GAO Caught Fabricating Evidence In Private College Sting
There is a war going on between largely government-backed, traditional universities and the private, career-orientated private universities. Universities such as Rasmussen College have shifted focus away from the traditional broad, liberal arts education and have more narrowly focused their programs on training for a specific career. This allows them to provide a cheaper, more efficient education.
As you might imagine, though, Big Education is chaffing at the competition. Thus, the Department of Education is considering denying federal education aid to students who attend these private universities. To bolster the case for that move, the Government Accountability Office ran a series of “stings” at 15 of these private universities, and reported that each and every one of them encouraged applicants to engage in student loan fraud. A GAO official testified to as much before the Senate Health, Education, Labor and Pensions Committee painting these private schools as money-hungry centers of fraud and corruption.
The problem? Mark Hyman at the Washington Examiner became suspicious of the GAO’s investigation and sent over a FOIA request. The request apparently took the GAO by surprise, as they immediately issued a revised report that was very different from the one originally testified to before Congress.
This was a move that resulted in the investigator in charge of the department which produced the report for Congress being fired.
The response to the FOIA request was unexpected. The GAO quietly reissued its report. The revised report was so dramatically different that it called into question either the competence or the integrity of the GAO. In general, it was GAO investigators who suggested deceptive or fraudulent activity with representatives merely acknowledging the investigators’ schemes.
There is more. A coalition of career colleges obtained audio recordings of the GAO investigation and had them analyzed. The results found numerous instances in which the GAO fabricated entire conversations.
In some cases, investigators appear to have turned off recording devices in midinterview raising questions regarding what investigators did not want recorded. Additionally, conversations portraying college representatives as acting professionally and responsibly were excluded from the report. In sum, the GAO report was a fraud
Last month, U.S. Comptroller General Gene Dodaro relieved Kutz of his duties as the head of the Forensic Audits and Special Investigations unit. In a written statement, Dodaro said the change will “ensure greater attention to the issues that led to the need to produce the errata to the for-profit schools report and by the subsequent inspection.”
According to the article, it appears as though the Department of Education included two major stock holders in these private colleges in their deliberations on new regulations targeting the universities. These stock holders were apparently informed of the DoEd’s announcement days before it went public, allowing them to dump their stock before values plunged with the news.
As early as 2009, three stock short-sellers had unusual involvement in the DoEd’s career college rulemaking process. Rule changes suggested by one short-seller in 2009 bear striking similarity to rules proposed by DoEd in 2010. The new rules would restrict financial aid for career college students.
Neither Antal Desai and Kent McGaughan of CPMG Investments nor Steven Eisman of FrontPoint Financial Services Fund were known for expertise in post-secondary education.
These short-sellers brought little to the table aside from a plan that could damage the value of publicly traded stocks of career colleges. Of note, Eisman was a major 2008 Obama campaign donor.
Emails and documents obtained by a FOIA request reveal startling involvement by Desai, McGaughy and Eisman in Education’s internal deliberations. In a July 2010 email to a senior Education official Eisman expressed alarm at an increase in career college stock prices.
In response, DoEd officials crafted a plan to notify various individuals, including Eisman, of harsh new rules at least two days before they were publicly released.
The DoEd announced its rules only days before Harkin’s committee hearing. These two events and the (now-discredited) GAO report caused the publicly traded stock of most career college companies to plunge in value 35 to 50 percent.
Higher education is big business for Big Government, and it looks like the government is pulling out all the stops to kill off the competition.
Tags: career colleges, government accountability office, higher education
