The WSJ joins forces with short-seller demonizers

By Felix Salmon
January 26, 2011

Back in October, Mike Elk dug into the weird way in which various well-regarded liberal activists, including Tom Matzzie, Lanny Davis, and CREW, were suddenly campaigning aggressively alongside the for-profit education industry. Unsurprisingly, there was money involved, and a lot of it seems to have flowed from John Sperling, the chair of the Apollo Group, which owns the University of Phoenix, and is a major funder of progressive organizations.

Tim Fernholz followed up with some very pointed questions for CREW in particular, which had been aggressively filing FOIA requests seemingly aimed at revealing what everybody already knew, which is that hedge fund managers who were short the for-profit education sector had been talking to the government about what they had discovered:

Here are important questions that CREW has refused to answer:

* Is the for-profit higher education industry, including John Sperling, funding their organization?

* Why have they gotten involved in this specific regulatory dispute and no others?

* Why did they not consult experts on education policy or short-selling before complaining to the Senate and filing FOIA requests?

* What are the connections between CREW Executive Director Melanie Sloan and Julian Epstein, president of the LawMedia Group, a lobbying firm specializing in astroturfing that is working on behalf of for-profit colleges?

Now, the results of the FOIA requests have been made available to the WSJ, which devotes three bylines and 2,000 words to their entirely un-newsworthy contents. What the WSJ doesn’t do is even attempt to ask any of Fernholz’s questions, let alone answer them. CREW is presented as an entirely unconflicted organization:

A group called Citizens for Responsibility and Ethics in Washington, or CREW, wrote to Education Secretary Arne Duncan last week that “certain hedge fund managers had direct and sustained input into the regulatory process.”

In what the group called “more troubling,” it said Education Department officials sought and received investors’ input despite knowing their financial motives, and asked for an investigation…

Investors were on the scene as well. Their efforts are revealed in large caches of documents and emails reviewed by the Journal, many of which surfaced as a result of a freedom-of-information suits filed by CREW, the Washington watchdog, and of legal action by a Florida for-profit college.

One investor, a New York firm called Quilcap Corp., sent a research article to an Education Department official, the emails show.

It goes on from there — but the fact that the WSJ’s list of revelations is topped by an emailed research article says all that you need to know. The only reason the WSJ is covering this story at all seems to be that the information was not public before — but just because something was secret doesn’t make it newsworthy.

The fact that the WSJ is covering a non-story is no big deal. Much worse is the fact that the real story — the corruption of liberal organizations — was right under their nose, and sitting in plain sight in any Google search, yet they completely ignored it. It seems that even the WSJ is much happier gratuitously participating in the demonization of short-sellers than in impartial coverage of the debate over for-profit colleges.

Update: I’m told this story was being shopped around various media outlets by Lanny Davis, who has very close connections to CREW, and who represents the Coalition for Education Success, a trade association of for-profit colleges. If the story did indeed come from Davis, which seems likely, there should have been a lot more disclosure.

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