Eisman first became publically involved with the gainful employment issue when he testified before the Senate’s Health, Education, Labor, and Pensions committee in June of 2010. Although he had few qualifications and knew little about education policy, Senator Harkin (D-Iowa) invited Eisman to give scathing testimony about for-profit schools. A FOIA from Citizens for Responsible Ethics in Washington (CREW) later revealed that Eisman had been in contact with DoEd officials, meeting in person and via email, for months leading up to the Harkin hearing.
The more Eisman and other financial advisors decried for-profit schools, the more the value if their stocks decreased, and the more money Eisman and his compatriots made. Eisman and his investors engaged in a practice called short selling where they bet that the stock price of for-profit schools would decrease. Although for-profit schools’ stocks took a hit while Sen. Harkin was holding hearings advocating for the gainful employment rule, the for-profits’ stocks nosedived once DoEd announced they were writing the regulation. Furthermore, there is reason to believe that Eisman was afforded inappropriate information about the timing of DoEd’s rule. It is very possible that Eisman knew DoEd was going to issue the rule before they did, allowing him to cash in on this information.
Despite an internal investigation underway from DoEd’s Inspector General and calls by Senator Mike Enzi that the SEC investigate the process surrounding the rulemaking, the Office of Management and Budget issued the final version of the rule a month ago.
A dark cloud still looms over the DoEd. Attempting to shed light on the dreadful rulemaking and the forces that drove its implementation, Congressional watchdog Reps. Issa (R-Calif.) and Foxx (R-N.C) are holding a hearing Friday July 8 titled “The Gainful Employment Regulation: Limiting Job Growth and Student Choice.” DoEd officials have been dodging questions about the rulemaking and its effects for far too long. Students that attend for-profit schools and the teachers and staff that are employed by the industry deserve their day in court. Rep Issa has given them one.