Student loan companies and education department officials have once again come under the federal scrutiny. This time, the lenses are trained on Matteo Fontana, general manager of Financial Partners Services.
In September 2003, Fontana allegedly held stocks worth $100,000 from New Jersey-based CIT Group, a financial services firm and parent company of Student Loan XPress.
At the time, Fontana supervised the government database, which contained confidential information on student borrowers. In the September 2003 Securities and Exchange Commission filing, it was also revealed that Fontana was the department’s primary contact for student loan companies.
The exercise by the Attorney General’s office is part of an intensifying nationwide investigation into the $85 billion student loan industry. Congressional Democrats and state law enforcement officials are increasing their focus on student loan providers and their alleged record-book discrepancies.
The U.S. Department of Education is also investigating Fontana’s involvement in the company. Furthermore, the New York Attorney General Andrew M. Cuomo questioned CIT Group executives about Fontana’s involvement in the company and asked Columbia University to hand over student lending documents.
These documents will be reviewed for incriminating evidence against university employees and officers who have made payments to the Education Lending Group or Student Loan Xpress. DOE’s Office of the General Counsel is “actively reviewing all relevant documents regarding this matter,” said Samara Yudof, an Education Department spokeswoman.
Cuomo’s investigation also revealed that the Education Lending Group’s stocks were owned by the financial aid directors at Columbia University, University of Southern California, and University of Texas at Austin. They were preparing to sell 10,500 shares of company stock, totaling at more than $100,000.
The stocks were held by a trio of college aid officials: Lawrence Burt, Associate Vice President for Student Financial Services at Texas; David Charlow, Executive Director of Financial Aid and Senior Dean of Student Affairs at Columbia; and Catherine Thomas, Associate Dean of Financial Aid at Southern California. They are all members on the advisory board for Student Loan Xpress.
Charlow, who owned at least 7,500 shares at the time of the 2003 sale, has been on leave pending university review.
Insiders allege that CIT offered stock options as a way to compensate board members.
Prior to CIT Group, federal officials also reviewed the lenders such as NelNet, Education Finance Partners, Educap, Sallie Mae, and College Board. Company investigations are still pending.
Federal officials claim that their investigations are necessary in pinpointing five main “questionable practices” among lenders:
- Financial kickbacks from lenders to schools.
- All-expense-paid trips for financial aid officers and families and gifts to school to "curry favor."
- Mutually benefiting tie-ups between the schools and the lenders.
- Lenders secretly acting as school representatives.
- Agreement between lenders to buyout all preferred lenders, leaving students with no options for choosing lenders.
URL: http://www.washingtonpost.com/wp-dyn/content/article/2007/04/05/AR200704050
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