For-Profit School Names Eisman in Suit

A for-profit college in Florida, Keiser School Inc., has sued a rival community college for trade libel, accusing Florida State College at Jacksonville of spreading "injurious falsehoods" about the school and conspiring with short-sellers such as Steve Eisman to damage its reputation.

Mr. Eisman, made famous by Michael Lewis for his early bets against the subprime industry, was not named as a defendant in the suit, but simply cited as a co-conspirator. His testimony before a congressional committee this summer lambasted the business model of for-profit education, and provoked earlier pushback from the industry.

While Keiser named the president and vice-president of FSCJ, Steven R. Wallace and Susan M. Lehr, as defendants alongside the institution they manage, it also listed a number of investment professionals. In addition to Mr. Eisman, who runs Frontpoint Partners out of Greenwich, Conn., others named include Gilchrist Berg, founder of the Jacksonville hedge fund Water Street Capital, and Antal Desai, an analyst at CPMG in Dallas.

The defendants and co-conspirators are accused of having been “engaged in a false and misleading campaign in the Florida press and the national media designed to disparage Keiser University and to drive Keiser and other proprietary schools out of business.”

In his testimony in June, Mr. Eisman told a Senate committee:

Until recently, I thought that there would never again be an opportunity to be involved with an industry as socially destructive as the subprime mortgage industry. I was wrong. The For-Profit Education Industry has proven equal to the task.

In its complaint, Keiser states that “following Eisman’s speech, Defendant Lehr wrote Eisman to thank him for making it, and he responded that she should stay in touch.” Further on, it adds that “Lehr traded information with Dallas-based CPMG Inc., another investment firm that had an apparent interest in seeing the value of proprietary schools decline.”

Keiser claims its relationships with the high schools where it recruits and the clinical sites where it trains some students have suffered, along with its expected enrollment.


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