Bonds. Big Bonds.

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Hamel says that the idea to start a loan authority "sort of emerged in a conversation between Pat Cantelme and myself. It was one of those conversations — I was discussing that a not-for-profit needed to be started to fill a void, and Pat picked up the idea and developed it."

After all, Hamel couldn't just apply to do the work. He knew that the bonds must go to a nonprofit company. That's the law.

Cantelme confirms that he approached Napolitano's deputy that fall and asked if he could start a nonprofit to be designated Arizona's new student loan bond seller. And Napolitano agreed.

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.

The only other director, Bob Vanosky, is a Paradise Valley native who worked for RBC Dain, Rauscher until retiring in 2003. Hamel was promoted to Vanosky's old job when Vanosky left.

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.

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Sarah Fenske
Contact: Sarah Fenske