New York investigators probing possible wrongdoing in the college loan industry are exploring whether USC's financial aid director had improper business ties to a lender that her office has recommended to students.
A letter sent Wednesday by the office of New York state Atty. Gen. Andrew M. Cuomo to the university said it was looking into whether Catherine Thomas, a USC associate dean and financial aid director, "engaged in deceptive practices or other illegal conduct in connection with her dealings with Student Loan Xpress Inc."
The development reflected a broadening of Cuomo's investigation into how financial companies in the $85-billion-a-year college loan industry win their business from universities. It also came the same week that a group of universities accused of taking improper payments from lenders reached an agreement with Cuomo requiring them to pay back $3.27 million to students.
According to New York officials, authorities are reviewing whether Thomas improperly received 1,500 shares of stock in Educational Lending Group, the former parent company of Student Loan Xpress.
The letter from Cuomo's office stated that New York officials "are deeply concerned" that Thomas may have received the shares in exchange for placing Student Loan Xpress on the university's preferred lender lists or to influence her to place the company on the lists.
"Students may therefore have been left with the false impression that the company was preferred because it was best for students, when in reality the company was selected because of its stock grants to Ms. Thomas," the letter said.
James Grant, a USC spokesman, said the university has not taken any disciplinary action against Thomas after receiving the letter by fax and that the 15-year university employee, a longtime college financial aid specialist, was at work Wednesday. He declined to comment beyond offering a prepared statement that said, "We have just received a copy of the attorney general's letter and will now review the information in the letter and respond."
Thomas and her immediate superiors referred all requests for comment to Grant.
The New York attorney general's office said Thomas and a partner sold the 1,500 shares in September 2003 for about $14,250, or $9.50 a share. It was not indicated how much Thomas paid for her shares, but one official noted that another higher education administrator involved in the same Cuomo investigation -- David Charlow, a senior associate dean at Columbia University in New York -- is believed to have acquired his securities for as little as $1 a share.
