Former Education Dept. Official to Plead Guilty Over Stock Holdings in Lender

November 02, 2009

Federal prosecutors have filed charges against Matteo Fontana, a former senior financial-aid official in the Education Department who in 2007 was found to be holding stock in one of the student-loan companies he oversaw, and Mr. Fontana has agreed in a plea bargain to pay a fine as high as $115,000, according to documents filed in the U.S. district court here.

Mr. Fontana, formerly manager of the Financial Partners Division of the Education Department's Federal Student Aid office, was reported in 2007 to possess at least 10,500 shares of stock, worth at least $100,000, in the Education Lending Group, the parent company of Student Loan XPress—one of the companies he was responsible for regulating. Further disclosures followed, including that he issued a controversial ruling in favor of Sallie Mae, his former employer, even though the ruling violated conflict-of-interest regulations.

He resigned from the Education Department in September 2008 after spending 17 months on paid leave.

Mr. Fontana was charged last Tuesday with making a false writing and with conflict of interest, both misdemeanors. The prosecutors say he lied about his stock holdings on multiple financial-disclosure forms and urged other members of the Education Department to make decisions that would benefit Student Loan XPress.

In a plea agreement filed last Thursday, Mr. Fontana agreed to plead guilty and pay a fine of $85,000 to $115,000 but would not serve prison time. A judge has to approve the agreement before it can take effect.

A lawyer for Mr. Fontana did not immediately return a call seeking comment.