USC says financial aid probe is limited
USC said Friday that an investigation of its financial aid office appears to be isolated to one administrator with business ties to a lender, but the New York authorities conducting the probe stopped short of describing it in such narrow terms.
At the same time, California Atty. Gen. Jerry Brown’s office said it also is “looking into” possible improprieties in the college financial aid market. A spokesman said he could not elaborate on the target or scope of Brown’s examination.
New York Atty. Gen. Andrew Cuomo’s office is investigating USC financial aid director Catherine Thomas’ acquisition of stock in the then-parent company of Student Loan Xpress Inc., which has been one of the school’s preferred lenders.
The transaction has come under scrutiny as part of a much broader investigation of the $85-billion-a-year financial aid industry. Cuomo’s office is trying to determine if school administrators received kickbacks for steering students to certain lenders.
Administrators at Columbia University in New York, the University of Texas at Austin and the U.S. Department of Education have become caught up in the inquiry.
Cuomo’s office obtained subpoenas Friday for Student Loan Xpress and its current owner, CIT Group, seeking any material about stock or gifts the companies gave to government officials.
In an e-mail, a CIT spokesman said it would “continue to cooperate fully with the attorney general’s office.”
New York subpoenas also were issued for lender Sallie Mae, as SLM Corp. is known, for information on any employees who worked both for the company and the education department during the last six years.
Matteo Fontana, an education department official who oversaw college lenders, owned at least $100,000 worth of stock in Education Lending Group Inc., the same firm in which USC’s Thomas held shares.
Higher Ed Watch, part of the nonprofit New America Foundation, disclosed Fontana’s stock ownership. Fontana, who once worked for Sallie Mae, has been placed on paid leave.
Thomas, an associate dean, also has been placed on paid leave, and USC has launched its own review of her actions and the financial aid office’s operations. USC has removed Student Loan Xpress from its list of lenders.
In a memorandum Friday to students, faculty and staff, USC Vice Provost Jerome A. Lucido said “the case appears to be isolated to a single individual who may have violated our policies.”
Lucido also said Thomas’ business dealings with Student Loan Xpress resulted in “no adverse financial consequences for our students and their families.”
A USC spokesman said Lucido and other administrators were not available for interviews. Thomas could not be reached.
Cuomo spokesman Arthur Harris said it was too early to conclude that the investigation of Thomas would not reach deeper into USC, although he gave no indication that it would.
According to Cuomo’s office, Thomas sold her Education Lending Group stock in 2003 for about $14,250, or $9.50 a share.
It could not be determined how much Thomas paid for the stock, if anything. Another college administrator in the Cuomo investigation -- David Charlow, a senior associate dean at Columbia -- is believed to have purchased his securities for as little as $1 a share, officials say.
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The Associated Press contributed to this report.
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