This blog post is cross-posted on The Huffington Post:

Earlier this month, the Government Accountability Office (GAO) issued a scathing report about the for-profit college industry. After conducting undercover tests at 15 for-profit colleges, the GAO found that representatives of four colleges had encouraged applicants to engage in fraud to secure government college loans and that representatives at all 15 had attempted to deceive applicants in some way.

No two ways about it, this is terrible. People looking to increase their marketability in a tough economic climate are being deceived about what an education at these schools will cost, what doors these degrees might open, and the salaries students can expect upon graduation. Perhaps worse, at least some schools are encouraging applicants to engage in out-and-out fraud to obtain government loans and are telling students not to worry about repaying them. Many of these students, unable to repay their loans, are defaulting on them and costing taxpayers millions of dollars.

In addition to the issues highlighted by the most recent GAO report, there have been other problems as well. Some for-profit colleges spend a large portion of revenue on non-teaching related expenses, have high dropout rates, and engage in abusive recruiting and debt-management practices.

Given all of the abuses documented, and the ever-increasing amount of federal student aid dollars flowing to these schools, the industry clearly merits greater scrutiny and regulation by both Congress and the Obama administration. But it is also worth noting that for-profit colleges are not the only ones engaged in deceptive tactics here. Some urging additional regulation of the industry are not exactly on the up-and-up themselves. It seems hedge fund managers have developed a remarkable interest in for-profit educational institutions, and not out of heartfelt concern for the American educational system.

Steven Eisman, for example, a hedge fund manager who previously manipulated market reaction in the for-profit education industry and has raked in cash through short sales based on dire public forecasts for companies in that industry, testified (PDF) before a Senate committee in June that the industry is fundamentally unsound and we should expect to lose millions from students who attend such schools and default on their loans. Last May, after a speech before the Ira Sohn Research Conference in which he described specific for-profit education institutions as on financially shaky ground, share values of those companies plummeted and Mr. Eisman reaped huge profits.

Shortly after Mr. Eisman testified about the evils of for-profit colleges, ProPublica reported on other efforts by those with financial interests to encourage federal regulation of the industry. An unidentified hedge fund manager (though according to Mr. Eisman, not him) hired Johnette McConnell Early to encourage federal regulation of for-profit education by sending Education Secretary Arne Duncan a letter signed by 19 executives of homeless shelters and service agencies expressing the concern that "for-profit trade schools and career colleges are systematically preying upon our clients," and pledging support for tighter regulation. While some of those who signed the letter had personal knowledge of aggressive recruiting tactics, others had only heard about them third-hand. Ms. Early claimed not to know whether the hedge fund she worked for was betting against the for-profit higher education industry, but she did admit, "Clearly an investment firm is not going to look into something unless they're thinking about whether it's a good or bad investment."

Further, 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. On top of this, one analyst of short-selling stated, "Short sellers have shown a steadily increasing interest in for-profit schools."

These examples suggest there may be a concerted effort by those who stand to benefit financially to drive down the stock price of certain for-profit schools. Knowing this, how can we be sure that the new regulations the Department of Education is proposing are really in the best interest of the Americans most likely to attend these schools? Even more disturbing, the revelations of the hedge fund managers' efforts here raise the specter of whether federal oversight and regulatory processes are being secretly manipulated for financial benefit in other instances.

While for-profit colleges have been rightfully criticized for offering little transparency as to how well taxpayers have been served by our substantial investment in that industry, some of the efforts to fuel anger against and encourage regulation of these schools are similarly lacking in transparency. Congress and the Department of Education should remain vigilant against the efforts of a few opportunistic multi-millionaires to abuse the regulatory process for their own pecuniary interests.

Melanie Sloan is CREW's Executive Director.

The House Ethics Committee is preparing for major ethics trials of two senior members of the Congress, but the Senate Ethics Committee is still sitting quietly as Sen. John Ensign's transgressions loom over his tenure in the Senate.

CREW's executive director, Melanie Sloan, said today:

While the House is confronting the ethics problems of two of its members, the Senate appears to be slow-walking the case against Sen. Ensign. Sen. Ensign abused his position to conduct an affair with campaign staffer Cynthia Hampton, who was married to his then-chief of staff, Doug Hampton, fired them both, paid her severance that he improperly failed to report to the Federal Election Commission, and conspired to help Mr. Hampton set up a lobbying business in violation of federal law. Nevertheless, Sen. Ensign remains in the Senate, collecting a $174,000 pay check from American taxpayers.

So what exactly is the Ethics Committee waiting for? Since Sen. Ensign has refused to do the right thing by resigning, the Senate Ethics Committee should convene a public hearing so Americans can learn all the details of Sen. Ensign’s misdeeds and decide for themselves whether he is fit for office.

Click here to learn more about CREW's actions against Sen. Ensign.

The House Ethics Committee today released their Statement of Alleged Violation (PDF) against California Rep. Maxine Waters.

After reviewing the statement, CREW's Executive Director Melanie Sloan said:

The facts released today make it increasingly clear that Congresswoman Waters abused her office and she must be held accountable for her actions. The Statement of Alleged Violation released by the House Ethics Committee confirms the congresswoman intervened on behalf of OneUnited Bank despite the fact that she knew her actions constituted a conflict of interest.

In addition, the fact that Rep. Waters' grandson was the person handling this matter on her behalf makes the matter worse. Congress has anti-nepotism rules, which sadly don't rule out members from hiring their grandchildren. Perhaps, however, someone not related to Rep. Waters would have stood up to her and prevented her office from taking action to protect her husband’s investment.

Read CREW's previous statement calling for Rep. Waters to step down as the chair of the Housing and Opportunity Committee here.

Back in January 2008, CREW asked the House Committee on Administration to add grandchildren to the list of relatives members of Congress are not allowed to employ. Click here to read that letter.

CREW today sent a letter to House Committee on Appropriations Chairman David Obey (D-WI) and Defense Appropriations Subcommittee Chairman Norm Dicks (D-WA), asking that the appropriations committee ban earmarks to non-profits that funnel earmarked funds to for-profits.

On March 10, 2010, Reps. Obey and Dicks jointly issued a press release announcing that the appropriations committee would no longer approve earmarks directed to for-profits.
News stories have indicated, however, that as soon as the ban was enacted, for-profit entities -- sometimes in collaboration with members of Congress -- began devising schemes to get around it.

The New York Times and the Huffington Post reported that some for-profit companies set up shadow non-profit organizations to receive earmarked funds, while others are exploiting partnerships with existing non-profits to serve as pass-throughs.

For example, Ohio defense contractor Imaging Systems Technology, which previously received $8.4 million in earmarks requested by Rep. Marcy Kaptur (D-OH) to produce body armor parts, established a non-profit organization specializing in the same product as the defense contractor, located at the same address, and naming the company’s vice-president as executive director. Rep. Kaptur then requested $10.4 million in earmarks for the new non-profit, the Great Lakes Research Center, noting it “met the requirements for reform.”

Asked about the maneuver to skirt the for-profit earmarks ban, the defense contractor’s president replied:

It’s not illegal - so what?

Given the lengths to which members of Congress and for-profit companies have gone to defy the ban, CREW suggests the appropriations committee issue a statement making clear that earmarks will not be awarded to non-profits that funnel any portion of earmarked funds to for-profit entities. In any event, because there has been confusion as to the ban’s parameters, CREW also suggests that the committee issue guidance regarding the scope of the ban.

CREW Executive Director Melanie Sloan said today:

Chairmen Obey and Dicks deserve credit for trying to reign in earmarks, but it is a tough road to hoe considering how addicted members of Congress and businesses are to all that pork. It was inevitable that some would try to circumvent the ban. The question is, confronted with clear evidence that for-profits are circumventing the ban by having non-profits serve as funnels for earmarked funds, what is the committee going to do about it?

Click here (PDF) to read CREW’s letter to Chairmen Obey and Dicks.

CREW sent a letter today to the Federal Trade Commission (FTC) requesting an antitrust investigation into drug companies’ vaccine distribution policies. Many drug companies, including Sanofi Pasteur and Merck, offer vaccines at discount prices – but with a potentially dangerous catch.

The discounts are conditioned on an express agreement that the physicians’ healthcare groups will use only the offering drug company’s vaccines and other products. If any member of the practice fails to comply with this exclusivity requirement, the entire practice loses the discounts.

On top of potentially depriving patients of receiving best-suited vaccines, this all-too-common occurrence suppresses market competition and may prevent new and more effective vaccines from being developed.

CREW’s Executive Director Melanie Sloan said today:

Patients presume that doctors choose vaccines based on the patient’s best interests. Now we learn that’s not always true. In some cases, doctors are choosing vaccines based on the discounts offered by the drug manufacturer. No one should have to question their physicians’ motives, but the practices of companies like Sanofi Pasteur and Merck suggest we should all be questioning our doctors closely about why they chose a particular vaccine.

Click here to read CREW’s letter to the FTC.

CREW today sent a letter to the Senate Committee on Health, Education, Labor and Pensions, calling for changes in rules and practices regarding witnesses brought in to offer testimony. CREW’s letter comes after the Committee heard the June 24th testimony of Steven Eisman – a portfolio manager of a hedge fund known to short-sale stocks in for-profit education companies.

Mr. Eisman has in the past offered public comments bashing the for-profit education industry – to his great financial benefit. For example, after a May 26, 2010 speech at the Ira Sohn Research Conference, the share values of the companies he criticized plummeted. Through short-sales in those companies, Mr. Eisman reaped huge profit.

CREW is calling on the Committee to put safeguards in place to ensure future witnesses cannot use their testimonies for their private financial gain.

Melanie Sloan, CREW’s executive director, said today:

While many who testify before Congress have a financial interest at stake, few profit directly from their testimony alone. Congress should not be in the business of helping hedge fund managers like Mr. Eisman make even more money. Congressional hearings are intended to air issues of national significance – not line witnesses’ pockets.

Click here to read CREW’s letter.

South Carolina has certainly seen its fair share of controversy over the past few years, and today CREW has the state’s latest and greatest in its sights: mystery Senate candidate Alvin Greene.

We just called on the Attorney General of South Carolina, Henry McMaster, to investigate (PDF) whether or not Mr. Greene was induced to run for the Democratic nomination to challenge incumbent Sen. Jim DeMint. Inducing a candidate to run is a blatant violation of South Carolina law.

Mr. Greene originally tried to pay the $10K filing fee with a personal check, which was rejected. He miraculously returned the same day with a new check with the name “Alvin M. Greene for Senate” handwritten as the payer. While he claims this money came from his personal savings account, he has to date refused to confirm this with documentation.

It looks unlikely that Mr. Green had this amount of money on hand. He was discharged from the Army in August 2009 and has been unemployed ever since. What’s more, in November 2009, when charged with obscenity for showing pornography to a USC student, he was assigned a public defender – a service usually reserved only for poor defendants.

CREW also filed a complaint (PDF) with the Federal Election Commission (FEC) alleging that Mr. Greene and three other candidates in the June 8, 2010 South Carolina primary violated the Federal Election Campaign Act (FECA) and FEC regulations by failing to file mandatory disclosure reports. Gregory Brown, Ben Fraiser, Brian Doyle and Mr. Greene all failed to file their mandatory April 15th Quarterly Report and 12-Day Pre-Primary Reports.

Additionally, Mr. Green failed to file a Statement of Candidacy for himself and a Statement of Organization for his campaign.

CREW’s Executive Director, Melanie Sloan, said today:

The people of South Carolina have a right to fair, transparent and fraud-free elections. Paying candidates to run for office and concealing the sources of campaign funds undermines the integrity of the electoral process and threatens our democracy.

And election law regulations – and their deadlines – exist for a reason. All candidates who are serious about representing the American public in our federal government should be able to perform such simply tasks as filing paperwork on time.

Read CREW’s FEC complaint and the complaint’s exhibits.

Read CREW’s letter to South Carolina Attorney General McMaster.

The Ninth Circuit Court of Appeals today unanimously reversed a lower court decision that would have a created a massive loophole in the Federal Election Campaign Act (FECA) and allowed wealthy individuals to contribute unlimited amounts to the candidates of their choice through straw donors.

The Justice Department had prosecuted prominent California trial attorney Pierce O’Donnell for violating FECA by reimbursing thirteen employees of his law firm for making a total of $26,000 in contributions to the presidential campaign of former Senator John Edwards (D-NC). A federal district court in California had dismissed the indictment on the grounds that the Act only prohibited making contributions under fake names – not reimbursing others for making contributions. The Ninth Circuit correctly rejected that interpretation today, holding specifically that the Act prohibits providing donation money to others when they are merely ‘straw donors.’

In September 2009, CREW filed an amicus brief in the case supporting the Justice Department's long-standing interpretation of the law.

CREW’s Executive Director Melanie Sloan said today,

By reversing the lower court’s decision, the Ninth Circuit has helped ensure that our elections are not bought and sold by the wealthy. Mr. O’Donnell’s scheme was a brazen violation of election law – and CREW praises the Ninth Circuit for recognizing this fact.

Click here (PDF) to read the Ninth Circuit’s decision.

CREW today sent a letter to the Inspector General of the Department of Health and Human Services calling for an investigation into the appointments of two members of the Food and Drug Administration’s (FDA) Tobacco Products Scientific Advisory Committee (TPSAC). The two members, Drs. Neal Benowitz and Jack Henningfield, have blatant financial ties to companies that make smoking cessation products – calling in to question the impartiality of the panel’s advice.

Dr. Benowitz’s ties to the smoking cessation industry include paid consultant jobs with Pfizer, GlaxoSmithKline, Novartis and Aradigm and charging between $270-600 per hour to serve as an expert witness in tobacco lawsuits. Similarly, Dr. Henningfield is a paid consultant for pharmaceutical companies. What’s more, he’s also a partner in a company that holds at least one patent for a nicotine gum, and will greatly benefit financially if he succeeds in obtaining a patent license.

This isn’t the first time the FDA has run into trouble with conflicts of interest on their advisory committees. Former FDA Chairman Lester Crawford pleaded guilty to such charges in 2006 when it was revealed he owned stock in Pepsico and Sysco at the same time he chaired the FDA’s Obesity Working Group. The FDA claimed it dealt with these conflicts in 2008 by instituting new procedures for screening potential panel members and proclaiming that members cannot participate in particular matters in which they have a financial conflicts of interest without a waiver. It seems the FDA is ignoring their advisory committee rules in the TPSAC, which is scheduled to meet tomorrow and Wednesday, June 8th and 9th.

Melanie Sloan, CREW’s executive director, said today:

TPSAC panel members are barred from having financial ties to cigarette companies. Common sense dictates they shouldn’t have ties to pharmaceutical companies that make smoking cessation products either. The public needs to have confidence that new regulations are aimed at preventing smoking, not increasing drug companies’ profits. Loathing tobacco companies does not justify ignoring clear conflicts of interest. As great as it is that the FDA is finally regulating tobacco products – and as credentialed as Drs. Benowitz and Henningfield may be – there is no excuse for including those paid to consult or create smoking cessation products on the panel. How can we have faith in the TPSAC’s conclusions when some of its members have a vested financial interest in the panel’s decisions?

Click here to read CREW’s letter to the Inspector General.

CREW today issued a report (PDF) that shows the Securities and Exchange Commission (SEC) is instituting its promised post-Madoff-scandal reforms at a slow pace and with limited progress.

Following the agency’s embarrassing 16-year failure to detect Bernard Madoff’s massive Ponzi scheme, SEC Chairman Mary L. Shapiro promised to make fundamental reforms to the Enforcement Division, ranging from the creation of a central database to manage tips, complaints and referrals, to the establishment of specialized units better able to analyze highly specialized and complex areas of security law.

CREW monitored these promised reforms by filing an October 2009 Freedom of Information Act (FOIA) request for documentation showing progress in seven key areas.

CREW found that despite the urgent need for significant structural reform, the SEC has not rushed to implement many of the promised changes. The agency has made the most progress in filling new staff positions and adding new offices, but given how long this has taken, the impact of these steps is not yet discernable. At bottom, the central question of whether the SEC has instituted meaningful and effective reforms to address the systemic problems revealed by the agency’s failure to uncover Mr. Madoff’s blatant criminal conduct still cannot be answered.

CREW’s Executive Director, Melanie Sloan, said today:

Despite its historic failure to prevent Bernie Madoff’s staggering fraud, the SEC is dragging its feet on some of the most urgent structural reforms needed. The SEC may be headed in the right direction, but not at the speed Americans have the right to expect given the agency’s monumental failures.

She continued:

The slow pace of reform is hard to fathom. If we’ve learned anything from the agency’s failure to stop Bernie Madoff and subsequent swindlers, it’s that the country needs an aggressive SEC working to protect Americans’ hard earned dollars.

Click here to read CREW’s report, “Reform at the SEC, Fiction or Reality?”

Click here to read a summary of the report’s findings.