Head of Aid Group Charged

July 9, 2009

Philip Day, the president of the national association that represents financial aid administrators, was charged Wednesday on a series of felony violations related to allegations from his previous job, as chancellor of the City College of San Francisco. The charges say that Day diverted college funds illegally to political campaigns that supported the college, such as bond measures. Such spending, if it took place, would violate California law.

There could of course never be a good time for the president of the National Association of Student Financial Aid Administrators to be face legal charges, but it would be hard to think of a worse time for the organization. Dramatic reforms in student aid and loan programs are currently being considered by the Obama administration and members of Congress. And the association's annual meeting starts in San Antonio on Sunday.

The association issued a statement Wednesday night noting that the charges are "unrelated to NASFAA, its members, or Dr. Day's tenure at NASFAA." The statement added: "Dr. Day has voluntarily requested an unpaid administrative leave from the Board of Directors leadership to deal with the situation so that this development will not distract the association from its essential work. The NASFAA Board of Directors leadership ... has granted his request. Regardless of these recent developments, the board leadership stresses that NASFAA has the capacity to continue its vital mission to expand access and remove financial barriers to higher education."

Philip R. Day Jr.

As of last night, Day and two senior officials at the City College of San Francisco who were charged did not respond to requests for comment. Previously, Day has said he did nothing wrong in the bond campaigns. The other two were Stephen Herman and James Blomquist, both currently associate vice chancellors.

Day has been in office at NASFAA less than two years. He arrived following the retirement of Dallas Martin, the end of whose tenure coincided with a series of scandals involving ties of some aid officials at various campuses (but not Martin) with lenders. Many aid officials had hoped that Day's arrival would give the group new influence in Washington, and the association has sought a higher-profile role in policy discussions. But in recent months, as the Obama administration has unveiled a series of programs to reform student aid, articles in the San Francisco Chronicle drew attention to questions about the spending on bond measures to support the City College.

According to that newspaper, Day could face nine years in prison and fines of $300,000 if convicted on all charges

Kamala D. Harris, district attorney of San Francisco, issued a statement about the charges: “Misusing public funds and laundering money for political purposes are serious offenses that jeopardize the integrity of the political process and weaken the public trust. The leaders of our public institutions must uphold their civic and fiduciary duties or face serious consequences.”

Here are details on the charges provided by the district attorney's office:

  • Day and Herman are each charged with one count of conspiracy, one count of misappropriation of public funds, one count of concealing an account of public money, one count of grand theft, three counts of using City College of San Francisco funds to support a political campaign, and one count of making a political contribution in the name of another.
  • Day is charged with a fourth count of using City College of San Francisco funds to support a political campaign.
  • Blomquist is charged with one count of using City College of San Francisco funds to support a political campaign, and one count of making a political contribution in the name of another.

The charges generally do not involve allegations that the individuals were trying to enrich themselves, but rather that they were trying to use money in ways that were banned by state law and were not authorized.

According to the complaints filed by the district attorney, several of the charges relate to bond campaigns by the college. In 2001, during a campaign for a $195 million bond measure for the college, City College of San Francisco and Pepsi negotiated a vending contract for Pepsi to sell Pepsi products throughout the campus and Pepsi had committed to paying City College a $75,000 signing bonus. According to the court documents filed by the district attorney, Day and Herman, without the knowledge of district trustees, directed Pepsi to pay $50,000 of the signing bonus to the bond committee instead of to the college.

Similar allegations are made concerning a payment by Bean Scene, which was awarded a contract to operate a cafe on the City College of San Francisco campus. The $20,000 signing bonus due to the college was sent to a campaign for a 2005 bond referendum, according to the charges.

Another $28,000 that Pepsi owed the college was diverted in 2006, the district attorney charges, for a statewide bond campaign for community colleges.

Some of the charges relate to the use of money for purposes other than campaigns. An additional $45,000 in Pepsi payments to the college was allegedly diverted to what the district attorney called a "hidden account" in the college's foundation. Day is charged with using these funds, according to the district attorney, "for expenses that could not, or were unlikely to be, reimbursed by City College, such as a City Club membership for himself, parking tickets, and alcoholic beverages at functions."

The college issued a statement late Wednesday saying that the "board and college administration cooperated fully with this investigation." The statement said that after allegations arose in 2007 about the 2005 bond campaign, two administrative investigations took place, leading to "explicit rules and guidelines concerning political activity and campaign finance." The statement added that "the new policies make clear that district personnel may not be involved in political campaigns in any way that uses public resources or public time."

A spokesman for the college, asked about the status of the two administrators who were indicted, said that Don Griffin, Day's replacement as chancellor, "is currently evaluating the college's administrative remedies relative to these employees. He has indicated that he will make a decision very soon."

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