Today Senator Tom Harkin, Chairman of the U.S. Senate Committee on Health, Education, Labor and Pensions, will hold a hearing titled "Emerging Risk? An Overview of the Federal Investment in For-Profit Education." The witnesses that are scheduled to testify at the hearing are Kathleen Tighe, the Department of Education's (“DOE”) Inspector General; Yasmine Issa, former Sanford Brown Institute (CECO) student; Margaret Reiter, former Supervising Deputy Attorney General in California; Steve Eisman, portfolio manager at Frontpoint Financial Services Fund; and Sharon Thomas Parrott, DeVry's SVP of Government and Regulatory Affairs.
Last Thursday, June 17, 2010, Congressman George Miller, Chairman of the U.S. House of Representatives Committee on Education and Labor, held a hearing titled “The Department of Education Inspector General’s Review of Standards for Program Length in Higher Education.” The witnesses that testified at the hearing also included Ms. Tighe, the Department of Education's Inspector General.
The For-Profit institutions are almost funded entirely by tax-payers. Without tax-payers’ money the industry simply would never have become a national problem.
The DOE's Inspector General, Ms. Tighe, in her opening statement at the Education and Labor Committee’s hearing last week specifically testified that the DOE have created rules that allowed them to break the law without the fear of any adverse consequences.
Below is the excerpt from Ms. Tighe’s testimony:
“…due to the safe harbors included in the Department’s current regulation, in many cases, schools are shielded from administrative, civil, and criminal liability… we advised the Department that provisions of those regulations were contrary to the requirements of the [Law] and reported our disagreement to Congress. In its Notice of Proposed Rulemaking, the Department proposes to eliminate all safe harbor and return to the clear ban on incentive compensation stated in the [Law].”
Clearly any American tax-payer who came to know about the For-Profit education scheme and heard Ms. Tighe’s blatant admission of improper influence on the executive branch and Congress would be astonished and demand immediate remedial action. Unfortunately Americans are too busy earning their livings and paying taxes, to have the time to call Congress or otherwise demonstrate their outrage.
Plainly speaking, the For-Profit education companies devised a system that allows them to run extraordinarily cold-calling boiler rooms at tax payer expense. They then use those profits to influence the DOE and its rule-making apparatus to protect their profits.
One would think that the For-Profits’ scheme could be exposed and remedied by these back-to-back House and Senate hearings. After all, the scheme is easily identified and so are the conflicts that allow it. Yet the For-Profits aren’t changing their conduct. Instead they have perfected their story.
This story was summarized by Andrew C. Steinerman of J.P. Morgan in a report on yesterday’s hearing. Mr. Steinerman wrote that “the DOE has repeatedly stated that the For-Profit sector plays an important role in higher education by providing capacity in the supply-constrained industry and by spearheading innovation.”
The analyst describes the Congressional hearings as “menacing.” The “menace” is apparently the “gainful employment.” The rule will supposedly make it harder for For-Profit to saddle disadvantaged students with tax payer funded debt that they will be unable to repay and cannot get rid of in bankruptcy. But in the end this new rule may simply be another messy, complicated scheme that the DOE’s staffers will allow the For-Profit to manipulate for their advantage.
At today’s hearing, Democratic U.S. Senator Al Franken for Minnesota, who is a newcomer to federally-funded schemes administered by a conflicted bureaucracy, asked Ms. Tighe what could be done to “shut-down” the For-Profit schools engaged in “fraud.” Ms. Tighe did not respond but commented on cases involving For-Profit incentive compensation. Ms. Tighe’s contention is that she is unable to protect students or tax-payers from the For-Profit incentive compensation misconduct.
The Alliance for Economic Stability, Inc. (“AES”) disagrees with Ms. Tighe’s contention and has delivered a series of letters to the DOE showing that the DOE could presently without any changes to existing laws or the DOE’s existing so-called “safe harbor” rules do a better job. For a copy of AES’s letters click here.
About the Alliance for Economic Stability:
AES is a non-partisan non-profit organization. The purpose of the AES is to encourage government policies that protect savings and investments, and promote a fair financial marketplace.