A for-profit college lobbying group has filed a federal lawsuit against the U.S. government, alleging negligence and malpractice in an investigation the U.S. Government Accountability Office conducted last year.

The suit is the latest effort by the Coalition for Educational Success to discredit a scathing GAO report about the schools' recruiting tactics, a report it argues has left a blemish on the sector's reputation.

The agency last summer conducted an investigation of 15 for-profit schools, saying in an Aug. 4 report to the U.S. Senate Health, Education, Labor and Pensions Committee that representatives at all 15 campuses provided misleading or fraudulent information to undercover agents that posed as prospective students. The GAO then amended the report in late November, correcting and softening a number of examples of recruiters' deceptive practices.

The Coalition--created shortly after the release of the first GAO report--is seeking financial damages from the U.S. government, alleging the initial investigation and the revised report were "erroneous and completely biased," according to the complaint. The group said the fallout from the report has been "explosive."

The GAO found what it said were problematic recruiting tactics at campuses owned by Education Management Corp. (EDMC), Apollo Group Inc. (APOL), Corinthian Colleges Inc. (COCO) and Washington Post Co.'s (WPO) Kaplan Higher Education, as well as at privately held school companies. Education Management and ITT Educational Services Inc. (ESI), not named in the report, are Coalition members.

Shares of for-profit colleges plummeted in the wake of the August release, with those whose schools were named falling between 11.2% and 18.4% in the following week. The schools' stocks have continued to slip and slide in recent months as investors prepare for tighter oversight from the U.S. Department of Education.

The initial GAO report fueled harsh criticism of the for-profit college sector, spurring a Senate HELP Committee request for reams of data from 30 for-profit schools and bolstering the Education Department's argument for increased industry regulation.

The Coalition alleged in its complaint that its schools have incurred "substantial costs and expenses" to respond to the report.

The Coalition isn't the only group questioning the report's findings, even in its amended state. In late December, six members of the U.S. House of Representatives--including Rep. Darrell Issa (R., Calif.), head of the House Committee on Oversight and Government Reform, and John Kline (R., Minn.,), chairman of the House Education and the Workforce Committee--asked the GAO for clarification on the agency's methodology. Sen. Mike Enzi (R., Wy.), ranking member of the Senate Committee on Health, Education, Labor and Pensions, issued a similar letter Dec. 7.

GAO spokesman Chuck Young said the agency met with members of Congress "and briefed them on the issue."

Nine members of Congress sent another letter, dated Jan. 29, to Acting U.S. Comptroller General Gene Dodaro to emphasize their concern about the report. The GAO is "preparing a response," Young said.

Meanwhile, the Coalition in December filed a lawsuit against the Education Department, alleging it wrongfully withheld records related to the GAO report and evidence of contact with short-sellers as that agency prepared new industry rules.

-By Melissa Korn, Dow Jones Newswires; 212-416-2271; melissa.korn@dowjones.com
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