Selling Career Colleges Short

Seemingly, there is no end to what once started as a relatively straight-forward story. The U.S. Department of Education embarked on an effort to impose new regulations that would severely restrict access to various federal loans and grant programs to students attending career colleges. Unlike state-owned public institutions and private, not-for-profit colleges, career colleges operate on a for-profit basis.

Since last autumn, this Dept of Ed effort to malign career colleges (or for-profit colleges) has been detailed in The American Spectator on several occasions (October 6, 2010; December 1, 2010; December 14, 2010; and January 18, 2011).

Recently revealed information suggests there may have been a financial motive involved in the Department of Education rulemaking.

Emails and related correspondence obtained from a series of Freedom of Information Act requests suggest stock market short-sellers including at least one who was a major donor to the 2008 Obama campaign had unusually strong involvement in the Ed Dept’s process of crafting new regulations impacting career colleges. Advance knowledge of the agency’s intention to write harsh regulations would benefit anyone shorting career college stocks with the expectation stock prices would plunge.

In late 2009, stock short-sellers Antal R. Desai and R. Kent McGaughy, Jr. of Dallas-based CPMG Investments met with Deputy Assistant Secretary of Education David Bergeron and senior Ed Dept official Ann Manheimer. Desai and McGaughy presented the two government officials with a 17-page document that severely criticized the career college sector. The document outlined recommended steps to be taken against career colleges to include actions by specific Congressional committees and an investigation to be conducted by the Government Accountability Office.

Neither Desai nor McGaughy were known for having expertise on the subject of post-secondary education. They brought little to the discussion aside from a game plan that, if implemented, could significantly degrade the value of publicly-traded stocks of for-profit colleges.

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