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Policy: Labor

Money trail connects watchdog group CREW to the for-profit colleges it defended

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Opinion,Education,Timothy P. Carney,Columnists,Labor unions,Labor,Corruption,Student Loans,House Judiciary Committee,College Tuition,For-Profit Colleges,Gainful Employment

A liberal corruption watchdog group broke with its ideological brethren to defend the for-profit college industry from regulatory assault. Meanwhile, it was apparently receiving money indirectly from a leader in that industry.

Citizens for Responsibility and Ethics in Washington is a liberal nonprofit group founded by Melanie Sloan, a former top Democratic aide to the House Judiciary Committee. CREW rails against Washington corruption, training fire on both parties but tilting decidedly left.

So when the Obama administration and the Left started going after for-profit colleges, it was noteworthy that CREW took the other side. Liberal reporter Mike Elk reported on the odd alliance at the time, and pointed to a potential trail of money connecting the for-profits to CREW. A forthcoming report by the Center for Consumer Freedom has finally connected the dots, suggesting that CREW’s position was fueled by money from Peter Sperling, chairman of the Apollo Education Group, which owns the for-profit University of Phoenix, and his late father John, who founded the school.

Most colleges and universities are either state-run (such as University of Maryland) or nonprofit institutions (such as Johns Hopkins). Recent years have seen a boom in for-profit colleges, which tend to be chains such as Kaplan College and the University of Phoenix.

Labor unions, among other Democrat-aligned special-interest groups, dislike the for-profit colleges, which threaten to disrupt the comfy world of academia. But for-profit colleges hardly have a claim on being capitalist innovators. The industry is largely built around capturing federal subsidies in the form of student aid.

The Obama administration, seeing the leverage they had over the industry, pushed new rules conditioning federal student aid to for-profits on the schools' success in landing students in decent jobs — known as “gainful employment” standards.

There’s a legitimate policy debate to have here: Should taxpayers subsidize colleges — nonprofit or for-profit? Should the colleges’ effectiveness matter? Should job placement be a core measure of that effectiveness? A related question that gets little attention: How nonprofit are the "nonprofits," which look like resorts and rake in enormous tuition payments while paying pitiful wages to their adjunct faculty?

But in Washington, when policy debates involve federal money, the substantive arguments get overwhelmed by machinations of special interests standing to make a buck on either side.

For-profit colleges and their investors lobby against the administration's push to stanch the flow of federal aid. Apollo Education Group hired K Street firms including Skadden, Arps and Elmendorf Ryan to lobby on the issue.

Meanwhile, investment firms had taken a short position on the for-profit companies' stock. They were pushing for the gainful-employment rules. In a 2010 Senate hearing, Democrats even brought in Wall Street short-seller Steve Eisman to testify against the colleges — when Eisman stood to profit from the proposed regulations.

CREW blasted Eisman’s role, rightly pointing out the unsavoriness of the situation. But in defending the for-profits, this liberal group brought scrutiny upon itself. Who was bankrolling CREW’s campaign against Eisman?

The money trail leads to the Sperlings, the family that founded the University of Phoenix.

John Sperling, who passed away Aug. 22, also founded the Aurora Foundation. Tax filings show that the charitable foundation provides almost all funding — $7 million between 2007 and 2012 — for an obscure Las Vegas charity called the Civic Duty Foundation.

The Civic Duty Foundation gave $150,000 to CREW in 2010 and 2011, when CREW was campaigning on the side of the for-profit colleges.

Civic Duty Foundation lists no employees on its tax forms. Its “principal officer,” according to tax forms, is Maria Morales of Sacramento, Calif. Maria Morales is a managing partner at a lobbying firm, JG Associates, run by Jim Gonzalez, a Democratic political operative. Gonzalez was a close associate of the Sperlings.

In 2008, while the Sperlings were trying to pass a renewable energy ballot measure in California, the New York Times wrote that Gonzalez “helped draft the ballot initiative for John G. and Peter Sperling, the father and son who founded the University of Phoenix and are each worth hundreds of millions of dollars.”

The Center for Consumer Freedom’s paper connects these dots and others, suggesting strongly that CREW isn’t above mixing money and policy.

I called and emailed Gonzalez, Morales, CREW, and the University of Phoenix. None responded to me by deadline. The CCF told me they receive no money from anyone involved in the for-profit college debate.

It is worth mentioning that CREW and CCF are mortal enemies. CREW’s “Scandals and Scoundrels” features two smiling head shots of CCF founder Richard Berman, blasting him for his publicity work for the tanning bed and food industries. CCF is funded by the food industry and opposes restrictive government food regulations.

In Washington, both sides often have decent arguments. But both sides also tend to be funded by special interests which stand to get rich off the outcome.

*UPDATE: This column has been updated to include the role of Mike Elk at the American Prospect in first reporting on this connection.

Timothy P. Carney, The Washington Examiner's senior political columnist, can be contacted at tcarney@washingtonexaminer.com. His column appears Sunday and Wednesday on washingtonexaminer.com.
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