An ED spokesman said officials there have never shared private information with traders.

“We’re very proud of the integrity of our process and feel we produced a regulation that gives students and taxpayers the protection they deserve,” agency spokesman Justin Hamilton told the New York Times. “We talked to as many people as possible when developing the regulations, including several officials from publicly traded for-profit colleges.” (ED failed to respond to an eCampus News reporter’s questions before press time.)

There has been no evidence that Eisman traded based on any inside information, but Eisman was one of several investors who lobbied for tougher restrictions on for-profit colleges.

POGO recently raised suspicions about Wall Street’s influence over the department after obtaining several eMail exchanges between agency officials and hedge fund traders that discussed the looming for-profit college regulations.

In his letter to Duncan, Grassley cited an eMail message from Eisman to an ED official that allegedly discussed education stocks. “I know you cannot respond,” the message reportedly said, “But just fyi. Education stocks are running [going up] because people are hearing [ED] is backing down on gainful employment.”

Grassley acknowledged that government officials can’t prevent such contact, but he said it was highly concerning that the eMail message was forwarded to other high-level ED employees. He also expressed surprise that Eisman was on such familiar terms with the official.

“Certain investors contact government agencies to try to gain any advantage they can over other investors,” Grassley said in a statement. “Since that’s inevitable, the question is how federal employees respond. Do federal employees give out information that short sellers can use to make money? Are the employees influenced in their rule-making by investors who don’t disclose their financial interests?”

He added, “The Department of Education should account for how it handled investor contacts leading up to the regulations affecting for-profit colleges and going forward. An accounting is necessary to establish confidence in the integrity of government management.”

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