CREW I citizens for responsibility

and ethics in washington

September 30, 2010

By Email: [email protected] and First-Class Mail

U.S. Department of Education

Office of Management
Regulatory Information Management Services
400 Maryland Avenue, S.W. , LBJ 2W220
Washington, D.C . 20202-4536
Attn: FOIA Public Liaison

Re: Freedom of Information Act Request

Dear FOIA Public Liaison:

Citizens for Responsibility and Ethics in Washington (CREW) makes this request for
records, regardless of format, medium, or physical characteristics, and including electronic
records and information, pursuant to the Freedom ofInformation Act, (FOIA) , 5 U.S.C. § 552,
and U.S. Department of Education (Education) FOIA Regulations, 34 C.F.R. §§ 5.1, et seq.

Specifically, CREW seeks any and all records from April 20, 2009 , to the present
pertaining to four for-profit companies: Corinthian Colleges, Inc., Kaplan, Higher Education
(including Kaplan College and Kaplan University), Devry University, and the University of
Phoenix.

Please search for records regardless of format, medium, or physical characteristics. We

seek records of any kind, including electronic records, audiotapes, videotapes, photographs, and
back-up tapes. Our request includes any telephone messages, voice mail messages, daily agenda
and calendars, information about scheduled meetings and/or discussions, whether in-person or
over the telephone, agendas for those meetings and/or discussions, participants included in those
meetings and/or discussions, minutes of any such meetings and/or discussions, e-mail or
facsimiles sent as a result of those meetings and/or discussions, and transcripts and notes of any
such meetings and/or discussions to the extent they relate to the aforementioned requested
information.

If it is you position that any portion of the requested records is exempt from disclosure,
CREW requests that you provide an index of those documents as required by Vaughn v. Rosen,
484 F.2d 820 (D.C . Cir. 1973) , cert. denied, 415 U.S. 977 (1972). As you are aware, a Vaughn
index must describe each document claimed as exempt with sufficient specificity "to permit a
reasoned judgment as to whether the material is actually exempt under FOIA. " Founding
Church ofScientology v. Bell, 603 F.2d 945, 959 (D.C. Cir. 1979) . Moreover, the Vaughn index

1400 Eye Street, NW., Suite 450, Washington, D.C. 20005 I 202.408.5565 phone I 202.588.5020 fax I www.citizensforethics .org
FOIA Public Liaison
September 30,2010
Page Two

must "describe each document or portion thereof withheld, and for each withholding it must
discuss the consequences of supplying the sought-after-information." King v. Us. Dep 't of
Justice, 830 F.2d 210,223-24 (D.C. Cir. 1987) (emphasis added). Further, "the withholding
agency must supply' a relatively detailed justification, specifically identifying the reasons why a
particular exemption is relevant and correlating those claims with the particular part of a
withheld document to which they apply.'" Id. at 224, citing Mead Data Central v. Us. Dep 't of
the Air Force, 566 F.2d. 242,251 (D.C. Cir. 1977).

In the event some portions ofthe requested records are properly exempt from disclosure,
please disclose any reasonably segregable non-exempt portions in accordance with 5 U.S.C. §
552(b). If it is your position that a document contains non-exempt segments that are so dispersed
throughout the document as to make segregation impossible, please state what portion of the
document is non-exempt and how the material is dispersed throughout the documents. Mead
Data Central, 566 F.2d at 261. Claims ofnon-segregability must be made with the same degree
of detail as required for claims of exemption in a Vaughn index. If a request is denied in whole,
please state specifically that it is not reasonable to segregate portions of the record for release.

Finally, CREW welcomes the opportunity to discuss with you whether and the extent to
which this request can be narrowed or modified to better enable Education to process it within
the FOIA's deadlines.

Public Interest Fee Waiver Request

In accordance with 5 U.S.C. § 552(a)(4)(A)(iii) and 34 C.F.R. § 5.64, CREW requests a

waiver of fees associated with processing this request for records. The subject of this request
concerns the operations of the federal government and the disclosures likely will contribute to a
better understanding of relevant government procedures by CREW and the general public in a
significant way. Moreover, the request is primarily and fundamentally for non-commercial
purposes. 5 U.S.C. § 552(a)(4)(A)(iii). See, e.g., McClellan Ecological v. Carlucci, 835 F.2d
1282, 1285 (9th Cir. 1987).

Specifically the requested records will inform the public about Education's role in the
current controversy over the for-profit education industry and the extent to which Education's
proposed regulatory changes, intended to rein in perceived abuses in the federal financial aid
program, have been influenced by individuals and entities in either the for-profit or non-profit
industry. Education recently announced it was taking more time to issue the new regulations
and, according to Secretary Duncan, this delay was to get "additional feedback" to "help the
department strike 'the right balance' between holding the programs accountable to protect
students and taxpayers and 'making sure we keep whole those programs that are doing a good
job. '" Eric Gorski. Govt. Delays Rule Opposed By For-Profit Colleges, Associated Press, Sept.
24, 2010 (Enclosed as Exhibit 1). The public is entitled to access documents that would shed
FOIA Public Liaison
September 30, 2010
Page Three

light on the critical role that the for-profit education industry has had on the development of
Education's regulations and policies in this arena.

CREW is anon-profit corporation organized under section 501(c)(3) of the Internal

Revenue Code. CREW is committed to transparency in government and protecting the citizen's
right to be aware of the activities of government officials and to ensuring the integrity of those
officials. CREW uses a combination of research, litigation, and advocacy to advance its mission.
The release of information garnered through this request is not in CREW's financial interest.
CREW will analyze the information responsive to this request, and will share its analysis with
the public, either through memoranda, reports, or press releases. In addition, CREW will
disseminate any documents it acquires from this request to the public through its website,
www.citizensforethics.org., which also includes links to thousands of pages of documents
CREW has acquired through its multiple FOIA requests as well as documents related to CREW's
litigation and agency complaints, and through www.scribd.com.

Moreover, CREW has a demonstrated interest in the subject of this request and a
demonstrated history of publicly disseminating information on the for-profit education
controversy to the public. On July 1,2010, CREW sent a letter to Chairman Tom Harkin of the
U.S. Senate Committee on Health, Education, Labor and Pensions, expressing concerns about the
Committee allowing Steven Eisman to testify on the state of the for-profit education industry,
given his apparent financial conflicts of interest. CREW sent a follow-up letter to Chairman
Harkin on July 14,2010, after reports surfaced of other efforts to manipulate the federal
government into increasing the regulation of for-profit colleges. 1 Advocating greater
transparency in the industry and efforts to regulate the industry, CREW stated in its July 14 letter:

those advocating greater regulation also must be transparent

about their tactics and motives. Otherwise, serious questions
arise as to exactly who is engaged in abusive conduct to maximize
private financial benefits: the for-profit educational industry, or those
raising the alarm about the industry. Americans need to have confidence
that legislative and regulatory processes are not being manipulated for
private financial gain.

Under these circumstances, CREW satisfies fully the criteria for a fee waiver.

News Media Fee Waiver Request

CREW also asks that it not be charged search or review fees for this request because
CREW qualifies as a "representatives ofthe news media" pursuant to the FOIA, 5 U.S.c. § FOIA

1 These letters are enclosed as Exhibit 2.

Public Liaison
September 30, 2010
Page Four

552(a)(4)(A)(ii)(II). In Nat 'I Sec. Archive v. Us. Dep'tofDefense, 880 F.2d 1381,1386 (D.C.
Cir. 1989), the U.S. COUli of Appeals for the D.C. Circuit found the National Security Archive
was a representative of the news media under the FOIA. As the court reasoned, the FOIA's
legislative history indicates the phrase "representative of the news media" is to be interpreted
broadly "if the act is work as expected ... In fact, any person or organization which regularly
publishes or disseminates information to the public . . . should qualify for waivers as a
'representative ofthe news media. '" Id., citing 132 Congo Rec. S14298 (daily ed. Sept. 30, 1986)
(emphasis in original).

CREW routinely and systematically disseminates information to the public in several

ways. First, CREW maintains a frequently visited website, www.citizensforethics.org, that
received 75,629 visits in August 2010. In addition, CREW posts all of
the documents it receives under the FOIA on www.scribd.com. and that site has received
411,057 visits to CREW's documents since April 14, 2010.

Second, since May 2007, CREW has published an online newsletter, CREWCuts, that
currently has 15,731 subscribers. CREWCuts provides subscribers with regular updates
regarding CREW's activities and information the organization has received from government
entities. A complete archives of past CREWCuts is available at
http://www.citizensforethics.org/newsletter.

Third, CREW publishes a blog, Citizens bloggingfor responsibility and ethics in

Washington that reports on and analyzes newsworthy developments regarding government ethics
and corruption. The blog, located at http://www.citizensforethics.org/blog. also provides links
that direct readers to other news articles and commentary on these issues. CREW's blog had
1,174 hits in August.

Finally, CREW has published numerous reports to educate the public about government
ethics and corruption. Examples include: The Revolving Door, a comprehensive look into the
post-government activities of24 former members of President Bush's cabinet; 2008 Top Ten
Ethics Scandals; 2008 Most Embarrassing Re-Elected Members ofCongress; and Those Who
Dared: 30 Officials Who Stood Up For Our Country. These and all other CREW reports are
available at http://www.citizensforethics.org/reports.

Based on these extensive publication activities, CREW qualifies for a fee waiver as a
"representative of the news media" under the FOIA.

If you have any questions about this request or foresee any problems in releasing fully the
requested records please contact me at (202) 408-5565. Also, if CREW's request for a fee
waiver is not granted in full, please contact me immediately upon making such a determination.
FOIA Public Liaison
September 30, 2010
Page Five

Please send the requested records to Anne L. Weismann, Citizens for Responsibility and Ethics
in Washington, 1400 I Street, N.W., Suite 450, Washington, D.C. 20005.

Sincerely,

Anne L. Weismann
Chief Counsel

Enclosure
EXHIBIT 1
 Page 1 of2

3 of 82 DOCUMENTS

The Associated Press

September 24,2010 Friday 08:42 PM GMT

Govt. delays rule opposed by for-profit colleges

BYLINE: By ERIC GORSKI, AP Education Writer

SECTION: BUSINESS NEWS

LENGTH: 678 words

The U.S. Education Department said Friday it will take more time to finalize new regulations targeting for-profit college
job-training programs, but emphasized it was intent on moving forward and holding the sector accountable.

For-profit colleges have campaigned hard against the "gainful employment" rule, which would cut off federal aid to college
vocational programs with high student debt levels and poor loan repayment rates. They've lobbied Congress, purchased
newspaper ads and helped students and others register complaints with the Education Department,

The government was to publish the final rule by Nov. 1, but department officials announced a new time line Friday, saying
sections of it would be ready by Nov. 1 and the remaining portions will be published in early 2011.

The department said it was taking more time to consider comments it received about 91,000 during a 90-day comment
period, a record for a proposed higher education regulation and hold several meetings and public hearings in the coming
weeks. The department said the schedule allows it to stick to its plan for the rules to go into effect around July 1, 2012.

"Let me be clear: We're moving forward on gainful employment regulations," Education Secretary Arne Duncan said in a
statement. "While a majority of career colleges playa vital role in training our workforce to be globally competitive, some
bad actors are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use."

Duncan said additional feedback would help the department strike "the right balance" between holding the programs
accountable to protect students and taxpayers and "making sure we keep whole those programs that are doing a goodjob."

Shares of for-profit education companies, beaten down earlier this year, had moved higher in the past few weeks. Rumors of
a delay in the gainful employment rule's publication had raised investor hopes that the government was considering a softer
approach, said Sterne Agee analyst Arvind Bhatia. Those investors were disappointed by the Education Department's
statement Friday, he said. Shares mostly turned lower or trimmed their gains after the announcement.

The gainful employment rule is the most contentious of several new regulations meant to bring greater oversight of for-profit
colleges, which rely heavily on federal loans and grants to operate.

In recent months, for-profit colleges have been subjected to tough questioning from Democratic lawmakers in Congressional
hearings, an undercover government investigation that alleged misleading and fraudulent tactics in recruiting and admissions,
and new data that showed their students are more likely to default on their loans.

Federal law already requires that vocational programs of less than two years "prepare students for gainful employment in a
recognized occupation" to be eligible for federal aid. The Education Department proposed measuring that through a
complicated formula that would weigh both the debt-to-income ratio ofrecent graduates and whether all enrolled students
repay their loans on time.

For-profit education companies have argued the rule would disproportionately hurt low-income and minority students and
undermine the Obama administration's college completion goals. The industry has also questioned the methodology behind
the rule.

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 Page 2 of2

Student and consumer advocacy groups counter that the proposal is too weak, saying programs could continue to profit from
federal aid when more than half their students can't afford to pay down the principal on their loans. The rule would help, not
hurt, consumers if it forces career colleges to reduce tuition and improve their programs, they say.

The impact of the proposed rule is in dispute. The Education Department estimates that if schools make no changes, 5 percent
of for-profit college programs would be ineligible for aid in 2012 affecting 8 percent of all for-profit college students. For-
profit colleges say that underestimates the impact.

Associated Press Business Writer Tali Arbel contributed to this report,

LOAD-DATE: September 25,2010

LANGUAGE: ENGLISH

PUBLICATION-TYPE: Newswire

Copyright 2010 Associated Press

All Rights Reserved

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EXHIBIT 2
 citizens .for. respon~ibility
CREW . and I
ethics In washington

July 1,2010

Chairman Tom Harkin

Senate Committee on Health, Education,
Labor and Pensions
428 Dirksen Senate Office Building
151 and C Streets, N.E.
Washington, D.C. 20510

By Facsimile: (202) 228-5044

Dear Chairman Harkin:

Citizens for Responsibility and Ethics in Washington ("CREW") respectfully requests

that the Committee on Health, Education, Labor and Pensions consider changes to its rules and
practices regarding witnesses invited to testify at committee hearings based on last week's
testimony by Steven Eisman, a portfolio manager of a hedge fund known to short-sale stocks in
for-profit education companies. In the past, Mr. Eisman was able to manipulate the market
reaction in the for-profit education industry and profit handsomely through short-sales based on
his dire public forecasts for companies in that industry. Mr. Eisman's recent congressional
testimony, during which he decried the for-profit education industry as "socially destructive as
the subprime mortgage industry," appears designed to accomplish this same end.

At a June 24, 2010 hearing on federal spending on for-profit education, Mr. Eisman
testified on the problems in the for-profit education industry. His testimony is a scathing attack
on an industry he describes as "fundamentally unsound" and one that has led us to "the cusp of a
new social disaster.'? Mr. Eisman offered the very dire prediction that over the next ten years,
defaults of Title IV loans would total $275 billion." At the same time, according to recent news
reports and Mr. Eisman's own response to questions at last week's hearing, he is a portfolio
manager of a hedge fund that profits significantly from short-sales of stocks in the for-profit
education industry. See, e.g., Lanny Davis, Transparency By 'Shorts' on 'For-Profit' Schools
Needed Too, The Hill, June 23, 2010 (attached as Exhibit A); Chris Frates, ShOJi Sellers Flag
School Stocks, Politico, June 30,2010 (attached as Exhibit B). After a May 26, 2010 speech by
Mr. Eisman before the Ira Sohn Research Conference in which he characterized specifically
identified for-profit education institutions as on financially shaky ground, share values of the

Testimony of Steven Eisman before the U.S. Senate Committee on Health, Education,
J

Labor and Pensions, June 24, 2010, available at http://help.senate.gov/hearings.

2 Jd.

3 Jd.

1400 Eye Street, N.w., Suite 450, Washington, D.C. 20005 I 202,408,5565 phone I 202,588,5020 fax www.citizensforethics.org
 Chairman Tom Harkin
July 1,2010
Page Two

named companies plummeted and Mr. Eisman reaped huge profits from short-sales in those
companies. Davis, The Hill, June 23, 2010. Mr. Eisman likely is counting on the same profits
resulting from last week's congressional testimony and a predictable down-swing in the share
value of for-profit education companies.

CREW is troubled that under these circumstances, the Committee on Health, Education,
Labor and Pensions invited MI'. Eisman to testify on policy issues related to the for-profit
education industry. To our knowledge, Mr. Eisman has no expertise in education policy; he
holds no degrees, has no experience, and no background on the education policies at issue. Mr.
Eisman's only experience is that he works for a hedge fund that is betting millions of dollars on
stock prices falling in the for-profit education industry. His financial conflicts of interest could
not be more blatant, yet they were not disclosed in advance of his testimony. Even more
troubling is Mr. Eisman's use of the congressional hearing and the Committee as a vehicle to
advance his own economic interests by dragging down stock prices of publicly traded companies.

Hearings like those held by the Committee serve a significant public function by airing
issues of national significance. The Committee's decision to broadcast the hearing and provide
public access to the witnesses' written statements reflects an understanding of the fundamental
importance of transparency in the Committee's work. Yet by inviting witnesses like Mr. Eisman
to testify, the Committee undermines those laudable and important goals. Accordingly, CREW
recommends that the Committee consider changes to its rules in order to identify in advance all
conflicts of interest potential witnesses may have. In addition, safeguards must be put in place to
ensure that never again is a witness permitted to use his or her hearing testimony for private gain.
The integrity of the Committee and the hearing process demands no less.

Thank you for your attention to this very important jJe.

:Jlt /
Melanie Sloan
Executive Director

Encls.

cc: Ranking Member Michael B. Enzi

 CREW I citizens for responsibility
and ethics in washington

July 14,2010

Tom Harkin r

Chairman
U.S. Senate Committee on Health, Education,
Labor and Pensions
428 Dirksen Senate Office Building
1'1 and C Streets, N.E.
Washington, D.C. 20510

By Facsimile: (202) 228-5044

Dear Chairman Harkin:

Thank you for your July 2nd response to Citizens for Responsibility and Ethics in
Washington's ("CREW") letter setting forth concerns with the recent testimony of Steven
Eisman before the Committee on Health, Education, Labor and Pensions ("HELP"). We
understand that you remain comfortable with Mr. Eisman's testimony, notwithstanding his
private financial interests, because he met the test of advancing the public interest in the
underlying matter of the hearing: for-profit colleges. Further, we agree with you that given the
disastrous economic impact of the collapse of the subprime mortgage industry, the federal
government must be vigilant in protecting Americans and the nation as a whole from future
serious economic injury such as may be posed by the for-profit college industry.

Nevertheless, separate and apart from the issues pertaining to Mr. Eisman, new
information has come to light regarding efforts to manipulate the federal government into
increasing the regulation of for-profit colleges. On July 9, 2010, Prol'ublica reported efforts by
Johnette McCOlmell Early to fuel a groundswell of anger and discontent against the for-profit
college industry.' Ms. Early solicited the unwitting sign-on of 19 executives from homeless
shelters and service agencies to a letter to Secretary of Education Arne Duncan expressing
concerns that "for-profit trade schools and career colleges are systematically preying upon our
clients," and pledging support for the agency's efforts to tighten regulation of that industry.'
While some of those who signed the letter had personal knowledge of aggressive recruiting
tactics, others had only heard about them from colleagues and news reports.'

J Sharona Coutts, Investment Funds Stir Controversy Over Recruiting by For-Profit Colleges,

Prol'ublica, July 9,2010 (attached as Exhibit A).

2 ld.; Letter to Secretary of the Department of Education Arne Duncan, June 17, 20 10 (attached
as Exhibit B).

3 Coutts, Prol'ublica, July 9, 20 IO.

1400 Eye Street. N.W.. Suite 450, Washington, D.C. 20005 I 202.408.5565 phone I 202.588.5020 fax www.citizensforethics.org
 Honorable Tom Harkin
July 14,2010
Page Two

Significantly, Ms. Early works for a financial firm she has refused to identify, which is
paying her to investigate for-profit schools.' Although Ms. Early claimed not to know whether
the finn is betting against the for-profit higher education industry, she did say, "Clearly an
investment firm is not going to look into something unless they're thinking about whether it's a
good or bad investment."

In addition, a non-profit group associated with another high-profile investor, Manuel P.

Asensio has written five letters to members of Congress and regulators since April criticizing the
for-profit college industry and calling for stricter regulation." Further, according to at least one
analyst of short-selling, "[s]hort sellers have shown a steadily increasing interest in for-profit
schools. ,,7

Taken as a whole, this new evidence suggests a concerted effort by individuals who stand
to gain financially to drive down the stock price of certain for-profit schools. Not content to
simply provide their views on the for-profit school industry, some are taking an active role to
shape public views of -- as well as congressional and executive branch reaction to -- that
industry, hoping to reap great financial benefits from the market's reactions.

Again, CREW agrees that the for-profit school industry merits scrutiny by the HELP
Committee and other regulators, and we welcome the opportunity to assist in providing greater
transparency in that industry. At the same time, however, those advocating greater regulation
also must be transparent about their tactics and motives. Otherwise, serious questions arise as to
exactly who is engaged in abusive conduct to maximize private fmancial benefits: the for-profit
educational industry, or those raising the alarm about the industry. Americans need to have
confidence that legislative and regulatory processes are not being manipulated for private
financial gain.

41d.; In a July 12,2010 conversation with CREW, Steve Eisman denied any connection with
Ms. Early.

5 Coutts, ProPublica, July 9, 2010.

7ld
Honorable Tom Harkin
July 14,2010
Page Three

As the HELP Committee continues its investigation of the for-profit college industry and
considers appropriate regulatory reforms, CREW respectfully suggests that you take into account
and publicly air the interests of the advocates on all sides of the issue. A good place to start
might be by requiring Ms. Early to identify the financial firm that employed her to drum up
signatures for the letter to Secretary Duncan.

Please do not hesitate to contact us if we can be of any service as the Committee's

inquiries continue.
.-) /"/

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Melanie Sloan
Executive Director

EncIs.

cc: Ranking Member Michael B. Enzi