Attorney General's Opinion
Attorney General, Richard Blumenthal
February 28, 2008
Acting Commissioner
Department of Higher Education
Dear Acting
This office has been asked whether the Commissioner of the Department of Higher Education may, consistent with the Financial Aid Code of Conduct (“Code of Conduct”), appoint an employee of the Department of Higher Education1 whose “spouse works in the financial aid office of
While the Code of Conduct prohibits an officer or employee of a university, or a family member of such officer or employee, from serving on a lender's advisory board, the Code of Conduct does not prohibit such an appointment to the CSLF Board. Instead, the Code recognizes that
Introduction
The Connecticut Student Loan Foundation (“CSLF”) is a non-profit corporation created by statute with the express purpose of “improv[ing] educational opportunity and promot[ing] repayment of loans.”
The Financial Aid Code of Conduct
On
In many respects, the Code of Conduct was designed to eradicate improper conflicts of interest in the relationships between lenders and institutions of higher education - - a number of which were revealed during the course of the investigation - - and to prevent similar misconduct in the future, thus restoring confidence in the competitive college lending market. To that end, the Code of Conduct provides a number of provisions to make a school’s financial aid practices transparent and free from improper influence or bias.
On
Analysis
Section I.A, the Code of Conduct defines a “Lender” as follows:
(i) any entity that itself, or through an affiliate, engages in the business of making loans to students, parents or others for purposes of financing higher education expenses or that securitizes such loans or (ii) any entity, or association of entities, that guarantees education loans. “Lending Institution” or “Lender” shall not include the “University” or the state or federal government.
By virtue of the fact that it lends money to students “in meeting the expenses of education,” Conn. Gen. Stat. §10a-204(1), including higher education, and is not a university, the state or the federal government, CSLF constitutes a “Lender” as that term is defined under the Code of Conduct and is subject to those provisions of the Code of Conduct applicable to Lenders’ relationships with institutions of higher education.
Section II.B of the Code of Conduct states in pertinent part: "No University officer, trustee, director, agent or employee, or any of their family members, shall serve on an advisory board for a lender." Thus, without more, section II.B of the Code would appear to prohibit a family member of an employee of the
However, Section II.A.3, of the Code of Conduct explicitly states that the Code of Conduct can not be interpreted to conflict with the statutory requirements concerning, among other things, how the CSLF Board of Directors is to be constituted. Section 10a-203(a) specifically mandates that at least one member of the CSLF Board represent the private colleges and that at least one be a financial aid officer at a college. Section 10a-203(a). Consequently, according to the Code of Conduct and Section 10a-203(a), the provisions of Section II.B of the Code of Conduct prohibiting employees of a University or their family members from serving on a lender's advisory board do not apply to appointments to the CSLF board.
The Code of Conduct, therefore, does not prevent the Commissioner from appointing a person as the Commissioner's designee on the CSLF Board even though that person’s spouse works in a college’s financial aid office.
However, the appointment being considered raises, on its face, many of the same concerns relating to conflicts of interest that precipitated the creation of the Code of Conduct in the first instance. These concerns are not mitigated by the fact that the Code of Conduct does not apply to appointments to the CSLF Board. Despite the inapplicability of the Code in this instance, potential conflicts should, where possible, be avoided. Maintaining an impartial and unbiased posture - - without the presence of even a perceived conflict of interest - - is particularly important given that the board seat in question is designated by statute to the Commissioner of Higher Education.
Accordingly, even though the Code itself does not apply in this situation, the principles underlying the adoption of the Code should be considered in the appointment of a designee for the Commissioner's seat on the CSLF Board. Therefore, because the proposed designee of the Commissioner of Higher Education is the spouse of an employee of the financial aid office of
Conclusion
For the foregoing reasons, I recommend that the aforementioned employee not be appointed to sit in the Commissioner's place on the CSLF Board of Directors.
Very truly yours,
ATTORNEY GENERAL
1 You have explained that the employee is Associate Director of Financial Aid at the Department of Higher Education.