Senator Eliot Shapleigh - El Paso, Texas

A 33-page report released Monday by the UT System's general counsel said Lawrence Burt, associate vice president and director of UT-Austin's Office of Student Financial Services, should have disclosed his ownership of stock in the parent company of Student Loan Xpress Inc. and recused himself from decisions concerning the lender.

The report also found that UT-Austin's procedure for deciding which lenders to recommend to students was opaque, subjective and heavily dominated by Burt, with no oversight from anyone above him. What's more, the report said, top managers in the aid office were almost completely unaware of basic ethics and conflict-of-interest principles, allowing the office to rate lenders by how generous they were in providing cookies, birthday cakes, candy bars, happy hours, barbecue and other treats to office employees.

"Restoring the credibility of our Office of Student Financial Services is paramount," said UT-Austin President William Powers Jr. He said he approved a recommendation by Juan González, vice president of student affairs, who supervised Burt, to dismiss him after consultation with UT System Chancellor Mark Yudof. González declined to comment on his supervision of Burt.

Powers named Charles Sorber — a former senior administrator for the UT System, former president of UT-Permian Basin and former interim president of UT-Arlington — to lead the financial aid office for an interim period beginning May 29.

Burt, whose annual salary was $145,880, could not be reached for comment. His lawyer, Dirk Jordan, said, "We think his termination is unfair and uncalled for. We're looking at the options. I don't know that there's any appeal in the UT System. Usually when the top makes their decision, there's not much appeal there."

The sharply critical report comes at a time when the New York attorney general's office and Congress are examining the $85 billion student loan industry and its ties to college financial aid offices. The U.S. House approved legislation last week intended to cut down on conflicts of interest, and a Texas Senate subcommittee is working on a similar measure.

UT System Vice Chancellor and General Counsel Barry Burgdorf, testifying Monday before the Senate panel, said he found no evidence that lenders shared loan proceeds with the Austin aid office, a practice at some schools.

Burgdorf said he also did not detect any inducements, such as cash payments, by lenders to the Austin campus in an effort to keep the school from participating in the federal direct loan program, which allows students to borrow from the U.S. Department of Education instead of from private lenders backed by the federal government. UT-Austin does not participate in the direct loan program, but Burgdorf's report recommended that the aid office take a fresh look at whether it might be a worthwhile option for some students.

Burgdorf said in an interview that it's difficult to say whether any students were harmed by what he called "poor management around the lender list issue." Loan terms, borrower benefits and other matters vary from lender to lender, he said.

"The harm is the loss of confidence in the system, the mechanism by which people finance their college education," Burgdorf said. "That's the real harm."

Burgdorf said the Texas attorney general's office and the Travis County district attorney's office had inquired about his review. Paco Felici, a spokesman for the state office, said it does not confirm investigations. Gregg Cox, assistant district attorney and director of the Public Integrity Unit, said, "We'll need a few days at least to go through everything and make any determinations as to whether it warrants further involvement on our part."

The report revealed new details concerning Burt's stock holdings in Education Lending Group Inc., the former parent company of Student Loan Xpress. Burt owned 2,300 shares in Education Lending Group, including 800 acquired in a predecessor company through a transaction in 2001 involving his retirement account.

He acquired 1,000 shares and the rights to 500 more later that year, and it's not clear whether he paid fair value for them, the report said. He realized a profit of about $18,050 on the sale of those 1,500 shares in 2005.

The investigation did not reveal direct evidence that Burt was able to acquire the 1,500 shares in exchange for including Student Loan Xpress on the list of recommended lenders.

"Nevertheless, the timing of the transaction . . . raises suspicion and, at least, creates the appearance of impropriety," the report said, adding that Burt violated UT-Austin's code of conduct as well as UT System regents' rules.

The report cited e-mails as further evidence of Burt's "inappropriate relationship" with lenders, including one in which he boasted to a representative of Collegiate Funding Services, a preferred lender, that "I did a billboard for you" by wearing the lender's shirt for an on-camera interview with Fox News about the dangers of credit cards.

What investigators said:

Findings from the University of Texas System's investigation of the UT-Austin financial aid office and its now-dismissed director, Lawrence Burt, include:

• Top managers in the office had 'an almost complete lack of awareness' of basic ethics and conflict-of-interest principles.
  

• Burt violated UT-Austin's standards of conduct and UT System regents' rules by acquiring shares in Education Lending Group Inc. through a private transaction and listing its Student Loan Xpress Inc. unit as a preferred student lender.
  

• Burt's friendship with Fabrizio Balestri and other Student Loan Xpress officials created an 'appearance of impropriety,' such as when Balestri loaned Marriott hotel points to Burt to pay for Burt's room when they were in Paris together.
  

• Decisions on lender lists were subjective and 'inappropriately concentrated' in one person, Burt, with no oversight from anyone above him at the university.
  

• Student Loan Xpress occupied the first position on every lender list that investigators examined for a five-year period except one, where it was the 11th lender listed.
  

• Candy bars, birthday cakes, happy hours, barbecue and other treats provided by lenders to aid office employees were tracked and apparently considered in deciding whether to include lenders on preferred lender lists.
  

• Burt had an 'inappropriate relationship' with Collegiate Funding Services, a preferred lender, including wearing the lender's shirt for an on-camera interview with Fox News.
  

• No evidence was found that lenders shared loan revenue with the aid office, that key office functions were being given to lenders or that there was inappropriate co-branding with lenders.
  

• •No ethical violations were found concerning unpaid service by Burt and other employees on student loan company advisory committees.

Source: UT System special investigative report (click on the clipboard below for the entire report)