Friday, April 13, 2007

Education Chief Orders Ethics Check

By Amit R. Paley

Washington Post Staff Writer
Friday, April 13, 2007; A09

U.S. Education Secretary Margaret Spellings has launched reviews of the department's ethics and financial disclosure policies in response to questions raised through far-ranging investigations of the student loan industry, the agency said in a statement last night.

Spellings also asked for the resignation of Ellen Frishberg, director of student financial services at Johns Hopkins University, from a committee that is drafting new student loan regulations for the department.

Frishberg was suspended from her post at Johns Hopkins this week after revelations that she had received at least $65,000 from the private lender Student Loan Xpress for consulting fees and tuition.

The actions by Spellings are part of the fallout from an expanding probe of the $85 billion-a-year student loan industry.

Congressional Democrats and the New York state attorney general have recently stepped up their scrutiny of the complex financial ties among lenders, universities and government officials.

Last week, the Education Department suspended an official, Matteo Fontana, after revelations that he owned at least $100,000 in stock in the parent company of Student Loan Xpress while he helped oversee the student loan industry.

Last night, the department released Fontana's financial disclosure forms filed from 2002 through 2006. In those forms, he disclosed selling more than $100,000 worth of stock in that company, Education Lending Group, in 2004.

Despite that disclosure, Fontana continued to work in the Office of Federal Student Aid as a deputy general manager. Government regulations generally do not allow employees to work on matters involving companies in which they hold more than $15,000 worth of stock.

Spellings has ordered at least two attorneys to review every disclosure form filed this year.

Katherine McLane, an Education Department spokeswoman, said, "The department's ethics office is very clear with employees that the onus is on them to provide full and complete and up-to-date information on their financial holdings."

The matter is under investigation by the agency's inspector general and aides to Sen. Edward M. Kennedy (D-Mass.), education committee chairman.

Kennedy said in a statement last night: "The financial disclosure forms filed by Education Department official Matteo Fontana during his time at the department raise grave concerns about the effectiveness and impartiality of the ethics process at the department. The forms show that department officials were aware that Mr. Fontana held a significant financial interest in a company that he was charged with overseeing. Any American can tell you that this is dead wrong."

Fontana did not respond last night to telephone messages left at his home.

Before he went to the agency in November 2002, Fontana worked for 11 years as a director at Reston-based student loan giant Sallie Mae overseeing information technology staff, the filings show. His financial disclosure forms also indicate that he sold between $1,000 and $15,000 of Education Lending Group stock in December 2002. But the forms do not reveal that he held any shares in 2003. Then they show the larger sale in 2004.

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