Home > News > May 15, 2007 - Other Capella University Employees Accepted Kickbacks!

Capella University Admits Others Accepted Kickbacks

Capella University has issued a press release (May 15, 2007) that states in part:

". . .that it is adopting a Code of Conduct recently established by the New York Attorney General’s office to ensure best practices in student lending . . .

"Capella’s review also found that during the 2005/2006 school year, Student Loan Xpress contracted with Mr. Lehmann for consulting services, for which he was paid approximately $12,400, including expenses. Mr. Lehmann also received less than $3,000 in honoraria ($2,000 of which has been returned) for his service as a speaker or evaluator at certain industry events. These arrangements were not approved by the University, were in violation of Capella’s policies, and were not previously revealed to management.

"The review discovered that Mr. Lehmann received travel, lodging, meals, entertainment, and gifts from Student Loan Xpress and other lenders as part of their sales and marketing initiatives. Mr. Lehmann also served on advisory boards of Student Loan Xpress and other lenders. His travel and lodging expenses in conjunction with board meetings were paid by the lenders, and he received meals, entertainment, and gifts at those functions.

"Other Capella employees associated with the University’s financial aid department received nominal gifts and nominal entertainment from Student Loan Xpress and other lenders [emphasis ours]. Lenders also reimbursed staff for travel expenses incurred during routine visits to financial aid service facilities. In the future, lender reimbursement for site visits will be prohibited, consistent with the newly-adopted Code of Conduct."

According to KARE 11 (television) News, Capella reached a settlement agreement with some Attorneys General Offices, which notes:

"An investigation by the attorneys general found that Lehmann was paid $12,400 by Student Loan Xpress. Lehmann also received a $2,000 honorarium from EdFinancial Services, another loan servicing company, and served on the advisory boards of several national lenders including Citibank, Chase, Wachovia, and Wells Fargo, the investigation found.

"Among the settlement's provisions:

• Capella is banned from taking anything of value from a loan company in return for a benefit, such as appearing on a preferred lender list.
• Capella employees are barred from taking anything of more than nominal value from a loan company, including trips.
• Capella employees can't take anything of value to serve on advisory boards of loan companies.
• Preferred lender lists must disclose criteria used to choose the companies on it, and students must be told they can choose any company they want regardless of the list.
  

Reuters News Service notes that:

"Minnesota-based Capella, as part of its agreement, disclosed information about the business relationships of the university's director of financial aid, Timothy Lehmann, the state said. These arrangements presented conflicts of interest based on his position [emphasis ours].

"The agreement with Capella does not prevent New York from pursuing legal action against Lehmann, Cuomo said in the statement [emphasis ours].

The Reuters article also notes that Capella University has agreed to, "mandates [that] end of any financial arrangements with lenders and deceptive practices."

The Associated Press has also reported that:

New York Attorney General "Cuomo said the agreement with Capella _ which doesn't include any compensation _ does not preclude cases he may bring against school officials [emphasis ours]." We urge Attorney General Cuomo to levy stiff penalties on Capella University - a for-profit scam.