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UT Financial Aid Director Expelled

(University of Texas)
Little illustrates the cozy relationship between college loan providers and some student financial aid officers better than the correspondence between Student Loan Xpress (SLX) President Fabrizio Balestri and University of Texas Financial Aid Director Larry Burt.

Monday, in announcing it had fired Burt for violating the school's standard of conduct, the university released a trove of e-mails and documents that serve as a symbol of impropriety.

The e-mails, from a 134-page report, show Burt referred to Balestri as "Breeze," who made fun of Burt and his "meager salary."

"I used to be able to earn outside the office," Burt writes in a lively July 2000 exchange about the men playing golf together on Balestri's dime. "About the only benie [benefit] is that while I may not golf well, at least I always golf for free." Burt's teenage son was to join their next outing. "Great kid," Breeze wrote. "I can't wait until he's legal, so I can mentor him on the finer things on life."

The six-week UT internal probe found that Balestri underwrote part of a trip they and their wives took together to Paris. In March, when we first reported that investigators on Capitol Hill and in New York Attorney General Andrew Cuomo's office were checking on Burt's 2005 vacation, he insisted to CBS News that he paid for it himself and sent us copies of receipts showing he used American Airlines frequent flier miles to buy plane tickets for himself and his wife. It turns out, however, Balestri covered the cost of Burt's hotel room using Marriott hotel "points," according to the UT report.

More troubling to UT was the red flag that drew investigative suspicion to Burt in the first place – a 2003 Securities and Exchange Commission filing listing him as an owner of stock in Education Lending Group, company that was a precursor to SLX. Letters from EDLG in the UT report reveal Burt was given his 1,000 shares as a gift, with an option to buy 500 more shares for $1 each. When he sold in 2005, Burt netted a profit of $18,050, according to the UT report, a bit more than he previously admitted.

"Dr. Burt owned stock in one publicly-held lender. It is not clear whether he paid fair value for it, but he was afforded a benefit in having the unique opportunity to acquire the stock in a private transaction," the UT report found. "Given the totality of circumstances, Dr. Burt's acceptance of the stock, as well as his acquisition of additional stock in the company on the open market, constituted a violation of UT System and UT-Austin standards of conduct."

"In addition," the report continued, "Dr. Burt's failure to disclose his holdings at a time during which he was making decisions concerning that lender compounded the conflict and the appearance of impropriety." Three months after acquiring the 1,500 shares, in 2003, Burt added SLX to the school's lender list. Instead of liquidating his investment or recusing himself from decisions involving the lender, Burt placed SLX at the top for five years.

Overall, UT's probe faulted Burt for monopolizing the decision-making power over which lenders would be listed for students and families seeking financial aid, a $300 million annual money flow at UT. "The decision-making process was opaque, and the criteria used did not place primary emphasis on students' interests," the UT report found.

Student Loan Xpress, a subsidiary of financial services giant CIT, last week paid the highest fine to date, $3 million, of the major lenders to have settled with Cuomo's office and agreed to a new code of conduct which bars lenders from sharing revenue from student loans as a payback for steering loans their way. (The lender, which has suspended Balestri and two other executives, is under scrutiny for its relationships with and stock awards to other school financial aid directors).

The nation's four largest student lenders – Sallie Mae, Citibank, Bank of America, and JP Morgan Chase – as well fast-growing lender Education Finance Partners have also settled with Cuomo. Their fines will go to a new fund to educate families about borrowing for college. Two other major lenders remain under investigation in New York – Nelnet and EduCapp. Cuomo is now probing whether Nebraska-based Nelnet made payments to college alumni associations for steering graduates to Nelnet in order to consolidate their school debts.