For-profit schools are at center of disputes

EDMC lobbies hard against federal regulations

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WASHINGTON -- As the Senate hearing was set to begin, a familiar character sidled up to the press table.

Lanny J. Davis, the former White House counsel to President Bill Clinton, dished out talking points in support of the for-profit college industry, a sector now under serious scrutiny in Washington.

Mr. Davis told reporters that for their convenience, he had several students waiting outside ready to sing the praises of their schools after the Sept. 30 hearing, which focused on students' high debt loads and overzealous recruiting tactics at schools owned by Downtown-based Education Management Corp., and other companies.

From Sept. 17 to year's end, Mr. Davis was paid $160,000 to lobby for a group called the Coalition for Educational Success -- a band of for-profit schools with EDMC at its center. His efforts are just a small part of a booming political advocacy campaign from the company, which has been aggressively fighting proposed regulations from the Obama administration and a Senate probe that the industry views as unfair.

Critics say EDMC and other for-profit education companies use misleading recruiting tactics and graduate students with massive debts and no jobs to pay them off.

The Department of Education has proposed regulations, including the so-called "gainful employment rule," which is expected to be finalized sometime early this year. The rule would mean that if a pool of graduates in a particular program has an average student-loan debt load that is high related to the average earnings of the group, the federal government will not make loans available to students in the program. The federal government also could deny loans to programs in which students default on their loans at a high rate.

EDMC is one of the nation's largest for-profit education companies, operating the Art Institutes, Argosy University, South University and Brown Mackie College -- accounting for more than 150,000 students in all.

From the middle of 2009 to the end of 2010, EDMC itself spent at least $850,000 on federal lobbying -- after not spending a dime in the previous decade. In addition the EDMC-backed Coalition for Education Success, which formed in September, spent $570,000 by year's end. The company also formed a political action committee in 2009 that raised $118,000, mostly from EDMC executives, and made $56,000 in political contributions during the 2010 election cycle.

In addition, EDMC hired DCI Group, a Washington-based public relations firm with a history of controversial clients, to help drum up a letter-writing campaign to the Department of Education to oppose the gainful employment rule.

"They definitely seem to be the most aggressive attack dogs," Stephen Burd, editor of the New America Foundation's "Higher Ed Watch" blog, said of EDMC.

The industry -- which, through the Association of Private Sector Colleges and Universities filed suit against DOE on Friday to block some of its new regulations -- argues that it is being unfairly singled out when high debt and low job prospects are problems across higher education.

"Not unlike our traditional school peers, EDMC employs consultants and advisors to help us in our continuing efforts to communicate to policymakers and others our opposition to the proposed gainful employment rule and other efforts we believe unfairly restrict student aid," EDMC spokeswoman Jacquelyn Muller said in an e-mailed statement.

"We believe that it is important that our students, faculty and administrators have a voice in expressing the difficulties it can create for students who will no longer have access to loans and grants that Congress has intended to be available for them."

As a result, the Department of Education was overwhelmed with more than 90,000 comments on the proposed rule and has delayed both the final version and its implementation, which is now set for July 2012.

Local reps question rule

Rep. Jason Altmire, D-McCandless, is among 66 members of Congress who have raised objections to the gainful employment rule, according to a tally kept by the Coalition for Educational Success that also includes Reps. Tim Murphy, R-Upper St. Clair, and Mark Critz, D-Johnstown. Mr. Altmire, who received $3,400 in campaign contributions from the EDMC PAC, served on the Education and Labor subcommittee on higher education during the last Congress and said he met with Education Secretary Arne Duncan four times to discuss for-profit college regulations.

Mr. Altmire said he would like to find a way to crack down on the industry's abuses -- including reports of deceptive recruiting practices and high debt loads for graduates with little support in their job search -- without unfairly focusing on only for-profits or holding schools accountable if students make poor decisions.

"On the lobbying side, of course they're going to be engaged because their very existence is at risk with this regulation," he said.

"There's no question that it's had an impact. I think Secretary Duncan has an open mind, and I have found him to be very fair-minded on this issue."

Among the tactics used by EDMC to fight the gainful employment regulation was the hiring of DCI Group. The Washington-based firm has faced controversy from its public relations campaign for the repressive military junta in Burma and its stealth campaign on behalf of government-backed mortgage companies Fannie Mae and Freddie Mac to defeat legislation that would have regulated them.

According to an August 2010 staff memo from EDMC CEO Todd S. Nelson, first publicized by Mr. Burd's "Higher Ed Watch" blog, DCI was hired to contact EDMC employees to help them write personalized letters to Mr. Duncan opposing the gainful employment rule.

Senate hearings

The schools also have faced scrutiny from the Senate Health, Education, Labor and Pensions Committee, led by Iowa Democrat Tom Harkin. Mr. Harkin has staged hearings about the schools' use of federal funds and is considering legislation to regulate them further.

"Being held accountable for whether or not their students succeed might mean smaller profits for their shareholders, which is why they've invested millions in a lobbying effort to keep Congress and the administration from asking hard questions about what students and taxpayers are getting for the tens of billions of dollars a year these companies get from the federal government," Mr. Harkin said in a statement responding to emailed questions about for-profit schools' lobbying.

A key sticking point in the battle between Mr. Harkin and the industry has been a Government Accountability Office report requested by the HELP committee last year. Undercover GAO investigators contacted 15 for-profit colleges posing as potential students and the agency's initial report found that all 15 made deceptive or questionable statements and four committed outright fraud.

But months later, GAO released more complete recordings and revised its findings to depict the colleges in a more favorable light, prompting accusations from the industry that the results had been skewed to please Mr. Harkin. The Coalition for Educational Success filed suit to retrieve all documents related to the GAO investigation, and the agency has fought the request in court.

Rep. Darrell Issa, R-Calif., chairman of the Oversight and Government Reform Committee in the new GOP-controlled House, has seized upon the issue and requested all communication related to the for-profit college investigation. In a letter to the GAO last week, Mr. Issa said agency officials had promised to cooperate with his request in a previous meeting with his staff.

The lobbyists

The drumbeat against the GAO has been led by Mr. Davis and the Coalition, a new parallel group to the broader Association of Private Sector Colleges and Universities.

APSCU has lobbied in Washington for years and produced a series of television advertisements -- which air frequently in D.C. -- targeting the gainful employment rule featuring for-profit school graduates asking the federal government not to restrict their school choice.

APSCU, which spent $1.45 million on lobbying last year according to federal disclosures, also announced a lawsuit against the Department of Education on Friday in an attempt to block its new regulations, including the gainful employment rule.

The Coalition, meanwhile, lists EDMC and ITT Educational Services Inc. (which runs ITT Technical Institute), among its biggest member companies. Ms. Muller did not respond to questions about EDMC's role in forming the group or why it felt the need for an additional advocacy arm.

The Coalition has mounted a public relations campaign with Mr. Davis as its face, writing op-ed articles in The Huffington Post arguing that restrictions on for-profit schools unfairly limit access to college for low-income and nontraditional students. The Coalition also spent heavily on behind-the-scenes influence, according to federal lobbying disclosures, hiring three different firms.

One lobbyist, Chicago-based William Singer, earned $70,000 in the final four months of 2010 entirely for lobbying Sen. Richard Durbin, D-Ill., who has been outspoken in his criticisms of for-profit colleges.

EDMC's own federal lobbying spending spiked from $110,000 in 2009 to at least $740,000 in 2010 (the year-end disclosure for one of the five firms lobbying on the company's behalf, Covington & Burling, was unavailable as of Friday, so that figure is likely to rise).

Among more than a dozen lobbyists registered as working on the company's behalf last year was William Gray, a former six-term Democratic congressman from Philadelphia, and Heather Podesta, the sister-in-law of John Podesta -- a chief of staff to President Bill Clinton.

EDMC's PAC giving benefited both Democrats and Republicans. The Democratic Congressional Campaign Committee was the largest beneficiary, with a $10,000 donation. Among individuals, Mr. Altmire's $3,400 tied him for the largest total with Sen. Michael Bennet, D-Colo., and the new chairman of the Education and Labor Committee, Rep. John Kline, R-Minn.

Efforts of other education companies

The activity puts EDMC atop its for-profit college peers. Apollo Group, which owns the University of Phoenix, has seen its lobbying expenditures level off in the past few years according to data compiled by the Center for Responsive Politics and the company easily was surpassed by EDMC this year. DeVry Inc. also has hiked its spending in the past two years, but its $600,000 total was short of EDMC.

Other major for-profit education companies, such as the Washington Post Co. (which owns Kaplan Higher Education) and ITT, spent comparatively small sums on lobbying last year.

The success of EDMC's aggressive advocacy ultimately will be judged by what policies emerge from the administration and Congress. Mr. Burd, who tracked the industry for years as a reporter at the Chronicle for Higher Education before joining the New America Foundation, said that for now, the company has succeeded in providing its allies with a playbook.

"What they're doing," he said, "is making it easier for the House Republicans and some people on the Education Committee to fight the Department on gainful employment and deny that there's a problem."

Correction/Clarification: (Published January 24, 2011) Attorney Lanny Davis wrote op-ed articles advocating for-profit schools after he was retained by the Coalition for Educational Success only for The Huffington Post. A story Sunday incorrectly stated that he also wrote opinion pieces in The Hill, but the piece Mr. Davis wrote in that newspaper was printed before he was retained by the coalition.

Daniel Malloy: or 202-445-9980. Follow him on Twitter at PG_in_DC.


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