AUSTIN — The University of Texas at Austin fired its financial aid director Monday after determining his ownership of stock in a loan company violated university rules.
Associate Vice President Lawrence Burt has been on paid leave since early last month, when he was named as part of the New York attorney general’s investigation into the $85 billion student loan industry.
Burt has denied wrongdoing. He did not immediately return a telephone call seeking comment.
The firing followed a monthlong University of Texas System investigation that found Burt placed a subsidiary of the loan company at the top of several preferred lender lists without any apparent justification.
The subsidiary — Student Loan Xpress — actually trailed many other companies in terms of volume, customer service and default rates and only led the pack in the number of “treats” provided to financial aid staff, the investigation found.
The investigation by UT System General Counsel Barry Burgdorf found Burt owned 2,300 shares in Education Lending Group Inc., the former parent company of Student Loan Xpress. That includes 1,500 shares he bought from a friend shortly before adding the lender to the preferred list.
Burgdorf found no direct evidence that Burt accepted the stock in exchange for adding Student Loan Xpress to the list.
“Nevertheless, the timing of the transaction in relation to Student Loan Xpress’ inclusion on OSFS lender lists raises suspicion and, at least, creates the appearance of impropriety,” Burgdorf said in a report on his investigation.
Burgdorf said Burt should have sold the stock or at least disclosed the fact that he owned it and recused himself from any decisions about Student Loan Xpress. He sold the stock in 2005 for at least $18,000.
When the investigation began last month, Burt said his previous ownership of the shares had no connection to Student Loan Xpress's position on UT's preferred lender list.
"They are on our lender list for the same reason the other 19 are on the list. They provide the best package of benefits to students," he said.
Burgdorf said the entire process of creating a preferred lender list was flawed because Burt alone had the authority to add or remove companies and he often did so with little or no explanation.
Burt admitted he did not use any set formula to create the lists, relying instead on subjective criteria that Burgdorf said did not necessarily correlate with what was best for students.
Among the criteria he apparently considered was the number of "treats" that lenders provided to financial aid office staff, Burgdorf said.
A list compiled between May and December 2005 found staffers were treated to ice cream, lasagna, barbecue, candy bars, popcorn, happy hours, birthday cakes and cookies. Student Loan Xpress was one of the lenders that provided the most benefits to staff, Burgdorf noted.
Texas law allows state employees to accept gifts worth less than $50. Most of the treats were probably worth less than that, but there was no process in place to judge their value, Burgdorf said.
"We found an almost complete lack of awareness related to basic ethics and conflicts of interest principles," Burgdorf added.
Burgdorf said UT should establish objective criteria for weighing whether a company should be included on the preferred lender list. And those companies should be listed in alphabetical order. He said managers also should be required to disclose their relationships with any entities involved in the student lending industry, regardless of the value of the holdings.
Charles A. Sorber, former president of the University of Texas of the Permian Basin, was named interim director of the financial aid office. His term will begin May 29.
Burgdorf's report can be found online at: