Where in the World is Matteo Fontana?

We hope you all enjoyed your Fourth of July vacation. While it’s nice to have the occasional hard-earned day off, we know someone else who has been on a very long paid break.

It has been 459 days since Matteo Fontana, the then-general manager of Financial Partners Division of the U.S. Department of Education’s Federal Student Aid office, was placed on administrative leave. The Department took this action after Higher Ed Watch revealed that he held at least $100,000 worth of insider stock in the student-loan company Student Loan Xpress. At the time, Education Secretary Margaret Spellings promised that she was taking the matter “very seriously.” But as far as we can tell, the Department hasn’t done anything beyond giving Fontana his regular paycheck and telling him to disappear.

It is clear that Fontana’s purchase and subsequent sale of the stock represented a substantial conflict of interest — he was, after all, responsible for overseeing the lenders and guaranty agencies that participate in the Federal Family Education Loan (FFEL) program. In addition, at the time he received the stock he was in charge of the National Student Loan Data System (NSLDS), a national database that keeps track of the student aid awards of tens of millions of students. Last year, the Department was forced to shut it down temporarily because, as Higher Ed Watch also revealed, student-loan companies had been mining it to collect personal information about borrowers for marketing purposes.

The stock holding wasn’t Fontana’s only controversial action — he also overruled the Department’s Inspector General (IG), over the question of whether a lucrative arrangement that exists between Sallie Mae and USA Funds, the country’s largest guarantee agency, violated the law and needed to be severed. Fontana’s decision in December 2004 to bless the arrangement essentially cleared the way for Sallie Mae to achieve its long-sought goal of becoming a fully privatized corporation.

But there are still many unanswered questions surrounding Fontana.

First, how much did the Department know about Fontana’s stock holdings? Fontana appears to have disclosed that he owned stock in the company, but was he upfront about all the shares he owned? Did he buy new stock after initially selling some of it? And why hadn’t his ownership and sizeable sale of the stock raise any red flags at the Department?

Federal rules appear to have required Fontana to receive a Departmental waiver before working on anything connected to Student Loan Xpress. Did Fontana receive such a waiver? If so, why hasn’t it been produced? If there was no waiver, this seems to be yet another example of the Department being asleep at the switch.

Also, has the Department even bothered to investigate whether Fontana actively helped loan companies, such as Student Loan Xpress, mine NSLDS to help market their products to potential borrowers?

Then there’s Fontana’s ruling on Sallie Mae’s relationship to USA Funds. Why why was a former Sallie Mae employee ever in the position to rule on a matter of such importance to the company and its shareholders?

Finally, why has there been such a long delay in making a decision over his status? Is his case really so complicated that it requires a 15-month investigation by the Department’s Inspector General? Given that Fontana is still collecting his $142,227 salary more than a year after being placed on paid administrative leave, we’re left to wonder whether the Department actually found wrong-doing on his part, or is simply using him as a scapegoat to cover up for its own negligence.

While we don’t know the answers to any of these questions, there’s one thing we’re certain of. It’s time for the Department to stop dragging its feet. Even European countries don’t give vacations this generous.