By New Times
By Connor Radnovich
By Robrt L. Pela and Amy Silverman
By Ray Stern
By Keegan Hamilton
By Matthew Hendley
By Monica Alonzo
By Monica Alonzo
In December 2004, barely a week after Cantelme drew up papers to create the Arizona Higher Education Loan Authority, or AHELA, Napolitano issued an executive order making it the state's designated seller.
The designation of the group came with no fanfare and zero publicity. But it made a huge change in who'd be supervising the sale of tens of millions of dollars in tax-free bonds.
Instead of a highly experienced group with expertise in student loans, Arizona's $90 million annual allotment in bonds would be managed by Cantelme and two friends, neither with any particular experience in higher education financing.
Louis DeRoon III is the agency's vice chairman. A longtime "honorary firefighter," he's the lawyer who's often summoned when firefighters have a brush with the law. And AHELA's secretary/treasurer is Shields, who became president of the firefighters union in Phoenix when Cantelme retired. He is also a major Napolitano supporter and was the chair of her 9/11 Memorial commission.
Cantelme defends the governor's choice, saying that anyone else could have made a pitch for doing a piece of the business. (Of course, that would require knowing about it, but, in Cantelme's defense, surely other bond salesmen had the same info as Hamel.) He's doing a public service, he says.
The predecessor to Cantelme's group, the Arizona Education Loan Marketing Corporation, was a big business: The group, along with its parent company, Southwest Student Services Corporation, had 250 employees.
And Southwest Student Services was an industry leader. The directors of the old group included a CEO, a former mayor, and two former educators.
Perhaps because the group had a sterling reputation, there never seems to have been an attempt, on the part of any Arizona governor or legislature, to supervise them or second-guess their decisions. But that's not how it works in some other states.
In Connecticut, the group that issues tax-exempt bonds for student loans is actually considered a quasi-public agency. It issues "requests for proposals" before hiring most contractors, according to its Web site. That means competition for the people seeking its business and, presumably, better rates.
In Connecticut, the group's chairman is appointed by the governor, and the legislature must approve the appointment. In Michigan, the legislature approves the entire board. (That board itself is run by the state treasurer, and its directors include officials from every one of Michigan's major universities.)
But AHELA was formed so quickly, and quietly, that some legislators say they had no idea it existed until after Napolitano vetoed its potential competition in 2005. Far from receiving public scrutiny, it's managed to do two years of business without getting a single mention in the Arizona Republic or even the Capitol Times.
Its first $91.9 million in bonds, in 2005, appears to have been used to purchase student loans from other lenders. But AHELA now originates its own loans, too. It's a preferred lender at the University of Arizona, and on the list to handle loans at Arizona State University.
"We've done what the governor said we should do," Cantelme says. "We've met our mission."
Their mission to whom?
Bond records show that the nonprofit has used Vanosky's old firm where, of course, Hamel currently works as the sole broker, marketing agent, and underwriter on every one of its three bond issues, which total $227 million.
Records show that the former nonprofit used at least three firms in a comparable time period.
"They're under no obligation to use us," Hamel says. He strongly denies any allegations of impropriety, explaining that this is how the bond business works.
"It's a competitive field," he says. "Now that they are in the marketplace, other entities will call on them." That would mean competition, and perhaps ultimately lower fees than Hamel and his firm are charging.
"But in the early stages," Hamel admits, "no one knew they were out there."
Until recently, AHELA's Web site listed a partnership with Grupo N, Cantelme's for-profit marketing firm. But while Cantelme confirms that Grupo N was doing work for AHELA, he says it's all pro bono.
Cantelme insists Grupo N never got paid. "You're way off base with that," he says. "Everything we've done has been donated."
AHELA's tax returns indicate that it spent $207,000 on marketing in 2005, but doesn't say where the money went.
Cantelme says the listing was taken off the Web site a few weeks ago, not because New Times was looking into the matter, but because it was a mistake: "It should have never been on the Web site in the first place."
But there are a few other oddities that remain on the Web site, www.ahela.org.
AHELA lists one special loan designated for workers at a particular company: workers at PMT Ambulance.
Cantelme is one of PMT's owners.
The site also lists only one scholarship "The Governor's 9/11 Memorial Scholarship."
Billy Shields, AHELA's secretary/treasurer, chaired the 9/11 Memorial Commission. Both he and Napolitano took harsh criticism from Republicans, who angrily criticized its anti-war sentiments. The scholarship, given to the writer of a 300-word essay, is intended to commemorate 9/11 and "show support for the Arizona 9/11 memorial."