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Cuomo Leading on Student Loan Investigation

by: NYBri

Wed Apr 11, 2007 at 12:26:11 PM EDT

In an interview with the AP printed in Newsday, New York AG, Andrew Cuomo, talked about a brewing corruption scandal.

Cuomo's interest grew when he received a complaint from a company trying to break into the student loan business. The complaint was that a few companies seemed to dominate the field and set terms and rates.

"For me it became real when I talked to lenders who couldn't get into the market," Cuomo told The Associated Press Tuesday. "You can be a lender who wants to compete and have a better product, but you just can't get to the students. ... The schools are controlling the access to the students."

More...

NYBri :: Cuomo Leading on Student Loan Investigation

Here's where he's going with it:

Two months after launching the case, Cuomo believes cozy arrangements between colleges and the companies that lend their students billions of dollars are far more widespread than even he anticipated. Cuomo wouldn't divulge where the burgeoning investigation is headed next, including whether more subpoenas are on the way, but said his investigation of the $85 billion industry could lead to criminal charges against high-ranking officials at both lending companies and universities.
--snip--
So far, six schools, including the University of Pennsylvania and New York University, have agreed to reimburse students a total of $3.27 million for inflated loan prices caused by revenue sharing agreements, Cuomo said. The schools will return money to students who took out loans during the time the revenue sharing agreement was in effect. Students will be refunded based on the amount they were loaned.

Look for this to be a BIG DEAL as it breaks, because this corruption hits millions of families right in their pocketbooks.

The interesting aspect of this investigation is that New York and other states seem to be taking the lead. The Feds and the DoJ haven't picked up the ball on this one.

Gee, I wonder why?

The attorney general said he has talked with lawmakers in Washington _ including Sen. Edward Kennedy, D-Mass., who heads the Senate Health, Education, Labor and Pensions Committee, about new legislation to reign in the student loan industry.
"There hasn't been enough supervision," he said. "There hasn't been enough regulation."

Fox guarding the henhouse yet again. Nice work, if you're a fox.

Tags: Andrew Cuomo, Student loan, New York, (All Tags)

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Cuomo Leading on Student Loan Investigation | 4 comments

Something to Chew On (4.00 / 2)

While this interview with Cuomo appeared in Newsday, my sense is that The New York Times has sort of been taking the lead on this story, with education reporter Jonathan Glater putting forth a dozen or more stories on the investigation since mid-January.

As far as the NYS Att'y Gen. taking the lead over other states and the feds, that's really no big surprise, given the vast powers afforded to the State Attorney General under the Martin Act of 1921 (N.Y. Gen. Bus. Law, Article 23-A, § 352) (sorry, no direct link available). While nominally focused on fraudulent practices in respect to stocks, bonds and other securities, the provisions of the statute have always given the AG broad authority to issue investigatory subpoenas for both documents and witnesses for virtually any fraud allegation, with the ability to effectively require compliance under what appear to be self-executing enforcement clauses.

It is because of this power -- unique among all the states, and far exceeding the authority of the federal government in many ways -- that the NYAG can engage in these types of investigations, very often with a successful conclusion (with the companies involved feeling as though they'd been strong-armed into a overly generous settlement). This is what made Spitzer so very effective as AG, but the governor has yet to fully come to grips, it seems, with his significantly more circumscribed powers in his "higher" office.

by: The Maven @ Wed Apr 11, 2007 at 19:40:59 PM UTC

Thanks, Maven (0.00 / 0)

That really explains things I have wondered about for a long time-- like why AG's from less prominent states didn't go after big game to make a name...
And, you are so right about Eliot having role-adjustment issues.

by: robinia @ Wed Apr 11, 2007 at 19:54:23 PM UTC

[ Parent ]

Some of Them Do (4.00 / 2)

It definitely depends on the specific circumstances, but there certainly are times when other states' AGs jump to the fore. A good example would be the tobacco company lawsuits of the mid-1990s, where the lead was taken by Mike Moore of Mississippi and Hubert Humphrey III of Minnesota. The settlements from these suits (in Minnesota's case, a single state, whereas Mississippi took the lead for the multi-state action) far exceeded that achieved by the federal government.

At the time, of course, the NYAG was Dennis Vacco, who always believed that his job was chief prosecutor for the state and thus spent much of his time and resources on going after, for example, internet service providers because their bandwidth was being used to transmit child porn. The state got a $5000 fine out of one company on that one, by the way.

by: The Maven @ Wed Apr 11, 2007 at 20:20:36 PM UTC

[ Parent ]