Conflicts of Interest

Wherefore waste our elocution,
On impossible solution. . . ."
-- Sir William Schwenk Gilbert,
The Gondolier

Recusal. Such a simple word. And yet it is the plug that enables you to drain the swamp that you create. The foregoing came to mind when it was reported that ten Senate Democrats had sent a letter to Education Secretary, Betsy DeVos. The letter addressed the hiring of Diane Auer Jones to serve as a senior policy advisor to the assistant secretary for post-secondary education. The Senators wrote that Diane has a "significant number of conflicts of interest and appearances of impropriety" in her new role. Diane joins the cadre of hires by Secretary DeVos of individuals who had been involved in the for-profit college industry prior to joining the department that regulates them. Following Mr. Trump's election, those in the for-profit college business all joined together in singing a loud refrain of "What a friend we have in Donald." Stock in for-profit colleges soared. The day after Mr. Trump's election, stock in Strayer Education Inc. that owns the for-profit college called Strayer University, went up by 20%.

The euphoria was not misplaced. Donald knew first hand of the travails of the for-profit college business since he was the creator of Trump University, an entity that had neither campus nor classrooms, and a faculty without academic credentials. Trump University was, like its creator, a complete fraud. It was sued in a class action by former students who ultimately settled their suit for $25 million. For-profit colleges were not all as blatantly fraudulent as Trump University, but they had been subject to considerable scrutiny and penalties under the Obama administration. Among them was DeVry University.

DeVry was a for-profit University whose practices resulted in an action against it by the Federal Trade Commission. That action alleged that DeVry touted its success rate at placing students, by including in its statistics former students who were employed in areas that had nothing to do with the education they received at DeVry. For its fraudulent activities, DeVry paid the FTC a penalty of $100 million, and for other transgressions paid the State of New York, $2.25 million and the state of Massachusetts, $455,000. One of Ms. DeVos's early hires was Julian Schmoke. He was placed in charge of the unit that investigates fraud in higher education. Mr. Schmoke was associate dean of the College of Engineering and Information Sciences at DeVry from 2008 to 2012. Although not at DeVry when the penalties were assessed, some of the practices for which DeVry was fined occurred while Mr. Schmoke was at DeVry. Ms. DeVos, placed him in charge of the special team at the department that investigates abuses by for-profit colleges such as those engaged in by DeVry. The need for concern about conflicts of interest he might encounter were less than they would have been under the prior administration. That is because under Ms. DeVos, the special team charged with examining various aspects of questionable for-college practices, was reduced from about twelve lawyers and accountants to three employees. Their charge was to focus only on processing student loan forgiveness applications and small compliance cases. Those are not the sorts of things that got DeVry in trouble. Nonetheless, if matters come before Mr. Schmoke that would appear to be a conflict of interest, he can use the magic word that drains the swamp and recuse himself.

Then there is Robert Eitel. Mr. Eitel has become Ms. DeVos's senior counselor. Before he joined her team, he worked at Bridgepoint Education. He was its top lawyer during the time it was being investigated for its activities as a for-profit college. One of those investigations resulted in Bridgepoint entering into a $30 million settlement over deceptive student lending practices. He is now on an unpaid leave from that institution. A spokesman for the department addressed the possibility that conflicts of interest might present themselves to Mr. Eitel in his new role. The spokesman said if that occurred Mr. Eitel would recuse himself.

And then there is Carlos Muniz. He has been appointed General Counsel for the Department of Education. Prior to his appointment, he provided consulting services to Career Education Corporation, the company that was being investigated by the Department before Ms. DeVos shut the investigation down. Since the investigation has been shut down, Mr. Muniz will probably have no conflicts of interest to resolve. Should they arise, however, he can invoke the magic word and avoid any appearance of impropriety.

And that brings us back to Diane. It was her hiring that prompted the senators to write their letter. She is now a senior adviser to the Department of Education on post-secondary education. Prior to her appointment, she worked for five years as a senior vice-president at Career Education, the same company from which Mr. Muniz came. She also worked as a lobbyist and consultant for for-profit colleges. The senators are worried that she may have conflicts of interest and asked how those possible conflicts would be resolved. I am happy to tell them. Should any conflicts arise, Diane will summon the magic word and the conflict will drain from the swamp. It's so obvious that one wonders why the senators had to rely on a simple columnist to provide the explanation.