Some of my left of centre readers will assume that for-profit educators have been involved in the dirty tricks, but it’s a bit more complex. Sure, there are arguments going on about whether some US for-profit colleges are recruiting homeless people and luring people into large debts, and they’re legitimate issues to explore, but this story is more Machiavellian.

US website ProPublica (”Journalism in the public interest”) explored a recent complaint about for-profit colleges recruiting homeless people from night shelters and so on. While there’s no reason homeless people shouldn’t participate in higher education, it seems pretty obvious to all the people close to the action that a lot of the homeless people don’t study or complete, but do access a lot of federal student loan funds.

Now, the complaint to the Secretary of Education about these activities was signed by a group of 20 night shelter managers around the US. Each of the managers was approached by a private investigator, who wrote the letter. The problem is that the PI was paid for by “an investment firm”, but did not disclose that to any of the night shelter managers, who are now justifiably upset. You might wonder why an investment firm matters in this scenario (don’t they invest in listed firms?). Well, over the last month or two there has been increasing criticism from some fund managers (and Steven Eisman in particular) that for-profit colleges are using dubious practices and are the next sub-prime mortgage disaster. Eisman has even testified in a Senate hearing.

The twist is, of course, that Eisman has invested in the industry and it is reasonably suspected that he is short-selling the big for-profit colleges’ shares (ie predicting that the price will go down). Short selling of these companies’ shares has boomed in recent times as people have picked that the shares are over-valued as increasing regulation looms. What is most interesting about this case is that the short-sellers appear to be getting actively involved in the political debate as well. It certainly makes the NZ situation look tame.

If you want an alternative view on the ProPublica position, read this Reuters blog.