Oklahoma Republican Sen. Tom Coburn blasted the Education Department Wednesday for what he called "very significant inappropriate behavior in tipping hedge funds on short selling private education" and called on a key Senate panel to investigate the matter.
Coburn was referring to documents released last week by Citizens for Responsibility and Ethics in Washington (CREW), a watchdog group that has called for federal authorities to investigate market manipulation by famous Wall Street short-seller Steven Eisman.
Coburn said the charges even could result in jail time for Education Department officials.
"Utilization of facts in the Department of Education in advantaging investors in one segment to make significant dollars over something the government’s thinking about doing is highly unethical and if proven to be the case, some people ought to be going to jail in the Department of Education," Coburn said at a Homeland Security and Government Affairs Committee hearing.
Justin Hamilton, a spokesman for the Education Department, defended his agency’s work. "We have been committed to integrity and transparency and are very proud of the process we’ve put in place in our efforts to help protect students and taxpayers," Hamilton said in an interview.
Coburn was referring to documents obtained by CREW that show collaboration between top Education Department officials and Wall Street short sellers hoping to profit from the demise of the for-profit college sector.
At issue is a push by the Education Department to strictly regulate for-profit colleges, including many “career” colleges that prepare students for a specific vocation.
Critics of the schools say they trick unprepared students into enrolling with false promises of high wages from the jobs they’ll get after graduation.
Industry representatives say the charges are overblown and warn the regulations will decimate the sector, rather than reform it.
The regulation at issue is still being finalized at the Education Department.
The House passed an amendment denying funding for the regulation in its continuing resolution bill, but whether the rider is included in the final deal between the House, Senate and President Obama remains in question.