Edsouth CEO Pulled in a Million from Two Jobs with Affiliated Organizations

Before a corporate restructuring of the nonprofit student loan servicing organization, Tony Hollin claimed to work fifty hours a week from two different subsidiaries.  But he isn't alone in the student loan industry. 

The Chronicle of Higher Education (Paul Baskin) shed light on one of the more striking cases of double dipping documented in federal Form 990s in its report on abuses in the student loan industry (no subscription required). 

In 2004, William A. Hollin (known as Tony Hollin) was the chairman and CEO of an organization called Educational Funding of the South (EIN 58-1757969 Form 990), which goes by the name of Edsouth.  The organization, based in Knoxville, Tennessee, provides student loans mostly in the southeast US, and had income of over $150 million. 

On page four of its Form 990, Edsouth lists Mr. Hollin among the officers, directors, and key employees as working fifty hours a week with compensation of $570,461 and benefits of $22,166.  At the end of this list there a check box next to question 75:

Did any officer, director, trustee, or key employee receive aggregate compensation of more than $100,000 from your organization and all related organizations, of which more than $10,000 was provided by the related organizations?  [Yes, No checkbox] If “Yes,” attach schedule (see instructions).

And there is a check in the Yes box.  Turning to page thirteen of the form, there is a reference to an organization called Educational Services of America (EIN 62-1586836 Form 990), going by the name of Edamerica, which paid Mr. Hollin $549,332.  Going over to that Form 990, it lists Mr. Hollin as president, also working fifty hours a week, with compensation of $540,000 and benefits of $9,332. 

The Chronicle article notes that after a corporate reorganization, Mr. Hollin is no longer on the payroll of the nonprofit, but he continues as chairman of two for-profit companies called Edfinancial Services and Edamerica that were spun off by Edsouth.  Of course, for-profit companies are not subject to the disclosure requirements of nonprofits. 

Just out of curiosity, I took a look at another player in the student loan industry, Educational Credit Management Corporation (EIN 41-1778617 Form 990) out of St. Paul, Minnesota.  Here (on page eighteen) the president Richard J. Boyle is listed with a work week of thirty seven and a half hours with zero compensation.  But question 75 (back on page four) is again checked Yes, and the attached schedule on page nineteen shows that Mr. Boyle received $515,891 in compensation and $101,631 in benefits from an affiliated organization, ECMC Group (EIN 41-1991995 Form 990). 

Over at the ECMC Group return, Mr. Boyle is listed with the reported salary and benefits, but the schedule notes that he works for this other organization less than one hour a week to earn his half million.  At least he's not claiming to work 100 hours a week. 

The moral, I guess, is that if you are willing to work 100 hours a week, you might as well work for a for-profit company, where they can pay you a million without disclosing it (... unless it's a public company.)  But if you can get by on less (say, a half million), you should just go with a nonprofit and work shorter hours. 

More seriously, it shows the limitations of the Form 990 to capture the reality of these large, complex organizations that include both for-profit and non-profit components.  The solution, of course, is to put all these $100 million plus organizations on a reporting scheme more similar to that mandated by the securities laws for public companies.  Of course this would require consolidated entity reporting regardless of corporate technicalities and regardless of whether they are for-profit, non-profit, or governmental.  It would also require disclosure of details of compensation packages for executives, not just one line summaries. 

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