The liberal lawmaker sent DeVos a letter this week requesting information about Eitel’s involvement in the suspension of two rules designed to protect students from predatory for-profit colleges, known as borrower defense to repayment and gainful employment. Warren said she wants to determine whether Eitel violated conflict-of-interest laws by working for the department while being employed by Bridgepoint.
Eitel was unavailable for comment. Education Department spokeswoman Liz Hill said he followed ethics rules and did nothing wrong.
Eitel took unpaid leave from Bridgepoint for several weeks to advise DeVos, before she appointed him as her senior counselor in April. Warren questions whether Eitel helped his employer in March by encouraging the department to extend the deadline for vocational programs to submit appeals and disclosures under the gainful rule–a regulation that threatens to withhold federal financial aid from career-training programs whose graduates are unable to earn enough to repay their student loans.
“If Eitel provided any advice…that affects the financial interest of Bridgepoint–between February 13, 2017, and April 5, 2017, and did so without receiving any relevant waiver, then it appears that Eitel may have violated the criminal conflict-of-interest statute,” Warren wrote. She is a member of the Senate Committee on Health, Education, Labor and Pensions.
Department spokeswoman Hill said Warren’s allegations were not only “outrageous but also defamatory.” She said Eitel, like most other members of any transition team, took a leave of absence from Bridgepoint and then resigned from the company once he was formally appointed.
“There is absolutely nothing untoward about that process,” Hill said. “Bob met with the department’s ethics officer. During that conversation it was decided that Bob would recuse himself from working on any particular matters related to his former employer, including existing borrower defense claims filed by Bridgepoint students.”
But Warren took issue with Eitel being involved with any aspect related to borrower defense–a statute that discharges the federal education loans of students defrauded by their colleges. Agency ethics official Marcella Goodridge-Keller wrote Warren in June saying that there was no conflict of interest in Eitel reviewing and rewriting the regulation.
“Given this information and the department’s failure to require his recusal, it appears highly likely that Mr. Eitel was involved in the implementation and delay of the borrower defense rule before April 5, when he was still employed at Bridgepoint,” wrote Warren.
Bridgepoint, like other for-profit college operators, has said its business could suffer under the borrower defense and gainful rules. In a November 2016 regulatory filing, the company said the defense rule would “expand the circumstances in which students may assert a defense to repayment against an institution…that could result in the imposition of significant restrictions on us and our ability to operate.” And in March, Bridgepoint told investors the rule “could damage our reputation in the industry and have a material adverse effect on enrollments and our revenues, financial conditions, cash flow and results of operations.”
From the outset, Bridgepoint has insisted that Eitel had no input on company business and no work-related communications with employees while he was on leave or after he left the company in April.
Eitel worked at Bridgepoint, owner of Ashford University and the University of the Rockies, when the company agreed to a $32 million settlement with the Consumer Financial Protection Bureau. The watchdog agency made the company refund and discharge $24 million in debt that students accumulated through an in-house loan program that allegedly misled borrowers about the total cost of the loans.
In February, the Education Department’s inspector general determined that Bridgepoint owes the department a $300,000 fine for miscalculating the refund of federal aid provided to Ashford students, according to a regulatory filing. The company can appeal the inspector general’s audit directly to DeVos, but department officials said Eitel will have no role in the matter since he has recused himself from anything related to the company.