Dems Question $250,000 in Bonuses for Gov Official

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May 17, 2007 2:48 PM

The White House appointee in charge of the Education Department's troubled financial aid office took home $250,000 in bonuses, leading Democratic lawmakers to question what she did to deserve such lavish rewards.

"Given that the student loan programs became increasingly rife with conflicts of interest and unethical practices" during the four years Theresa Shaw served as chief operating officer of the Federal Student Aid office, "it is questionable whether these bonuses were justified," House Education Committee Chairman George Miller, D.-Calif., told ABC News. The bonuses were first reported by Government Executive magazine.

From 2003 to 2006, the department awarded Shaw with annual bonuses ranging from $60,000 to $71,250, the magazine reported Tuesday.

Shaw stepped down from her post last week after her office was rocked by several scandals and investigators began to scrutinize its operations.

The Department said her departure was "absolutely" unrelated to the inquiries; Shaw told her subordinates she was leaving because "I had accomplished all that had been asked of me."

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The FSA office oversees all publicly-underwritten student lending. 

In January, the department belatedly closed a loophole that allowed private education lenders to improperly collect hundreds of millions of dollars from the government.  A department whistleblower had alerted his superiors to the problem in 2003, but they reportedly chose to ignore it and reassigned him to another position.

The Justice Department is currently mulling an audit of the biggest beneficiary of the loophole, Nelnet. The lending firm improperly billed the government for $278 million, according to a review by the Education Department's inspector general. The company said the conclusions were "incorrect," and the Education department declined to pursue repayment.

In April, one of Shaw's subordinates was suspended after it was disclosed he had held $100,000 worth of stock in a private student lender, a conflict of interest. The employee, Matteo Fontana, had worked with Shaw at the student loan giant Sallie Mae before joining her at the Education Department.

The department's inspector general is now reviewing Shaw's office for other potential conflicts of interest between employees and lenders.

The lender recently settled with New York Attorney General Andrew Cuomo after his growing investigation into the student loan industry unearthed allegations the company was giving financial incentives to school financial aid officials, who steered student borrowers to use the company. The company did not admit wrongdoing but paid millions to an educational fund and agreed to reform their practices.

Also last month, it was revealed that private education lending companies were abusing a database in Shaw's office that contained personal information on millions of students. The department did not dispute the breaches, but insisted it had been "vigilant" in watching for unauthorized access to the system.

Before the recent scandals, Shaw enjoyed a positive reputation. The Government Accountability Office (GAO) found her office had improved under Shaw's watch, and in October 2005 she was invited to testify before Congress on her management accomplishments.

Sen. Edward Kennedy, D-Mass., chair of the Senate committee which oversees the Education Department, said Shaw did not deserve her bonuses, and the fact they were awarded was "troubling."

"Such performance should not be awarded with generous bonuses," the senior lawmaker said.