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Student Aid Commission Chief Quits : Education: Federal pressure on director of California panel forces his resignation. Action comes after U.S. says state agency had collected millions more than it deserved.

October 12, 1994|J. MICHAEL KENNEDY | TIMES STAFF WRITER

Under pressure from the federal government to step down, the executive director of the embattled California Student Aid Commission resigned Tuesday, saying he was doing so to help restore the little-known state agency's sullied reputation.

The resignation of Samuel M. Kipp III is the latest in a string of developments that has pitted the U.S. Department of Education against the commission, which administers millions of dollars in student loans in the state.

The battle began last year when the federal agency conducted an audit and claimed that the student aid commission had collected millions of dollars more than it deserved from the federal government because it had overstated its portfolio of outstanding loans by $1.5 billion.

The stakes went higher in August when the education department demanded that the commission pay $62.6 million worth of defaulted student loans and that it fire its top administrators because of "unprecedented" mistakes in the handling of student loans over several years. It also ordered that the commission junk its $14-million computer system, described by the education department as "muddled, convoluted and . . . archaic."

At the time, the federal agency said that unless something was done to rectify the situation, the education department "will have no choice but to terminate" its relationship with the commission and find someone else to administer the federally guaranteed student loan program in the state.

Kipp, director of the agency for nine years, submitted his resignation in a letter to Commission Chairman Mike Carona. In it, he said that he wanted "to do everything possible to assure that the commission prevails and successfully resolves its dispute with the Department of Education."

Kipp was referring to a lawsuit filed in September by the state attorney general's office against the education department, contesting the order to pay the $62.6 million. In the lawsuit, the attorney general's office said the commission would suffer irreparable damage if it had to pay that money to the federal government and called the demand "arbitrary and capricious."

In a statement by Carona after accepting the resignation, he praised Kipp for the "myriad accomplishments of the agency under his leadership."

Later, in a telephone interview, Carona said Kipp's resignation fell short of the original demand that all the high-ranking administrators leave the staff. But he said Kipp was clearly a target during the past year.

"It's clear the Department of Education wanted Sam's head," he said. "He also took a lot of hits on the state level."

Sean Walsh, Gov. Pete Wilson's press secretary, said he did not know of any pressure from the governor's office for Kipp to resign.

The resignation brought quick response from Kathleen Brown, Wilson's opponent in the gubernatorial race.

"Like the Energizer bunny, Pete Wilson's financial scandals keep going and going and going," she said. "For more than a year, he has defended his commission and its executive director. This occurred despite . . . the threat of a total federal pullout of our student loan program, jeopardizing billions of dollars of aid to middle-class students."

Walsh said Brown's comments did not merit a response.

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