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CIT Group [CIT
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] said it had placed the chief executive and other top executives at its student loan unit on paid leave, after a recently announced investigation by New York's attorney general.
New York Attorney General Andrew Cuomo is probing the extent to which universities and their financial aid officials are receiving kickbacks from student loan companies in exchange for steering business their way.
Cuomo's office said last week it is investigating grants of stock from Education Lending Group, the former holding company for Student Loan Xpress, to financial aid officers at three major U.S. universities.
CIT said it placed Student Loan Xpress CEO Mike Shaut on paid leave, along with President Fabrizio Balestri and Vice Chairman Robert deRose.
Randall Chesler, president of CIT Consumer Finance, will oversee the student loan business on an interim basis, CIT said.
The management changes are designed to help CIT conduct its own probe into the student lender.
CIT acquired Education Lending Group in 2005. In a prospectus for a 2003 stock offering, when the company was publicly listed, Education Lending Group said that officials from New York's Columbia University, University of Southern California and the University of Texas each owned at least 1,500 shares.
Student Loan Xpress is a preferred lender at the three universities.
"I don't think this is really going to have a material impact on their operations, but the message they're trying to get across is, they're taking any kind of corporate governance issue very seriously," said David Chiaverini, an analyst at BMO Capital Markets with a "market perform" rating on CIT.
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