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A Washington advocacy group is claiming that Wall Street investors have conspired with the Department of Education to craft rules that would damage for-profit colleges to drive down their stock prices and allow short-sellers to profit.

The as-yet unsubstantiated conspiracy theory -- advanced in a press release Wednesday -- underscores the intensity of the campaign by for-profit colleges to derail proposed federal rules that could tighten their access to federal aid dollars. The new rules come in response to a growing body of evidence that for-profit colleges such as the University of Phoenix and Kaplan University have left graduates suffering under debts they cannot repay given the meager wages they typically earn.

In the press release, the self-described watchdog, Citizens for Responsibility and Ethics in Washington (CREW), portrays the rule-making as little more than a ploy aimed at driving down stock prices of the publicly-traded companies that operate for-profit colleges so that savvy short sellers can cash in.

"Wall Street investors have been working with high-ranking education officials to craft regulations, allowing them to net millions of dollars through the short sale of for-profit college stocks," declares the press release.

When pressed for evidence of this conspiracy, the group's executive director, Melanie Sloan, cited e-mails that did little more than establish that department of education officials have met with one prominent short seller, Steve Eisman, who Michael Lewis profiled in his best-selling book The Big Short. In recent months, Eisman has emerged as a strident critic of the for-profit college industry, asserting that it fleeces taxpayers and preys on students.

Asked to explain how a meeting between the government agency and a critic of the for-profit industry amounts to proof of a conspiracy, Sloan said only that Eisman was unfit to offer advice on the subject.

"They should be cautious, given that Eisman was making money on the market fluctuations," she said, referring to the profits he garnered by betting against mortgages. Eisman declined to comment.

A Department of Education spokesman dismissed the allegations as "patently ridiculous," adding that officials gather information from a wide range of sources in drafting all regulations, including members of the for-profit sector.

Stocks of companies that own for-profit colleges have indeed dropped significantly over the past year in anticipation of the Department of Education's new rules, and after public statements made by Eisman. Another major trigger for plummeting stocks was the release of a Government Accountability Office report last year that found widespread fraud in recruitment practices at several for-profit colleges.

None of the e-mails referenced by the group indicate that Eisman's sentiments played any role in shaping the rules being crafted.

CREW describes itself as a "non-profit legal watchdog group dedicated to holding public officials accountable for their actions." But the group's executive director, Sloan, had planned to join a prominent Washington lobbying firm that represents the for-profit college industry, Lanny J. Davis and Associates.

Davis has been in the center of a bruising battle over new rules that could restrict the for-profit college sector's access to federal student aid money, the lifeblood of the industry. Davis has become a lighting rod in Washington for his paid representation of highly controversial figures, among them the Ivory Coast dictator Laurent Gbagbo.

A press release announcing Sloan's hire last November quoted Davis saying he was "thrilled" by the addition to his team. But Sloan said Wednesday she plans to remain at CREW indefinitely and has no ties to Davis. She did not explain the discrepancy between her statement and the press release.

"I think I am being clear," she maintained. "I don't work with the coalition or Lanny Davis."

Davis said Sloan might yet join his firm, though the timetable is "still uncertain." He added that she would not be working on for-profit college rules regardless.

Davis' most recent lobbying disclosure form lists only two clients for the firm, the Coalition for Educational Success and Martek Biosciences Corporation.

Both the Coalition for Educational Success, the trade group represented by Davis, and CREW have sued the Department of Education, seeking documents and correspondence that policymakers had in the lead-up to the development of the new regulations for the for-profit sector.

The regulations aim to curb some of the more controversial trends for the for-profit education sector, including high student loan default rates and excessive burdens of debt compared to the salaries students attain after graduation.

The for-profit education industry has waged an extensive advertising and e-mail campaign against the so-called "gainful employment" rules being considered by the Education Department, arguing that the rules would limit low-income students' access to college and would hold for-profit schools to a different standard than public or private non-profit colleges.

Davis and Sloan have frequently assailed statements made by Eisman, the Wall Street short seller who famously bet against the subprime mortgage market and has since turned his attention to what he portrays as predatory recruitment and financial practices by for-profit colleges. At industry conferences and in testimony before the Senate, Eisman has excoriated the for-profit sector for vacuuming up federal student aid, leaving students with excessive debt burdens.

In a speech made at an investment conference last May, Eisman likened for-profit colleges to subprime mortgage lenders.

"Are we going to do this all over again?" he asked. "We just loaded up one generation of Americans with mortgage debt they can't afford to pay back. Are we going to load up a new generation with student loan debt they can never afford to pay back?"

CREW claims that Eisman's depictions are not motivated by civic interest, but rather personal investor gain. His mere meeting with Department of Education officials crafting the new rules amounts to proof of an improper proceeding, the group claims.

"Education officials knowingly allowed that process to be tainted by the undisclosed role of short-sellers, seeking to use the regulatory arena to manipulate the financial markets and drive down the share value of for-profit education companies, all for their own personal gain," declares a letter CREW sent Wednesday to Education Secretary Arne Duncan.

The letter asks that Duncan investigate the matter.

RS/KA