For-Profit College Lobbying Group Sues Over GAO Report
February 02 2011 - 12:15PM
Dow Jones News
A for-profit college lobbying group has filed a federal lawsuit
against the U.S. government, alleging negligence and malpractice in
an investigation the U.S. Government Accountability Office
conducted last year.
The suit is the latest effort by the Coalition for Educational
Success to discredit a scathing GAO report about the schools'
recruiting tactics, a report it argues has left a blemish on the
sector's reputation.
The agency last summer conducted an investigation of 15
for-profit schools, saying in an Aug. 4 report to the U.S. Senate
Health, Education, Labor and Pensions Committee that
representatives at all 15 campuses provided misleading or
fraudulent information to undercover agents that posed as
prospective students. The GAO then amended the report in late
November, correcting and softening a number of examples of
recruiters' deceptive practices.
The Coalition--created shortly after the release of the first
GAO report--is seeking financial damages from the U.S. government,
alleging the initial investigation and the revised report were
"erroneous and completely biased," according to the complaint. The
group said the fallout from the report has been "explosive."
The GAO found what it said were problematic recruiting tactics
at campuses owned by Education Management Corp. (EDMC), Apollo
Group Inc. (APOL), Corinthian Colleges Inc. (COCO) and Washington
Post Co.'s (WPO) Kaplan Higher Education, as well as at privately
held school companies. Education Management and ITT Educational
Services Inc. (ESI), not named in the report, are Coalition
members.
Shares of for-profit colleges plummeted in the wake of the
August release, with those whose schools were named falling between
11.2% and 18.4% in the following week. The schools' stocks have
continued to slip and slide in recent months as investors prepare
for tighter oversight from the U.S. Department of Education.
The initial GAO report fueled harsh criticism of the for-profit
college sector, spurring a Senate HELP Committee request for reams
of data from 30 for-profit schools and bolstering the Education
Department's argument for increased industry regulation.
The Coalition alleged in its complaint that its schools have
incurred "substantial costs and expenses" to respond to the
report.
The Coalition isn't the only group questioning the report's
findings, even in its amended state. In late December, six members
of the U.S. House of Representatives--including Rep. Darrell Issa
(R., Calif.), head of the House Committee on Oversight and
Government Reform, and John Kline (R., Minn.,), chairman of the
House Education and the Workforce Committee--asked the GAO for
clarification on the agency's methodology. Sen. Mike Enzi (R.,
Wy.), ranking member of the Senate Committee on Health, Education,
Labor and Pensions, issued a similar letter Dec. 7.
GAO spokesman Chuck Young said the agency met with members of
Congress "and briefed them on the issue."
Nine members of Congress sent another letter, dated Jan. 29, to
Acting U.S. Comptroller General Gene Dodaro to emphasize their
concern about the report. The GAO is "preparing a response," Young
said.
Meanwhile, the Coalition in December filed a lawsuit against the
Education Department, alleging it wrongfully withheld records
related to the GAO report and evidence of contact with
short-sellers as that agency prepared new industry rules.
-By Melissa Korn, Dow Jones Newswires; 212-416-2271;
melissa.korn@dowjones.com
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