WASHINGTON - Today, Citizens for Responsibility and Ethics in Washington (CREW) asked the Securities and Exchange Commission (SEC) to investigate whether certain Wall Street investors have been illegally manipulating the market price of for-profit education stocks.  In a letter to SEC Director of Enforcement Robert Khuzami, CREW specifically highlighted the efforts by several short-sellers to help shape national education policy by injecting themselves into the agency's regulatory process for the apparent purpose of personal financial benefit.   Click here to read the letter.

"A down-turn in the market of for-profit stocks correlates with well-known short-seller Steve Eisman's congressional testimony slamming the industry.  It is up to the SEC to ensure no investor - big or small - has an unfair advantage in the financial markets." said CREW Executive Director Melanie Sloan.  "Yet it appears that Wall Street investors, with no expertise or stake in education policy, may have influenced the Department of Education's regulation of for-profit education institutions for financial gain." 

CREW first became aware of this activity after the Senate testimony of Mr. Eisman, which led CREW to file a Freedom of Information Act request and ultimately sue the Department of Education for records of officials' contacts with investors.  The documents Education was forced to produce reveal that a number of hedge fund managers, including Mr. Eisman and others from CPMG,  have been working closely with high-level Education officials and others to push for stringent regulation of the for-profit industry.  Read about CREW's actions in that matter here.

The for-profit education industry, although a small segment of the financial market, generates substantial revenue.  At the same time, stocks in for-profit education companies have suffered substantial losses since Mr. Eisman's June 24, 2010 congressional testimony.  This correlation warrants a closer look by the SEC.

"CREW is not defending the for-profit college industry, nor taking any position on the proposed regulations," said Ms. Sloan. "Given the enormous sums of money involved and the symbiotic relationship between short-sellers and the Department of Education, it seems at the very least that something fishy is going on here.  Like the umpire in a baseball game, it is the SEC's responsibility to call the balls and strikes to make sure that everyone plays by the rules."

Click here to read CREW's letter to the SEC.

Click here to read CREW's exhibits.