Chairman Miller Requests Information from Department of Education

April 6, 2007
Blog
The New York Times reported today that:

A senior official at the federal Education Department sold more than $100,000 in shares in a student loan company even as he was helping oversee lenders in the federal student loan program.

The official, Matteo Fontana, now general manager in a unit of the Office of Federal Student Aid, was identified yesterday from government documents as a stakeholder in the parent company of Student Loan Xpress who sold shares in 2003.

His involvement with the company emerged a day after a widening investigation into the student loan industry revealed that three senior financial aid officials at Columbia University, the University of Texas at Austin and the University of Southern California had also sold shares at the same time.

Rep. George Miller (D-CA), chairman of the House Education and Labor Committee, requested information from the Department of Education on the reports saying, "we want to make sure that taxpayers, students and their families are being served in their best interests by the Department of Education and not through cronyism."

The full letter to Secretary Spellings:

April 6, 2007

VIA FACSIMILE

The Honorable Margaret Spellings

Secretary of Education

U.S. Department of Education

400 Maryland Avenue, SW, Rm. 7W301

Washington, DC 20202

Dear Secretary Spellings:

I am writing in regard to the recent reports that at least one senior member of the Office of Federal Student Aid (FSA) held a significant amount of stock in the parent company of Student Loan Xpress, CIT Group. Recent news reports have revealed that Mr. Matteo Fontana, General Manager in FSA, sold 10,500 shares in this company in 2003 while holding an influential position in your Department.

This revelation follows other disturbing findings of improper relationships between lenders in the Federal Family Educational Loan Program (FFEL), those responsible for providing assistance to borrowers in obtaining loans, and government officials. Following reports of the sale of $18 million of stock owned by Al Lord, the chairman of Sallie Mae (SLM Corp.), just days prior to the public announcement of significant student lender cuts in the President's FY 2008 budget, I, along with Chairman Barney Frank, asked you, the White House, and Mr. Lord to disclose the details of the relationship between the government and Sallie Mae leading up to the stock sale. Additionally, just a few weeks ago, I sent letters to five lenders asking them to provide extensive information about their relationships with schools' financial aid offices and information on lender advisory panels or boards on which school officials serve.

Given the recent news reports regarding your Department and Mr. Fontana, I seek additional information about the Department of Education's involvement in these relationships, including those of key staff members. Specifically, I ask that you provide information about any relationship between senior FSA and other officials who are responsible for overseeing the multi-billion dollar Federal investment in FFEL and participating lenders. Please also disclose the steps that you take to ensure the absence of actual conflicts of interest, or the appearance of such conflicts, between your employees and lenders participating in the FFEL program, as well as any confirmed violations of Department ethics rules. Please provide me with relevant documents, including copies of written correspondence, e-mails, meeting minutes, notes, Department guidance concerning its code of ethics, and Office of Inspector General reports.

As a member of Congress and Chairman of the Committee with oversight of this issue, I respectfully request your written response within 10 days of receiving this letter. I further ask that you direct your staff to coordinate the production of the requested information with Michael Zola, Chief Investigative Counsel, House Education and Labor Committee at (202) XXX-XXXX.

Sincerely,

GEORGE MILLER

Chairman

CC: Senior Republican Member Howard P. "Buck" McKeon

Barney Frank, Member of Congress