A coalition representing some of the nation’s for-profit colleges sued the Government Accountability Office on Wednesday for alleged professional malpractice and negligence in its investigation of so-called career colleges.
The lawsuit—Coalition for Educational Success v. U.S.—was filed under the Federal Tort Claims Act in Washington federal court on behalf of the Chicago-based coalition by Paul Smith, a partner at Jenner & Block. It charges that the GAO “issued a negligently written, biased and distorted report that foreseeably caused substantial financial injury” to the coalition.
Last June, the Senate Health, Education, Labor and Pension Committee, chaired by Sen. Tom Harkin (D-Iowa), began a series of hearings to examine federal education spending at career colleges, such as Strayer University and ITT Technical Institute. In preparation for the hearings, Harkin, a critic of career colleges, asked the GAO to conduct an undercover investigation to determine if career college representatives engaged in fraudulent, deceptive, or otherwise questionable marketing practices.
The GAO sent individuals posing as applicants to 15 career colleges in six states and Washington, D.C. In August, the government auditor released a highly critical report, stating that four of the career colleges engaged in fraudulent practices and that all 15 colleges made deceptive or otherwise questionable statements. The August report was submitted as testimony to the Senate committee. But in November, the GAO issued a revised report and testimony that corrected findings for 13 of the 15 colleges.
The revised report has triggered an inquiry into the GAO’s forensic audit and special investigations unit by House Oversight and Government Reform Chairman Darrell Issa, R-Calif.
“We have a theory that the [GAO] has certain basic, nondiscretionary standards that it is supposed to follow,” said Smith. The August report, he said, “was so clearly not an unbiased effort to find out the truth. Essentially the answer was predetermined.”
The lawsuit states that in the days following the August report’s release, the market capitalization of the publicly traded organizations that own and operate career colleges dropped nearly $4.4 billion—or about 14%. “In addition, to combat the factual inaccuracies and biased conclusions contained in the GAO’s report, the Coalition was forced to incur substantial additional costs and expenses to advocate for its numerous career college members and to set the record straight,” the complaint says. “The Coalition’s damages continue to accrue because the GAO refuses to withdraw its reports and conclusions.”
GAO spokesman Charles Young said, “The bottom line remains that a GAO review team independent from the investigators who did this work examined the report and found no material flaws in the evidentiary support for the overall message of the testimony and consequently our findings did not change. We continue to stand by the overall message of this report."
The coalition and the Association of Private Sector Colleges and Universities also are engaged in a battle with the Department of Education over new regulations governing federal student financial aid to career colleges. The association, represented by Douglas Cox, a partner at Gibson, Dunn & Crutcher, challenged those regulations on Jan. 21 in a suit against the department in Washington federal court. (Career College Association v. Duncan).