Higher Ed | Daily Report

cliff1066/FlickrKeiser University Chancellor/CEO Arthur Keiser

A lawsuit filed this week by a for-profit college in Florida accuses a nearby public college of conspiring with outside groups, including the Institute for College Access and Success in Oakland, to sully the for-profit's image and harm its business.

Fort Lauderdale-based Keiser University, a privately held proprietary college, filed suit on Monday against Florida State College at Jacksonville and two of its top officials, President Steven Wallace and Vice President of Government Relations Susan Lehr, the Florida Times-Union reported.

The complaint claims that Wallace and Lehr "disseminated false information" about proprietary schools, including Keiser, by working through advocacy groups and short-sellers who benefit when stocks of publicly traded for-profits drop in value.

Keiser did not actually sue these advocates and short-sellers as defendants in the lawsuit, but listed them as "co-conspirators," including Pauline Abernathy, vice president of the Institute for College Access and Success, Steven Eisman, portfolio manager at FrontPoint Financial Services Fund and others.

The suit comes amid increasing attention to the for-profit industry, in part due to its growing share of federal financial aid dollars. The federal government has proposed regulations that aim to protect students from debt they cannot repay by requiring for-profit institutions to better prepare students for "gainful employment" or risk losing access to federal student aid.

The lawsuit points to e-mails exchanged among Wallace, Lehr and the so-called co-conspirators that Keiser says show a "destructive media campaign designed to disparage the education opportunities provided by proprietary schools, including Keiser University, and to drive those schools out of business."

Keiser alleges that the negative publicity "directly harmed" it, causing it to have "a substantially decreased business valuation" and significantly fewer students enrolled than expected. The college also says its efforts to partner with clinical sites for health care programs and to participate in outreach programs in Florida high schools have been damaged.

As for the specific claims involving the Oakland organization, Keiser claims it has e-mails showing that Lehr, Abernathy and others were trading information with Eisman, an investor and outspoken critic of for-profit schools who bets against shares of proprietary education companies. A spokesman for Keiser did not provide those e-mails on Tuesday.

The lawsuit also alleges that the message spread by the college was "in concert and consistent with" the message disseminated by advocates such as the Institute for College Access and Success.

The appendices to the lawsuit include one e-mail exchange involving Abernathy and other institute staffers in April of this year. In the e-mail, Abernathy congratulates Lehr on helping to defeat a bill in the Florida legislature that would have given for-profits matching grants from state revenues for scholarships. Abernathy also discusses the possible inaccuracy of a report by Credit Suisse on the U.S. Department of Education's proposed regulations on the for-profit industry. Abernathy writes:

Congratulations Susan on the victory in FL! I have been assured that the Credit Suisse description of the regulation is not accurate, but I dont [sic] know that it is in our best interest to share that.

A spokesperson for the Institute for College Access and Success said Tuesday the organization is not ready to comment on the lawsuit. But here's the statement Florida State College at Jacksonville gave Tuesday to the Florida Times-Union:

The suit is absurd. We are not concerned in the slightest because we have done nothing improper. We are simply trying to protect our local college students from excessive debt. We will continue to do so on behalf of our community and will defend the college vigorously in court.