Nelnet's Friend with Benefits

Nebraska Attorney General Jon Bruning is a forgiving man at least when it comes to those who are helping finance his planned campaign for the United States Senate, like his good friends at the student loan company Nelnet.

As The New York Times first reported, Bruning is allowing Nelnet to renege on a $1 million settlement the company reached with his office in April of this year. Amidst revelations this spring of industry wide kickbacks, improper inducements, and gifts from student loan providers to colleges and universities, Nelnet quickly shut down a Nebraska investigation into its activities by agreeing to provide $1 million to the state in support of a national financial aid awareness campaign.

But according to a spokeswoman, Bruning decided last week to forgive Nelnet its $1 million obligation after the company announced that it had reached a separate $2 million settlement with New York State Attorney General Andrew Cuomo to end his investigation into Nelnet's business practices. Bruning has decided to forgive Nelnet's obligation because "it doesnt make sense to create two funds for the same purpose," according to his spokeswoman.

A closer look at the relationship between Bruning and Nelnet suggests another rationale.

From the start, the April 20th settlement between the Nebraska Attorney General and Nelnet, headquartered in Lincoln, Nebraska, seemed suspicious. Nelnet initiated the settlement before Bruning even started his own investigation, presumably with the hope that agreement with friendly officials in the Cornhusker State would keep Cuomo off the company's back. Brunings statements at the subsequent press conference reveal just how chummy the two parties are. Appearing with Nelnet President Jeff Noordhoek, Bruning gushed, "This is a good company, an ethical company" and said he could only find two minor improper actions. The fawning continued in a press release, in which Bruning said "We are grateful for Nelnets self-disclosure and their leadership in promoting integrity, choice and competition in this industry."

Brunings endorsement of Nelnet and kid glove treatment followed closely on the heels of financial contributions Nelnet officials and their families made to his planned campaign to unseat incumbent Senator Chuck Hagel in the state's 2008 Republican primary. Officials from Nelnet and Union Bank & Trust, which are both owned by the same family, have given $16,100 to Bruning, including $2,300 from Noordhoek just 16 days before the two would appear together to announce the $1 million settlement. The biggest benefactor by far was Mike Dunlap, Nelnet's Chairman and Chief Executive Officer, who along with his wife Terri Dunlap, gave $9,200 to Bruning on March 23rd of this year. It wasn't the first time Dunlap showed his support for the Attorney General he also gave $5,000 to Brunings 2006 re-election campaign as the state's top cop.

Nelnet officials appear to be hedging their bets or trying to insulate themselves from criticism. So far this election cycle, the company also has contributed $5,000 to Hagel through its political action committee.

This background gives us a pretty good guess at what has happened behind the scenes. Nelnet took a gamble with a friendly state attorney general in an attempt to avoid harsh penalties for actions being scrutinized by New York State and others. When that gambit failed to sate Cuomo and Nelnet was forced to settle with New York State, the company was allowed to get out of its original deal with its favorite state attorney general. We bet taxpayers wish they could recoup their losses from Nelnets improper 9.5 percent recycled loan scheme that easily. The company still holds approximately $300 million in improperly claimed taxpayer subsidies.

As we reported two weeks ago, seeking higher office in Nebraska with Nelnets support can be a lucrative endeavor. Democratic Sen. Ben Nelson received almost $65,000 in the 2005-2006 election cycle alone from Nelnet and Union Bank executives and officials. This June, Nelson co-sponsored an amendment that would have sent $4 billion in financial aid earmarked for students instead to for-profit student loan companies like Nelnet. Nelson's amendment lost 61-36.

If Bruning wants the funds to unseat Hagel, this waived $1 million settlement likely wont be the last favor he does for his friends at the "good and ethical company."