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Education official put on leave

He owned stock in student loan firm; lending probe grows

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A senior U.S. Education Department official who owned stock in a student loan company while helping oversee the federal lending program was placed on leave Friday, the department said.

The New York attorney general also widened his investigation into the industry, subpoenaing one of the nation's largest lenders to students for a list of all former employees who had worked for the federal department in the past six years.

The moves came a day after the Education Department said it would investigate the shareholdings of the senior official, Matteo Fontana, general manager in a unit of the Office of Federal Student Aid and a department employee since 2002.

A 2003 prospectus for a stock offering filed by the Education Lending Group, the parent company of Student Loan Xpress at the time, showed that Fontana planned to sell 10,500 shares in the company valued at about $100,000.

Fontana's stake in the student loan company has raised questions about a potential conflict of interest, and the department has referred the matter to its inspector general. Senior financial aid officers at Columbia University, the University of Texas at Austin and the University of Southern California also held stock in the company, according to the prospectus. They were also placed on leave this week by their universities.

Margaret Spellings, the education secretary, also asked one of those officials, Lawrence W. Burt, director of student financial aid at the University of Texas at Austin, to resign from a federal advisory committee on student aid, said her spokeswoman, Katherine McLane.

Burt held and sold shares in the parent company of Student Loan Xpress, one of the lenders the university recommends to its students.

With the disclosure that Fontana had been put on leave, Andrew M. Cuomo, the New York attorney general, said he was widening his investigation into the student lending business to see if other federal, state or local public officials had received stock or benefits from Student Loan Xpress or its parent companies.

Cuomo issued subpoenas Friday to Student Loan Xpress and CIT Group, its parent company since 2005, according to John Milgrim, a spokesman.

Milgrim said Cuomo also issued a subpoena to SLM Corp., the giant student lending company known as Sallie Mae, asking for a list of all of its former employees who had worked for the Education Department in the last six years, and for e-mail messages and other communications between those former employees and the company.

Fontana had worked for Sallie Mae from 1994 to 2001.

Tom Joyce, a Sallie Mae spokesman, said he did not know how many other former employees moved to the Education Department. He said the company planned to cooperate with Cuomo.

Rep. George Miller, D-Calif., and chairman of the House Education and Labor Committee, on Friday released a letter he sent to the education secretary seeking information about relationships between lenders and the federal officials who oversee them.

The University of Southern California said Friday that it had struck Student Loan Xpress from a list of lenders that had provided good rates and service to its students.