Politics

Debarred short seller with checkered past lobbied Education Department on for-profit colleges

Before a jury found Manuel Asensio had illegally defamed a company whose demise he would profit from, and before securities regulators barred him from employment in the banking industry for the rest of his life, he used to take down companies with savage reports under the banner of his investment bank, Asensio & Company.

Then, as an “activist” short seller, he would compile damning research on a business, take a market bet its stock would go down, publish his report, and profit when it did go down.

Nowadays, Asensio is the director of the Alliance for Economic Stability (AES), a non-profit organization lobbying the Education Department on for-profit or “career” colleges, one of a group of short sellers who have teamed up with the Obama administration and a slew of left wing interest groups to push for strict regulations of the sector.

Documents obtained by The Daily Caller show Asensio’s group lobbied the agency vigorously with the benefit of surprisingly intimate knowledge of a federal government investigation into one specific firm, Bridgepoint Education, Inc.

For instance, e-mails from Asensio’s group indicate he possessed, or at least knew a great deal about, a draft audit of Bridgepoint by the Education Department’s Office of Inspector General (OIG) that had not been released to the public — or even to Bridgepoint.

The name of the sender of these e-mails is redacted. But one e-mail to Education Department officials from April 28, 2010 says, “I am with AES (eally.org) …. the methods you used for identifying the size of the illegal incentive compensation at Bridgepoint are deficient. The information you have provided is incomplete and grossly underestimates the severity and frequency of Bridgepoint’s violations.”

The e-mails specify Asensio’s group is referring to the Education Department’s “5 years old [sic] investigation into Ashford,” Bridgepoint’s preeminent campus in the home state of the chairman of the Senate education committee, Iowa Sen. Tom Harkin.

It’s important that Asesnsio’s group possessed such detailed information – and critiques – about the draft audit of Bridgepoint because in late April 2010, the Education Department had not yet provided that draft to Bridgepoint, the firm being investigated.

The revelations also come on the heels of charges by Oklahoma Republican Sen. Tom Coburn that Education Department officials were “tipping hedge funds” with inside information, allowing them to take trading positions ahead of the market. Doing so, Coburn said at a Senate hearing last week, “is highly unethical and if proven to be the case, some people ought to be going to jail in the Department of Education.”

The Education Department’s Office of Inspector General is part of the agency but, under the Inspector General Act, independent from it.

Other documents show that roughly a month after Asensio’s group lobbied the Education Department on the methodology of its draft audit of Bridgepoint, Harkin requested a copy of the draft audit or a briefing on its contents — but was rebuffed.

After Harkin staffer Robin Juliano asked for a copy of the audit, Education Department officials told her “we could provide the briefing but it would be better to do after we received the auditee’s [Bridgepoint’s] comments on our draft report.” The staffer agreed, according to a summary of communications between the Education Department and Harkin’s staff provided by the agency pursuant to a Freedom of Information Act (FOIA) request.

The audit was not finalized and issued until almost a year later, on January 21, 2011. Since its release, Bridgepoint’s stock has risen 4.5 percent.

Bridgepoint is part of the $33 billion for-profit education industry that faces a push by the Education Department for strict new regulations.

Critics of the schools say they trick unprepared students into enrolling with false promises of high wages from the jobs they’ll get after graduation.

Industry representatives say the charges are overblown and warn the regulations will decimate the sector, rather than reform it.

The most contentious new rule, known as “gainful employment,” is still being finalized at the Education Department. Thursday, Harkin is holding a hearing on Bridgepoint: “a case study in for-profit education and oversight.”

The documents released under FOIA were provided to The Daily Caller by advocates for the for-profit college industry.