Education Secretary nominee Betsy DeVos and her husband have extensive financial holdings through their private investment and management firm, RDV Corporation. The firm, where DeVos once served as director, has financed real estate acquisitions, telecom companies and online charter schools, among other things. But one particular deal is creating concern on Capitol Hill.
RDV is affiliated with LMF WF Portfolio, a limited liability corporation listed in regulatory filings as one of several firms involved in a $147 million loan to Performant Financial Corp., a debt collection agency in business with the Education Department.
Twenty-three percent of Performant’s revenue is directly tied to its dealings with the Education Department, which had 14 contracts worth more than $20 million with the company in fiscal 2016, according to regulatory filings and government documents. The company lost out on a recent contract bid with the department and is now protesting the decision with the Government Accountability Office, which can dismiss the dispute if the department reverses course.
If confirmed as secretary, DeVos would be in a position to influence the award of debt collection, servicing and recovery contracts, in addition to the oversight and monitoring of the contracts. She would also have the authority to revise payments and fees to contractors for rehabilitating past-due debt — all of which has Senate Democrats concerned.
An investment fund formed by the DeVos corporation, Ottawa Avenue Private Capital, is listed as the resident agent for LMF WF, which shares the same address as companies run by the DeVos family. A resident agent handles much of the official business of a fund, such as receiving official documents for a business, and may even have a stake in the fund. RDV senior executives, some of whom head up Ottawa Avenue, did not respond to requests for comment.
A senior Democratic aide who spoke anonymously because they were not authorized to speak publicly said Performant is one example of a company with possible connections to DeVos that could lead to conflicts of interest should she be confirmed. Senate Democrats have been urging full financial disclosures and the completion of an Office of Government Ethics review before DeVos is confirmed.
Democrats have pressed top Republicans on the Senate’s Health, Education, Labor and Pensions (HELP) Committee to postpone DeVos’s confirmation hearing until the ethics office wraps up its vetting. DeVos, a billionaire Republican with no professional experience in schools, has vast wealth and tremendous financial holdings. Though her hearing was pushed back by a week, to Tuesday, the ethics office said the review is still underway.
“Senators will have the opportunity Tuesday to get Betsy’s views on the department’s decision pertaining to Performant Financial Corp.,” said Ed Patru, spokesman for Friends of Betsy DeVos. “The purpose of independent reviews is to identify, among other things, potential conflicts of interest with respect to investments and holdings, and we have full confidence OGE will perform its function relative to Betsy DeVos and her family, just as it has done with scores of other nominees over the years.”
Performant, which declined to discuss the lenders in its credit syndicate, was rattled by the Education Department’s rejection of its bid in December, and shares of the public company tumbled 50 percent on news of the decision. Months before the announcement, Performant said in a regulatory filing that the contract provided “an opportunity to grow” its student debt collection business.
“Our revenues and operating results would be negatively affected if our student loan and receivables clients, which include four of our five largest clients in 2015 and 2014, reduce the volume of student loan placements provided to us, modify the terms of service, including the success fees we are able to earn upon recovery of defaulted student loans, or any of these clients establish more favorable relationships with our competitors,” the company said in its regulatory filing.
Education Department officials have grown wary of some of the private collection agencies the department uses to recoup past-due student loans, after years of public criticism about the aggressive practices some of them employ. The department has canceled its contract with five companies and refused to renew agreements with others, including Performant. Though the company was not caught up in the 2015 review that led the department to cut ties with the five companies, Performant has had its share of regulatory headaches.
The company disclosed in 2013 that the Consumer Financial Protection Bureau had requested documents and other information related to its debt collection practices and procedures. The bureau, which has received hundreds of consumer complaints against Performant, did not take any formal enforcement action against the company, but identified problems with the department’s debt collectors.