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For-Profit Group Sues GAO for 'Professional Malpractice' For-Profit Group Sues GAO for 'Professional Malpractice'

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EDUCATION

For-Profit Group Sues GAO for 'Professional Malpractice'

First, it was the Education Department. Now, it’s the Government Accountability Office.

Lobbyists for career and technical colleges are using every tool at their disposal to fight the government for imposing itself on their clients. In the latest twist, the Coalition for Educational Success filed suit against the GAO today, alleging “professional malpractice” for its investigation of the industry and the subsequent report that was issued in August.

 

The complaint said the nonpartisan government watchdog produced a “negligently written, biased and distorted report that foreseeably caused substantial financial injury” to coalition members. The Coalition for Educational Success represents a handful of for-profit college companies like the Art Institutes, whose schools are spread across the country.

The coalition is a spin-off of the Association of Private Sector Colleges and Universities. APSCU filed suit a few weeks ago against the Education Department, saying the agency’s new regulations on the industry impose unlawful burdens on schools. (Neither lobbying organization has invited the other to join in their separate lawsuits, although both groups argue largely the same points when talking about the unfairness of new regulations and government investigations.)

The lawsuits are an outgrowth of a year-long government and public relations nightmare for colleges like Strayer, DeVry, and ITT. The GAO, the Education Department, and the Senate Health, Education, Labor, and Pensions Committee have all been poking at the industry, lobbing accusations of fraudulent recruiting practices, overpriced tuitions, and failure to help students graduate or get jobs.

 

For-profit colleges say the charges are overblown and they are the target of widespread government bias. The GAO revised its original report in November, which lent some credence to the industry groups’ arguments. GAO said the revisions were technical, but the industry loudly protested that the revisions corrected errors that originally made for-profit colleges look worse. That is a key part of the lawsuit against the GAO in today’s lawsuit. The revisions “cast serious doubt on the credibility and objectivity of the GAO’s analysis,” the complaint said.

The GAO’s unusual step of revising the report also prompted House Oversight and Government Reform Chairman Darrell Issa, R-Calif., to launch an investigation into GAO’s Forensic Audit and Special Investigations Unit.

The original GAO report did some real damage to the profit margins in the industry, the complaint said: "In the days following the report’s release, the market capitalization of the publicly traded organizations that own and operate career colleges dropped nearly $4.4 billion -- or about 14 percent." This kind of argument shows where the tension lies between the government and the industry. That these companies are in the profit business at all is galling to some lawmakers and educators. Senate HELP Committee Chairman Tom Harkin, D-Iowa, has said the companies are more loyal to shareholders than they are to students.

In the midst of the lawsuit furor, the industry is watching closely for a final rule expected soon from the Education Department that could limit for-profit schools' access to student loans if they don't meet certain benchmarks on their graduates' employment. The department held off on finalizing that portion of the rule last year so that it could digest more than 90,000 comments from the industry on that one piece.  For-profit colleges say the original proposal would devastate the industry. The administration appears willing to tinker with its original framework, but it's unlikely that any changes will go far enough to prevent more lawsuits.

 

This article appears in the February 2, 2011 edition of National Journal Daily PM Update.

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