News & Politics

Obama Regs on For-Profit Colleges, Finance, Railroads, and Airlines All Profited His Best Friend

Barack Obama walks down the beach barefoot with shoes in hand with Marty Nesbitt, Obama's friend and campaign treasurer, at Kailua Beach, Hawaii during his vacation on Oahu early Saturday morning, Aug. 9, 2008. (AP Photo/The Honolulu Star-Bulletin, Mike Burley)

President Barack Obama led regulatory attacks on numerous industries during his tenure at the White House. In many cases, his regulations — ostensibly to protect the public good — tanked the stock of various companies, enabling his close friends to swoop in and buy them for pennies on the dollar. Perhaps no figure best represents this “smash and grab” technique better than Marty Nesbitt, now head of the Obama Foundation.

Nesbitt first met Obama back in the 1980s, after playing basketball with Michelle Obama’s brother, Craig Robinson, at Princeton University. While at business school in Chicago, he met Obama playing basketball. When Obama ran for Congress in 2000, Nesbitt served as campaign chairman. He also fundraised for Obama’s state Senate and U.S. Senate campaigns, and served as his campaign chairman in 2008.

Nesbitt’s wife delivered Obama’s two daughters, and his family frequently vacationed with the Obamas in Hawaii or Martha’s Vineyard. Nesbitt became chairman of the Obama Foundation in 2014. The Chicago Tribune has branded Nesbitt “the First Friend.”

Peter Schweizer’s new book “Secret Empires: How the American Political Class Hides Corruption and Enriches Family and Friends” details exactly how Obama’s policies enabled Nesbitt to swoop in and profit after companies felt the regulatory fire of the White House.

Nesbitt even formed a firm called Vistria, aimed to capitalize on “the nexus of the public and private sectors.” He filed for the trademark shortly after Obama’s reelection, and ten days before joining the Obamas for Christmas in Hawaii.

“Obama and his administration would attack industries with government power, which led to substantially lower valuations for these companies. Nesbitt and Vistria, or others close to Obama, could then acquire those assets for pennies on the dollar,” Schweizer explains. Nesbitt followed this pattern in at least four industries targeted by Obama.

In 2013, President Obama turned his ire toward for-profit colleges. He declared that students were being “preyed upon very badly,” and accused these schools of “making out like a bandit.” For all their faults, for-profit schools have their defenders, and Nesbitt himself would later invest in America’s largest one.

The Obama administration began the push in 2011, when the Department of Education (DOE) announced the so-called gainful employment rule, requiring for-profit schools to track job placements for graduates. DOE meetings to craft regulations included Deputy Education Secretary Tony Miller and Secretary Arne Duncan, both of whom would later join Vistria.

The left-leaning Citizens for Responsibility and Ethics in Washington (CREW) sounded the alarm about emails showing that senior DOE officials were communicating with hedge fund investors planning to “short” for-profit stocks based on these rules.

In his second term, Obama’s administration pushed “a broader series of crackdowns on the industry by agencies including the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC), and the Securities and Exchange Commission (SEC).”

The regulatory onslaught hit Apollo Education Group, which operated America’s largest for-profit college, the University of Phoenix, particularly hard. In July 2015, the FTC announced an investigation into Apollo, and in October, the Department of Defense (DOD) put the University of Phoenix on probation.

This DOD attack suspended the University of Phoenix at military bases across the country and cut off the school’s $2-4 billion per year in taxpayer funds. The soldiers, sailors, and Marines attending the school lost their GI Bill benefits, leaving some bereft of housing payments — and some homeless — as a result.

According to Schweizer, about 15 schools committed similar offenses to the University of Phoenix, but the Pentagon only suspended four of them, including this largest school.

Thanks to these attacks, Apollo’s stock price dropped from $11.29 per share in October 2015 to $6.38 by January 2016. The January price represented a 90 percent drop from January 2009 when Obama took office.

The “smash” had been carried out, and it became time for the “grab.” Obama-connected investors swooped in. The Wall Street firm Apollo Global Management (not previously affiliated with Apollo Education Group), another firm called Najafi Companies, and … Marty Nesbitt’s Vistria Group teamed up to buy the company. The purchase required DOE approval, but Vistria’s Paul Miller used to be a senior official there.

Vistria and its partners hired an attorney to lobby the Pentagon, and the suspension was lifted in January 2016.

In December 2016, the Obama administration approved the sale, but the DOE required a few conditions — most notably a signed letter of credit valued at 25 percent of the federal funding the University of Phoenix would receive from student loans and grants. Vistria and its co-investors objected. On December 20, just weeks before Obama left office, the requirement was dropped to 10 percent.

Apollo Global Management, Najafi, and Vistria bought the University of Phoenix for just $10 a share, at $1.14 billion. Before the Obama administration’s regulatory onslaught, the company was worth almost nine times that price.

Tony Miller, who had been the number two official at the DOE, became the chairman of the board. Arne Duncan set up an office at Vistria’s headquarters in Chicago.

“It’s ironic that a former senior official at the Department of Education — an agency that has intentionally targeted and sought to dismantle the for-profit college industry—would now take the reins at the country’s largest for-profit college,” said Rep. Virginia Foxx (R-Va.). Diane Jones, a DOE official under former President George W. Bush, told Schweizer these changing terms were highly unusual.

President Obama’s best friend Marty Nesbitt also jumped into the financial industry after Obama’s regulations brought it to heel.

The president turned his ire against the cash advance industry, which provided short-term loans to individuals and businesses. Many abuses had taken place in the industry, but in 2011 the Federal Deposit Insurance Corporation (FDIC) reported that more than 33 million households were unbanked or underbanked. This industry plays a vital role in the economy.

Even so, under Obama, the DOJ teamed up with the CFPB in December 2012 to target what it deemed to be financial crimes. They formed a new agency, the Financial Fraud Enforcement Task Force (FFETF). The DOJ also launched Operation Choke Point in 2013, targeting banks and the business they do with payday lenders, payment processors, and other financial companies.

In response, banks terminated their accounts with payday lenders. Cash advance firms began to shrink. Regular banks stopped offering cash advances.

Amid this crackdown, however, ForwardLine Financial, a company founded in 2003 to extend alternative financing solutions to small businesses, adapted to the new rules. In October 2015, none other than Obama best friend Marty Nesbitt became FrontLine Financial’s board chairman. Vistria associate Michael Castleforte also joined the board.

Early on, Vistria had hired Obama’s former deputy assistant for legislative affairs, Jon Samuels. Samuels had worked on the Dodd-Frank Financial Reform Act. Fortune magazine noted Samuels’ hiring at the time, reporting that he “doesn’t appear to have any experience working in the financial services industry. Rather, Samuels has made his career in politics.”

As of June 2017, FrontLine boasted that it finances “98% of U.S. businesses that banks consider too small and too risky for a business loan.” Its competitors had been effectively smashed, and it seems FrontLine had been grabbed by Obama’s best friend.

The Obama administration also targeted the railway industry, which had been deregulated back in 1980 by President Jimmy Carter. Roughly thirty years later, Obama sought to tax and regulate the industry.

In its 2012 report to the SEC, Norfolk Southern Railroad noted, “Efforts have been made over the past several years to re-subject the rail industry to increased federal economic regulation, and such efforts are expected to continue in 2013.” The Surface Transportation Board (STB) became a wholly independent federal agency, with widespread control over railroads’ environmental, safety, and security practices.

Mere weeks after President Obama was sworn in for his second term, Norfolk Southern announced that Obama best friend Marty Nesbitt was joining their corporate board. He had no background in railroads or transportation, but his 2015 compensation was $278,937.

Nesbitt took part in at least one other “smash and grab,” Schweizer notes. Just as Obama’s best friend joined the board of Norfolk Southern, American Airlines was facing bankruptcy, and announced a merger with US Airways. The Obama DOJ filed suit to stop the merger.

A whopping sixty-five Democratic congressmen and congresswomen signed a letter in support of American. While the Obama administration backed down from this attack, American Airlines struggled with the Pension Benefit Guaranty Corporation, and the administration launched a federal investigation into price gouging in July 2015.

American Airlines also lobbied the federal government to “shield us from competition and roll back consumer protections.” On October 17, 2015, the merger between American Airlines and US Airways took place. Less than a month later, Obama’s best friend Marty Nesbitt joined the board of directors.

As with Norfolk Southern, Nesbitt had no experience in the airline industry. In 2016, he took home $395,704 as a member of the board for American Airlines.

“Today, as chairman of the Obama Foundation, Marty Nesbitt is, as Politico puts it, ‘the man building Barack Obama’s future.’ From an empire-building perspective, this payback makes sense, given that Obama has already helped Nesbitt build his legacy,” Schweizer concludes.

Schweizer includes many stories of Obama’s “smash and grab” technique. “A circle of investors including Vistria and others linked to Obama would consistently purchase companies in these sectors once their valuations dropped under the government onslaught,” the author writes. Other investors besides Nesbitt cashed in on the financial crackdown, and many more made bank in the energy industry thanks to new regulations.

Nesbitt is far from alone, but as Obama’s friend and the head of the Obama Foundation, his corruption proves particularly egregious. In his powerful book, Schweizer also reveals multiple scandals involving Vice President Joe Biden, Secretary of State John Kerry, leading congressmen, and even — yes — President Donald Trump’s network.

Schweizer deserves immense credit for uncovering these important stories, and PJ Media is privileged to share his groundbreaking work.