Blog: Short Seller Sell-Out

Storytelling and a clandestine web of fibs are the biggest threats poised to bring down career education, not financial aid allotment.

Last winter and on into spring, traditional media outlets began relying solely on anecdotes from students who’d been dissatisfied with their experiences at career colleges in order to cast them in a negative light. Those stories have led to the recent Senate hearings that have featured the testimony of one student whose career college experience was unsatisfactory. And that one story has greatly contributed to the overall negative portrayal of the sector and its relationships with students.

Now, storytelling from a different narrator is offering a similar threat, and these stories are laced with lies and half-truths. Someone who makes his living short selling stocks should be a numbers person. He should know the percentages of his chances at success and a dollar amount of how much they stand to make – or lose. He should also possess a certain smoothness – an ability not unlike the best salespeople to convince investors, politicians or whoever he can that an industry is well on its way to a cataclysmic burn out, so he can turn around and purge the stocks he borrowed at lesser prices.

Those qualities can go a long way in turning an industry upside down long enough to make a buck. But it also turns out that short sellers are gifted with the written word – or at least are wise enough to enlist the services of those who have those skills.

On Monday, Pro Publica, a New York-based nonprofit news outlet, found that out a letter encouraging U.S. Education Secretary Arne Duncan to crack down on for-profit colleges that recruit students in homeless shelters was drafted by a researcher. The researcher, though, was working for an investor betting against the publicly traded education companies.

According to Bloomberg Businessweek, “Johnette Early drafted the letter with input from shelter workers and enlisted 20 workers, administrators and advocates to sign it, she said in an e-mail on July 9.” Early claimed to neither be for or against for-profit education, and she her email stated that her client asked her to operate independently and free of bias. Short seller Steve Eisman made a similar claim when offering unsworn testimony to the Senate’s Senate Health, Education, Labor and Pensions (HELP) Committee that had convened a hearing to examine the career college sector earlier this month.

Early declined to say who she was working for, but even those of us with perpetually open minds find it hard to believe her statements. When your client has the intention of making millions when an industry goes belly up, your investigative work of homeless shelter recruitments is going to upturn something that’s not only bad, but damning enough to grab some headlines.

Short sellers are penning their own future for career education. The ending involves a crash that leaves several thousand students in limbo and some much needed programs axed.

Eisman, who testified about what he sees as the misconduct of the career college sector and its use of financial aid dollars, is part of a group behind a letter meant to set fire to the career education. Knowingly or unknowingly, he’s been leading the charge. Before the author of the letter was discovered, he’d already done his best to provide the kindling, both in his testimony and pledging to pay for any student debt incurred by another testimony-offer, Yasmine Issa.

Since appearing in Good Housekeeping, Issa’s story has been told and retold, and she’s become the figurehead it seems for every student who’s ever attended a career college. Issa borrowed about $14,000 to attend Sanford Brown. She graduated only to find few career prospects. Her degree, she said, had left her without the proper credentials for a job as an Ultrasound Technician.

So, following the Senate hearings, Eisman pledged to pay Issa’s bill. The move was an obvious public relations tactic to clear his image. “Why would I be trying to make money off of people in this predicament?”

Eisman definitely has a gift for messaging, for public relations tactics – albeit negative tactics designed to cast a dark light on the activities of a decent-functioning business. But here’s what we know now. Eisman sat innocently before the Senate and offered unsworn testimony about something he needs to see go up in flames. He claimed not to have in any interest in whether or not career colleges succeed or fail. Then less than two weeks after the hearings, this letter that was meant to cast career colleges and recruiters of the homeless simply to gather their financial aid money came out. He’s claimed that career colleges are “morally bankrupt.”

Eisman and people of his ilk are dirty – the lowest of the low. Their actions are worse than Lebron ditching Cleveland or the remake of Karate Kid. Eisman is into things for the short-term. He’s a short seller. And he’s also sold out whatever capital he might have held in morality.

By Kevin Kuzma, Editor, Career College Central

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