Previously sealed court documents show that JPMorgan (JPM) and Citigroup (C) are being sued for conspiring with education finance company Nelnet (NNI) to allegedly receive federal student loan subsidies by making false claims and illegally recruiting more borrowers.
Well at least I know what my increased credit card bill rate is going to.
The civil action suit was filed in May 2008 at U.S. District court in Omaha, Nebraska and was posted recently on Wikileaks, just before it was officially unsealed by the court.
The 285 page suit (below) says Nelnet illegally induced students to apply for federal student loans, paying telemarketers to aggressively push the government product, and used false advertising to get more applications, like promising that students would save thousands of dollars in interest payments by consilidating their loans with Nelnet. They then presented false claims to the Department of Education to receive federal funding.
How much they are asking for is unclear.
The company has already had to sign agreements with state authorities promising not to offer a variety of incentives to students and school authorities, according to the Lincoln Journal Star. Here’s their summary:
A settlement with the U.S. Department of Education in 2007 allowed Nelnet to keep $278 million in disputed profits from the controversial loan subsidy.
Nelnet agreed not to take advantage of the subsidy in the future. In 2006, the department’s Office of Inspector General concluded Nelnet got the $278 million improperly and should repay it. After the settlement in early 2007, the Justice Department opened a civil file on other issues contained in the inspector general’s report.
Separately, Nelnet settled with Nebraska Attorney General Jon Bruning and New York Attorney General Andrew Cuomo, who said Nelnet may not have broken the law but acted deceptively and uncompetitively by sponsoring marketing events and paying for school employees to participate
So glad we gave these chums $ome
bonus bailout money.
If you have a few hours to waste, here is the document in its entirety