Cuomo investigating whether athletic departments took kickbacks

Updated: August 4, 2007, 4:49 PM ET
Associated Press

ALBANY, N.Y. -- New York attorney general Andrew Cuomo is now investigating whether top college athletic departments nationwide -- including those at Auburn University, Ohio University and Texas Christian University -- steered student-athletes to education lenders in exchange for kickbacks.

Cuomo said Wednesday that he served 39 universities with subpoenas and requests for documents about deals between athletic departments and Student Financial Services Inc., which operates as University Financial Services. He said he's looking at how team names, mascots and colors were used to suggest the company was the college's preferred lender.

"Students trust their university's athletic departments because so much of campus life at Division I schools centers around supporting the home team," said Cuomo. "To betray this trust by promoting loans in exchange for money is a serious issue, especially when Division I schools already generate tremendous revenue from their student-athletes."

Cuomo began the investigation as an outgrowth of his national probe of student loan providers and college administrators, which he said uncovered a pattern of favoritism for lenders who provided kickbacks, "revenue-sharing" plans and trips and other gifts in exchange for designations as recommended lenders. Sometimes the colleges provided campus employees to staff telephone banks for lenders drumming up business.

Cuomo's findings led to state and national reforms.

"Today's action is an important new step as we continue to examine the unethical conflicts that pervade the student loan industry," Cuomo said.

Spokesmen for Auburn, Ohio and TCU didn't immediately respond to requests for comment. The loan company couldn't immediately be reached for comment.

Cuomo said that during his first investigation, he found the athletic director of Dowling College on New York's Long Island entered into a revenue-sharing agreement with University Financial Services that paid the college $75 for every new loan application and exclusive marketing advantages on campus and allowed the lender to use the department's interns to disseminate its brochures.

Dowling ended the relationship with the company as part of its settlement of Cuomo's investigation.

Cuomo's investigation has resulted in settlements and reforms with 12 lenders -- including Nelnet Inc., Citibank, Sallie Mae, JP Morgan Chase and Bank of America -- and several colleges, with $13.7 million in payments made to a national education fund to help high school students and their families more wisely and safely apply for student loans.

Cuomo has said the U.S. Department of Education has had weak oversight of the student loan industry, a view supported Wednesday in a report by the investigative arm of Congress.

The Education Department is supposed to make sure banks that participate in the federal student loan program aren't giving schools or school officials anything of value in exchange for getting business at a particular school.

But the department has not sought out cases of improper conduct, according to the report by the Government Accountability Office. It found the department primarily responds to complaints and doesn't even do a particularly good job of tracking those.

During the past 20 years, the department has only brought cases against two lenders, according to the report. More often, department officials have written letters to lenders asking them to stop acting improperly.

The department recently issued proposed regulations to try to limit abuses by lenders. Those could become effective next year.


Copyright 2007 by The Associated Press