OMB Talks Preceded Sallie Mae Stock Sale
Friday, May 25, 2007
Congressional investigators yesterday disclosed that Sallie Mae executives met with Bush administration budget officials in December, less than two months before the company chairman sold $18.3 million of Sallie Mae stock. Three days after the sale, President Bush unveiled a budget that included unexpectedly large cuts to lending subsidies, after which the company's shares plummeted.
The meeting was revealed in an internal Sallie Mae document released yesterday by the House education committee, which is investigating the sale of 400,000 shares by Albert L. Lord, the head of the student loan company, which is headquartered in Reston. The document, prepared last December, provides a glimpse into a major corporation's elaborate lobbying efforts to gain influence on Capitol Hill.
Tom Joyce, a spokesman for Sallie Mae, confirmed that two or three mid-level company executives met in December with officials from the Office of Management and Budget to discuss the importance of private student loan companies. But he said White House officials never revealed details of the proposed budget.
"There was no inkling of what the president's budget would be," he said, adding that Lord was not briefed on the meeting.
Some Democrats have been critical of Sallie Mae, and the committee chairman said he found the timing troubling. "Sallie Mae intended to have discussions with the administration about the President's budget before it was released to the public," Rep. George Miller (D-Calif.) said in a statement. "That raises the question of what information Mr. Lord had, when he had it, and what he did with it."
The House and the Securities and Exchange Commission began to investigate the stock sale after The Washington Post reported in February that Lord would have received about $1.4 million less from the transaction if he had sold his shares at the closing price on the day Bush unveiled his budget.
Joyce said the company had no idea the cuts to industry subsidies would be so large. "The timing of Mr. Lord's stock sale was coincidental," he said yesterday.
Sean Kevelighan, a spokesman for the Office of Management and Budget, declined to discuss any meetings between Sallie Mae and the White House, but said such conversations with industry groups would not be unusual.
The internal Sallie Mae document, "Federal Government Relations Strategy Discussion," makes clear who Sallie Mae views as its political allies: "Democratic control of Congress" is listed as one of the company's "challenges" and "Republican White House" is defined as one of its "strengths."
The document then describes its three main political strategies: create a coalition within the Democratic Party, arm congressional Republicans and the White House to "combat irresponsible proposals" and coordinate with "key allies, especially schools, employees and lender peers."
The strategy calls for lobbying and directing campaign contributions to Democrats on the financial services committees; the Congressional Black Caucus and the Congressional Hispanic Caucus; and new members of Congress. It also calls for hiring a Democratic lobbyist and generating grass-roots action from schools that use the company and from its own employees.
The investigation into the stock sale comes as Sallie Mae and the $85 billion-a-year student loan industry are under heightened scrutiny over business practices. Last month Sallie Mae agreed to be sold for $25 billion to a private-equity firm. And just this week, its chief executive, Thomas J. Fitzpatrick, resigned in what sources said was an effort to improve relations with Democrats.