Student Loan Nonprofit a Boon for CEO

The company was very successful, and in 2000, Wells Fargo, the financial services giant, purchased for more than $150 million a for-profit affiliate of EduCap that serviced its loans.

After the expiration of a non-compete agreement that accompanied the sale, Reynolds has returned to the business, and EduCap is once again one of the few nonprofit lending companies in the country.

Several associates said Reynolds has recently been considering new business opportunities, and company executives declined to say whether Reynolds will remain in the loan industry.

The IRS has been reviewing the company's financial arrangements, according to people with direct knowledge of the matter. Under those arrangements, one legal entity, EduCap, operates under three different names: EduCap, the Catherine B. Reynolds Foundation and Loan to Learn, the brand under which EduCap loans money to students.

The exact nature of the IRS inquiry is unknown. Reynolds declined to comment but said EduCap complies with the law. IRS spokesman Michael Devine also declined to comment.

Richard Lee Colvin, a loan industry expert at Columbia University's Teachers College, said Reynolds "has acted in the nonprofit space very much as a for-profit company."

Reynolds said U.S. law allows her to run EduCap as a nonprofit, adding that critics should "take it up with Congress."

Much of the critics' scrutiny of EduCap centers on its spending. The company paid for Reynolds, her husband, their now-teenage daughter and several friends to go to luxury resorts in the Bahamas last year and in Barbados in 2004, according to internal company records.

The accommodations during the Bahamas trip were at the Four Seasons Resort in Great Exuma, where EduCap paid for a 37-person lobster bake one evening that cost $92 a head, plus the $450-an-hour Sweet Love Band, according to billing records.

George C. Pappas, the company's senior vice president for strategic partnerships, described the trips as official retreats for EduCap's six-member board at which company business was discussed.

One of the company's most expensive properties is the Gulfstream IV jet, which was purchased about five years ago, according to company and federal aviation records.

Reynolds sometimes has used the jet to fly her family and friends on personal vacations, according to former employees and company records. On a two-week trip to China and Turkey in 2004, for example, Reynolds took her daughter, sister and niece aboard the jet.