A for-profit college is suing Florida State College at Jacksonville, its president, and its chief lobbyist for "tortious interference with a business relationship" and "injurious falsehood" in connection with what it says was "a false and misleading campaign in the Florida press and the national media designed to disparage Keiser University and to drive Keiser and other proprietary schools out of business."
The complaint, filed yesterday in Broward County, Florida, names two money managers, Steven Eisman of Frontpoint Financial Services Fund, LP, Greenwich, Conn., and Gilchrist Berg of Water Street Capital, Jacksonville, Fla., as "co-conspirators."
The involvement of short-sellers in the push for increased regulation of for-profit colleges and universities has been the subject of extensive coverage here, but the court complaint lays out new details about the way that the government-backed colleges — the complaint terms Florida State College at Jacksonville "a state-funded direct competitor of Keiser University" — worked hand in hand with short-sellers.
"Keiser suffered special damages as a result of Defendants' negative media campaign in the form of, among other things, decreases in expected enrollment, increased costs of doing business, and decreased business valuation," the complaint claims.
The complaint says the president of Florida State College at Jacksonville, Steven Wallace, sent Mr. Berg, described as "a prominent Jacksonville short-seller" an e-mail "with information to use against the proprietary schools."
The complaint also cites an email from the top lobbyist for Florida State College at Jacksonville, Susan Lehr, that "personally insulted Dr. and Mrs. Keiser, Keiser University officials. Ms. Lehr called Mrs. Keiser "very arrogant like him. I guess that is what happens to you when you 'earn' $20 million a year and own 5 jets."
The suit says that Ms. Lehr was "trading information with Eisman" who "stood to profit if the value of proprietary schools declined."
And it says that Ms. Lehr promoted an Eisman speech critical of for-profit colleges in advance and "tailored a Florida State College press release to Eisman's message."
Says the complaint: "In May 2010, short seller Steve Eisman gave a speech called 'subprime goes to college' that predicted for-profit stocks would continue to fall. The speech also helped ensure that they would."
The suit was first reported yesterday by the Florida Times-Union.
We have calls in to Florida State College for their response and will post it when we receive it; they had no comment to the Times-Union, saying that they had not yet had a chance to review the complaint.