Former Education Official Faces Federal Investigation

WASHINGTON — Federal investigators are probing whether a former top Education Department official violated the law by allegedly sharing information inappropriately about new regulations with an advocacy group he founded.

Newly released court documents show that federal prosecutors believe the Education Department's former deputy undersecretary, Robert Shireman, might have violated executive-branch ethics laws by allegedly discussing sensitive government information with the group, the Institute for College Access & Success, or TICAS.

"We have documents showing your involvement or interaction with TICAS in matters pending before the U.S. Department of Education in violation of the statute," Justice Department lawyers wrote in a letter to Mr. Shireman in April 2012. "Your conduct may render you personally liable," the letter stated. The letter and other legal documents showing the Justice Department's interest in Mr. Shireman were recently disclosed as part of a legal proceeding on the scope of a subpoena request.

A lawyer speaking on behalf of Mr. Shireman, who served in the post from February 2009 to July 2010 and then as a departmental consultant, declined to comment. An Education Department spokesman and a TICAS spokeswoman also declined to comment.

The investigation is being led by the Education Department's inspector general, along with civil lawyers at the Justice Department, according to the documents. Investigators are currently treating the matter as a potential civil infraction but have warned Mr. Shireman that criminal penalties are possible for the alleged behavior.

The federal conflicts-of-interest law is intended to prevent government officials from participating in decisions in which they might have a financial interest. Violations can bring criminal penalties and civil fines of up to $50,000 a violation.

If Mr. Shireman "continued to serve the interests of TICAS, his former employer, while he was at Education, that would present a clear conflict of interest," said Anne Weismann, the chief counsel for the nonprofit Citizens for Responsibility and Ethics in Washington, which has pushed for an investigation.

The inquiry underscores how prosecutors are beginning to clamp down on the way Washington handles sensitive government information. The Securities and Exchange Commission has begun probing whether government officials improperly tipped off investors before announcing a major health-care policy change in April. It is also looking into whether Food and Drug Administration officials leaked word to investors in 2010 that it planned to reject a diabetes drug. The SEC has declined to comment on the cases, and officials involved in the situations have denied any wrongdoing.

Details of communications with Education Department officials and people in the private sector were published in a page-one Wall Street Journal article in January 2011 and in other news outlets.

Mr. Shireman and other senior department officials shared information with TICAS and other groups that were pushing the Education Department to clamp down on for-profit colleges, according to departmental emails released in recent years. The for-profit firms rely on government-backed student loans for a big chunk of their revenue.

In court papers dated April 17, 2013, the department's Office of Inspector General said that for two years beginning February 2009, "there were communications between Mr. Shireman and TICAS through Mr. Shireman's TICAS email and personal email accounts."

A few days before the Education Department announced its clampdown in July 2010, officials laid plans to selectively leak news of the policy shift, according to departmental emails. The emails show officials considered briefing Diane Schulman, who ran an investment-research firm that shared information with Steve Eisman, a short-seller portrayed in "The Big Short," a book about the housing crisis. Mr. Eisman had bearish bets on stocks of for-profit colleges and shared information about the industry with senior Education Department officials, including Mr. Shireman, according to the departmental emails.

On July 21, 2010, an Education Department official wrote to a colleague: "Eisman is a short seller anyway you cut it and anything you tell Schulman gets to Eisman." Neither Ms. Schulman nor Mr. Eisman were briefed by the department.

Ms. Schulman didn't respond to requests for comment.

The department made public the final regulations on July 23, 2010. The rules were weaker than expected, and the stocks of some for-profit colleges rose as much as 15% that day.


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