For Profit Higher Education's New Conspiracy Theory

For-profit college lobbyists have recently identified a convenient scapegoat to explain why the proprietary school sector has been the subject of so much negative press of late: it's all the work of a dastardly group of short sellers who have been "stage-managing" attacks in the news media to drive down the stocks of some of the country's largest publicly traded for-profit higher education companies.

In this conspiracy theory, the journalists who have been writing these stories have simply been dupes for hedge funds looking to cash in on the industry's misfortunes. The Career College Association laid out this theory in a post it ran on its blog this month, entitled, "How Short Sellers Corrupt Media Coverage of For-Profit Colleges for Financial Gain." According to this post, this critical coverage is being driven not by "altruistic consumer reporting initiatives" but by "the personal financial interest of short sellers."

To back up its claims, CCA cites a recent article in ProPublica that raised serious questions about the conduct of an investment company researcher who acknowledges that she was a source for a blockbuster BusinessWeek investigative report this spring that revealed how some proprietary schools have been recruiting unqualified students at homeless shelters.

According to the ProPublica article, this researcher organized a group of homeless shelter leaders to write a letter to Education Secretary Arne Duncan, complaining about the schools' exploitation of homeless people -- without fully revealing that she worked for a company that was "shorting" the industry. Many of the signatories told ProPublica that they were furious that they had been misled, having assumed, in some cases, that she was a researcher with BusinessWeek.

If these allegations are true, they are outrageous. There is absolutely no good reason why this individual was not up front with the shelter officials, who were putting their reputations on the line by signing the letter she had written for them. [For her part, the researcher disputes the claims, and some of the shelter employees she worked with back her up.]

Having said that, we at Higher Ed Watch do not see how this unfortunate incident undercuts the BusinessWeek report in any way. In fact, in some ways, the ProPublica article, wittingly or not, actually bolsters it.

The ProPublica story, for example, leads off with Nancy Panico, who has herself "encountered" problems with for-profit schools trying to recruit homeless youth at the center she runs in Tucson, AZ. While Panico is angry about having been "used," the article makes clear that she stands by the allegations that were included in the letter:

"Had I known, I probably wouldn't have signed on," Panico said. "I probably would have contacted one of the other people and said, 'Hey, now that we have all this information, let's do this ourselves.' I think it's sleazy to basically use me and use other executive directors that have a real issue to make a profit for some companies."  [emphasis added]

Similarly, the article quotes Jane Burch, the chief executive officer of another shelter in Tucson, saying "that her organization would never have signed a letter unless they agreed with its contents." She adds, "Why would I not want to see another avenue to have our clients' rights protected?"

Neither Panico nor Burch appear in the BusinessWeek article -- suggesting that the recruiting of homeless students may very well be even more widespread than the magazine reported.

Regardless, as we have pointed out before, the author of the BusinessWeek article -- the Pulitzer-Prize winning journalist Daniel Golden --  nailed the story because he was able to get the schools he profiled in the article -- Drake College of Business in Newark, NJ, and Chancellor University in Cleveland -- to admit that they had been doing exactly what the story charged them with doing.

For instance, Ziad Fadel, Drake College's president, defended the school by saying, "We don't exclusively target the homeless." In a follow-up interview with the Newark Star-Ledger, Fadel "admitted that his school had been recruiting in numerous homeless shelters in Newark, Elizabeth, Montclair, and other towns," the newspaper reported.

Similarly, officials at Chancellor University acknowledged that they had made a concerted effort, at least for a very brief time, to recruit at homeless shelters in order to pump up the school's enrollment numbers. The initiative "had all the best intentions, but the time and effort generated very little interest," Chancellor's Chief Executive Officer Bob Barker wrote in an e-mail that the magazine article quoted.

Ever since the BusinessWeek article came out, the Career College Association has been trying to discredit it. The allegations included in it have been particularly damaging the industry at a time when the federal government is considering cracking down on recruiting abuses at proprietary schools.

At first, CCA attacked Golden for relying on "a small number of unfortunate anecdotes of recruiting in homeless shelters" to malign the proprietary school sector. But that didn't do the trick, especially since the group could not find a single mistake in the article. So now, with the ProPublica article in hand, the association is essentially accusing Golden -- and anyone else writing critically of the industry -- of being a patsy for the short sellers.

This is total and utter nonsense. And instead of mindlessly repeating these accusations, as some publications have done, journalists should hold the association accountable for making such outrageous claims.

We said it before and we'll say it again -- students, taxpayers, and even for-profit colleges themselves would be much better served if the Career College Association focused its energies on rooting out the unscrupulous practices that have been revealed. Then maybe there wouldn't be so many damaging articles.