions will be published in early 2011.The department said it was taking more time to consider comments it received about 91,000 during a 90-day commentperiod, a record for a proposed higher education regulation and hold several meetings and public hearings in the comingweeks. The department said the schedule allows it to stick to its plan for the rules to go into effect around July 1, 2012."Let me be clear: We're moving forward on gainful employment regulations," Education Secretary Arne Duncan said in astatement. "While a majority of career colleges playa vital role in training our workforce to be globally competitive, somebad actors are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use."Duncan said additional feedback would help the department strike "the right balance" between holding the programsaccountable to protect students and taxpayers and "making sure we keep whole those programs that are doing a goodjob."Shares of for-profit education companies, beaten down earlier this year, had moved higher in the past few weeks. Rumors ofa delay in the gainful employment rule's publication had raised investor hopes that the government was considering a softerapproach, said Sterne Agee analyst Arvind Bhatia. Those investors were disappointed by the Education Department'sstatement Friday, he said. Shares mostly turned lower or trimmed their gains after the announcement.The gainful employment rule is the most contentious of several new regulations meant to bring greater oversight of for-profitcolleges, which rely heavily on federal loans and grants to operate.In recent months, for-profit colleges have been subjected to tough questioning from Democratic lawmakers in Congressionalhearings, an undercover government investigation that alleged misleading and fraudulent tactics in recruiting and admissions,and new data that showed their students are more likely to default on their loans.Federal law already requires that vocational programs of less than two years "prepare students for gainful employment in arecognized occupation" to be eligible for federal aid. The Education Department proposed measuring that through acomplicated formula that would weigh both the debt-to-income ratio ofrecent graduates and whether all enrolled studentsrepay their loans on time.For-profit education companies have argued the rule would disproportionately hurt low-income and minority students andundermine the Obama administration's college completion goals. The industry has also questioned the methodology behindthe rule.

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Student and consumer advocacy groups counter that the proposal is too weak, saying programs could continue to profit fromfederal aid when more than half their students can't afford to pay down the principal on their loans. The rule would help, nothurt, consumers if it forces career colleges to reduce tuition and improve their programs, they say.The impact of the proposed rule is in dispute. The Education Department estimates that if schools make no changes, 5 percentof for-profit college programs would be ineligible for aid in 2012 affecting 8 percent of all for-profit college students. Forprofit colleges say that underestimates the impact.Associated Press Business Writer Tali Arbel contributed to this report,LOAD-DATE: September 25,2010LANGUAGE: ENGLISHPUBLICATION-TYPE: Newswire

Copyright 2010 Associated PressAll Rights Reserved

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CREW Icitizens.for. r e s p o n ~ i b i l i t y. and ethics In washingtonJuly 1,2010

Chairman Tom HarkinSenate Committee on Health, Education,Labor and Pensions428 Dirksen Senate Office Building151and C Streets, N.E.Washington, D.C. 20510By Facsimile: (202) 228-5044Dear Chairman Harkin:

Citizens for Responsibility and Ethics in Washington ("CREW") respectfully requeststhat the Committee on Health, Education, Labor and Pensions consider changes to its rules andpractices regarding witnesses invited to testify at committee hearings based on last week'stestimony by Steven Eisman, a portfolio manager of a hedge fund known to short-sale stocks infor-profit education companies . In the past, Mr. Eisman was able to manipulate the marketreaction in the for-profit education industry and profit handsomely through short-sales based onhis dire public forecasts for companies in that industry. Mr. Eisman's recent congressionaltestimony, during which he decried the for-profit education industry as "socially destructive asthe subprime mortgage industry," appears designed to accomplish this same end.

At a June 24, 2010 hearing on federal spending on for-profit education, Mr. Eismantestified on the problems in the for-profit education industry. His testimony is a scathing attackon an industry he describes as "fundamentally unsound" and one that has led us to "the cusp of anew social disaster.'? Mr. Eisman offered the very dire prediction that over the next ten years,defaults of Title IV loans would total $275 billion." At the same t ime, according to recent newsreports and Mr. Eisman's own response to questions at last week's hearing, he is a portfol iomanager of a hedge fund that profits significantly from short-sales of stocks in the for-profiteducation industry. See, e.g., Lanny Davis, Transparency By 'Shorts' on 'For-Profit' SchoolsNeeded Too, The Hill, June 23, 2010 (attached as Exhibit A); Chris Frates, ShOJi Sellers FlagSchool Stocks, Politico, June 30,2010 (attached as Exhibit B). After a May 26, 2010 speech byMr. Eisman before the Ira Sohn Research Conference in which he characterized specificallyidentified for-profit education institutions as on financially shaky ground, share values of the

J Testimony of Steven Eisman before the U.S. Senate Committee on Health, Education,Labor and Pensions, June 24, 2010, available at http://help.senate.gov/hearings.

2 Jd.

3 Jd.

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Chairman Tom HarkinJuly 1,2010Page Twonamed companies plummeted and Mr. Eisman reaped huge profits from short-sales in thosecompanies. Davis, The Hill, June 23, 2010. Mr. Eisman likely is counting on the same profitsresulting from last week's congressional testimony and a predictable down-swing in the sharevalue of for-profit education companies.

CREW is troubled that under these circumstances, the Committee on Health, Education,Labor and Pensions invited MI'. Eisman to testify on policy issues related to the for-profiteducation industry. To our knowledge, Mr. Eisman has no expertise in education policy; heholds no degrees, has no experience, and no background on the education policies at issue. Mr.Eisman's only experience is that he works for a hedge fund that is betting millions of dollars onstock prices falling in the for-profit education industry. His financial conflicts of interest couldnot be more blatant, yet they were not disclosed in advance of his testimony. Even moretroubling is Mr. Eisman's use of the congressional hearing and the Committee as a vehicle toadvance his own economic interests by dragging down stock prices of publicly traded companies.

Hearings like those held by the Committee serve a significant public function by airingissues of national significance. The Committee's decision to broadcast the hearing and providepublic access to the witnesses' written statements reflects an understanding of the fundamentalimportance of transparency in the Committee's work. Yet by inviting witnesses like Mr. Eismanto testify, the Committee undermines those laudable and important goals. Accordingly, CREWrecommends that the Committee consider changes to its rules in order to identify in advance allconflicts of interest potential witnesses may have. In addition, safeguards must be put in place toensure that never again is a witness permitted to use his or her hearing testimony for private gain.The integrity of the Committee and the hearing process demands no less.

Thank you for your attention to this very important jJe.:Jlt /Melanie SloanExecutive Director

Encls.cc: Ranking Member Michael B. Enzi


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CREW Icitizens for responsibilityand ethics in washingtonJuly 14,2010

Tom HarkinChairmanU.S. Senate Committee on Health, Education,Labor and Pensions428 Dirksen Senate Office Building1'1 and C Streets, N.E.Washington, D.C. 20510By Facsimile: (202) 228-5044Dear Chairman Harkin:

r

Thank you for your July 2nd response to Citizens for Responsibility and Ethics inWashington's ("CREW") letter setting forth concerns with the recent testimony of StevenEisman before the Committee on Health, Education, Labor and Pensions ("HELP"). Weunderstand that you remain comfortable with Mr. Eisman's testimony, notwithstanding hisprivate financial interests, because he met the test of advancing the public interest in theunderlying matter of the hearing: for-profit colleges. Further, we agree with you that given thedisastrous economic impact of the collapse of the subprime mortgage industry, the federalgovernment must be vigilant in protecting Americans and the nation as a whole from futureserious economic injury such as may be posed by the for-profit college industry.

Nevertheless, separate and apart from the issues pertaining to Mr. Eisman, newinformation has come to light regarding efforts to manipulate the federal government intoincreasing the regulation of for-profit colleges. On July 9, 2010, Prol'ublica reported efforts byJohnette McCOlmell Early to fuel a groundswell of anger and discontent against the for-profitcollege industry.' Ms. Early solicited the unwitting sign-on of 19 executives from homelessshelters and service agencies to a letter to Secretary of Education Arne Duncan expressingconcerns that "for-profit trade schools and career colleges are systematically preying upon ourclients," and pledging support for the agency's efforts to tighten regulation of that industry.'While some of those who signed the letter had personal knowledge of aggressive recruitingtactics, others had only heard about them from colleagues and news reports.'

J Sharona Coutts, Investment Funds Stir Controversy Over Recruiting by For-Profit Colleges,Prol'ublica, July 9,2010 (attached as Exhibit A).2 ld.; Letter to Secretaryof the Department of Education Arne Duncan, June 17, 2010 (attachedas Exhibit B).3 Coutts, Prol'ublica, July 9, 20 IO.

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Honorable Tom HarkinJuly 14,2010Page TwoSignificantly, Ms. Early works for a financial firm she has refused to identify, which ispaying her to investigate for-profit schools.' Although Ms. Early claimed not to know whetherthe finn is betting against the for-profit higher education industry, she did say, "Clearly aninvestment firm is not going to look into something unless they're thinking about whether it's agood or bad investment."In addition, a non-profit group associated with another high-profile investor, Manuel P.

Asensio has written five letters to members of Congress and regulators since April criticizing thefor-profit college industry and calling for stricter regulation." Further, according to at least oneanalyst of short-selling, "[s]hort sellers have shown a steadily increasing interest in for-profitschools. ,, 7Taken as a whole, this new evidence suggests a concerted effort by individuals who standto gain financially to drive down the stock price of certain for-profit schools. Not content tosimply provide their views on the for-profit school industry, some are taking an active role to

shape public views of -- as well as congressional and executive branch reaction to -- thatindustry, hoping to reap great financial benefits from the market's reactions.

Again, CREW agrees that the for-profit school industry merits scrutiny by the HELPCommittee and other regulators, and we welcome the opportunity to assist in providing greatertransparency in that industry. At the same time, however, those advocating greater regulationalso must be transparent about their tactics and motives. Otherwise, serious questions arise as toexactly who is engaged in abusive conduct to maximize private fmancial benefits: the for-profiteducational industry, or those raising the alarm about the industry. Americans need to haveconfidence that legislative and regulatory processes are not being manipulated for privatefinancial gain.

41d.; In a July 12,2010 conversation with CREW, Steve Eisman denied any connection withMs. Early.5 Coutts, ProPublica, July 9, 2010.

7ld


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foia request: crew: department of education: regarding for-profit education companies: 9/30/10

Documents