Bailout

For-profit colleges? increasingly desperate tactics

By Felix Salmon

Back in June, it was very puzzling why Tom Matzzie, the former Washington director of MoveOn.org, would be waging a campaign against Steve Eisman and other people who are exposing the abuses of the for-profit college industry. Now Mike Elk has uncovered what many of us suspected at the time:

Matzzie is vice president of the lobbying firm LawMedia Group. LawMedia represents the Student Access, Student Choice Coalition, which is funded by several for-profit schools. Matzzie also runs an organization called Accountable America, which he says accepted funding from John Sperling, the Chairman of the Apollo Group, which owns the University of Phoenix. Matzzie did not disclose these conflicts of interest when he denounced Eisman for testifying against for-profit schools’ predatory loans.

But already the for-profit school industry is moving on to other tactics. Like lawsuits:

Keiser University, a regional for-profit college, has filed suit against Florida State College at Jacksonville President Steven Wallace and one of his top administrators, saying they tried to sully the school?s image by colluding with detractors of for-profit colleges.

I’ve uploaded a copy of the lawsuit here, and embedded it below. It charges that FSCJ worked with Eisman to wage a media campaign against Keiser, which seems to me to be a pretty good idea, actually. If for-profit colleges can wage aggressive marketing campaigns, there’s no reason why state colleges shouldn’t do so as well, revealing the truth about what exactly you’re likely to end up with if you take out substantial loans to attend a for-profit institution. (Enormous drop-out rates mean that millions of students end up with nothing but burdensome debt, which can’t even be discharged in bankruptcy, and no degree to show for it; the ones who do get a degree often find it worthless in the real world.)

I can’t imagine that Keiser will prevail in court, although they’ll surely cost FSCJ lots of money in legal fees defending this. Yes, there does seem to have been an orchestrated campaign against Keiser — and I’ll take Keiser’s word for it that the campaign worked. But I don’t see anything illegal here. FSCJ is allowed to make claims about Keiser, and vice versa. If this case comes to trial, I look forward to lots of reporters covering FSCJ’s defense — which will surely be that the statements in question are true, rather than false.

It’s not clear which specific statements Keiser is taking issue with, or where those statements appeared. Instead, the suit just gives us this kind of thing:

Defendants? false statements included, among other things, that proprietary schools like Keiser ?ripped off? students by providing ?worthless degrees,? and that such schools engaged in ?subpriming students.?

With any luck, the publicity resulting from this case, if it does go to trial, will be even tougher on Keiser than the publicity it’s objecting to in the suit. This lawsuit is a high-risk and pretty desperate tactic, I think, on the part of Keiser. So expect more such suits, if and when the harsh light of negative publicity continues to damage the for-profit education industry. They’re a sign that blood is being drawn, even if the Department of Education is dragging its feet on reform.

20101004 Complaint Against FSCJ FINAL

Full post as published by Macroprudential on October 06, 2010 (boomark / email).