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Audit: Employee used prepaid tuition investments for personal gain

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SPRINGFIELD — At least one former employee of Illinois' beleaguered prepaid tuition program personally benefited from the investment firms the program contracted with in 2010 and 2011, according to an audit released today.

By Andrew Thomason

SPRINGFIELD — At least one former employee of Illinois' beleaguered prepaid tuition program personally benefited from the investment firms the program contracted with in 2010 and 2011, according to an audit released today.

George Egan, former director of portfolio management for College Illinois!, and others also were given combined bonuses of $176,003 after resigning or being fired.

Egan was a partner in a company, which was not identified in the report, that invested $500,000 in the Balestra Capital investment firm at the same time the firm was bidding on a contract with College Illinois!, according to the audit by Illinois Auditor General William Holland.

The College Illinois! general counsel, who was not identified in the audit, highlighted these dubious circumstances in 2010.

"The General Counsel indicated in the e-mail that she was not comfortable with the personal investment but was asked to re-think her position," the audit says.

The Illinois Student Assistance Commission, the parent organization for College Illinois! went on to invest $55 million in Balestra Capital.

Egan was given a $24,166 bonus by College Illinois! when he resigned several months after the investment in Balestra Capital.

But that wasn't the end of investments made by College Illinois! in which Egan had skin in the game.

The program made a questionable investment of up to $30 million in the real estate investment firm Lyrical-Antheus Realty Partners upon the recommendation of Egan before he quit. College Illinois! signed the contract with Lyrical-Antheus on Feb. 9, 2011. Egan, in turn, invested $185,000 in Lyrical-Antheus on Feb. 25, 2011.

"It is unknown when the investment was first contemplated or whether the Director of Portfolio Management had a prior relationship with Lyrical-Antheus," the audit says.

State Rep. Jim Durkin, R- Western Springs, has been the lead voice in the Legislature for investigating College Illinois!.

"The fast and loose attitude in the management of College Illinois! … was more pervasive than I previously thought," Durkin said. "I would suggest it (was) more than just lapse in judgment."

ISAC responded in the audit to Egan's personal investments, saying it will present a new conflict-of-interest policy at its board meeting in June.

"The revised policy will also include investment restrictions related to potential or recent investments for any ISAC employee involved in the investment process as well as members of the Commission Board or Investment Advisory Panel. ISAC, through its Compliance Officer, will ensure that the policy is implemented and followed," ISAC said in the audit.

But that comes nearly two years after Egan's questionable investments, and won't do much, if anything, to fix the ailing prepaid tuition fund.

The state began investigating College Illinois! after media reports that highlighted questionable investment strategies and an unfunded liability — how much in assets on hand versus how much in promised benefit — of $536 million, or 29.5 percent.

Egan and the man who hired him, former ISAC executive director Andrew Davis, most of the other executive staff and the board that oversees College Illinois! have been replaced since Wednesday's audit was requested by the General Assembly last year.

The auditor general is forwarding the findings of the audit to the Illinois Attorney General, which is looking into the management of College Illinois!, and the Illinois Office of Executive General "for their consideration and possible follow-up," Jim Dahlquist, a spokesman for the auditor general, said.

Maura Possley, a spokeswoman for the attorney general, said the audit will be taken into account in its investigation.

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