Pa. student loan agency spent $409K to hide board spending

HARRISBURG -- The state's student loan agency spent $409,000 in legal fees to keep the public from finding out about board members' extravagant spending at luxurious resorts.

The Pennsylvania Higher Education Assistance Agency lost a 19-month legal battle in February and was forced to release records showing that its board, composed mostly of state lawmakers, spent $860,000 on expenses such as facials, pedicures, culinary classes, fly fishing, expensive wine, falconry lessons and a $491 limo ride to shopping outlets.

In its fight to keep the records secret, the board spent enough to provide 102 students each with $4,000 grants -- the maximum allowed.

"It is beyond astonishing. It is unconscionable," said Chuck Ardo, a spokesman for Gov. Ed Rendell.

Sen. Jim Ferlo, D-Highland Park, author of a bill to strengthen the state's open records law, cited PHEAA's efforts to hide its spending as an example of Pennsylvania's "very backward law that denies public access."

"I'd have to say the phrase 'off with their heads' is too generous, in my view. It is B-A-U -- business as usual -- in Harrisburg," said Ferlo. "It's just reprehensible."

Ferlo said he is not convinced that PHEAA board members' spending at resorts is a thing of the past, as the agency contends, or that other state agencies wouldn't wage similar legal battles.

"I can't defend it," said Sen. Sean Logan, D-Plum, vice chairman of PHEAA. "I'd much rather see those dollars spent elsewhere to help students."

Logan, who became vice chairman this year, said previous board officers decided to fight the release of records.

"We're kind of stuck with those bills. We are moving on from here," he said.

Board officials say they halted the resort trips in 2005. The trips from 2000 through June 2005 were to resorts such as Nemacolin Woodlands in Fayette County, The Greenbriar in White Sulphur Springs, W.Va., The Homestead in Hot Springs, Va., and Meadowood in St. Helena, Calif.

PHEAA sued the Harrisburg Patriot-News, The Associated Press and WTAE-TV after the news outlets sought the documents.

"You don't spend this much money if you have nothing to hide," said Eric Epstein, founder of Rock the Capital, a state government reform group. "The whole PHEAA story has yet to be told.

"This is a textbook example of misplaced priorities."

Created as a public corporation in 1963, PHEAA manages $85 billion in assets and is the second-largest insurer of federal student loans in the country. The agency provides college loans, state grants and scholarships.

The legal fees were paid to the Stevens & Lee law firm in Reading and Lamb McErlane of Chester County, the Patriot-News reported Thursday.

"I know 102 kids in Fayette County would have appreciated that money," said Rep. Tim Mahoney, D-Uniontown, sponsor of a House open records bill. "That's what it is supposed to be about -- not pedicures and rubdowns."

Mahoney said PHEAA officials clearly abused power, and he wonders, "How many other state agencies are doing the same• ... It's an abuse of state money, and it has to stop."