In the summer of 2007, Nebraska Attorney General Jon Bruning waived a $1 million settlement reached with a student loan company accused of improper business practices.
He later backed down after being accused of showing favoritism to Nelnet, a company whose executives had donated $16,000 to his campaigns.
A year after the controversy, Bruning and two top Nelnet executives purchased a $675,000 house together near the Platte River.
Bruning, now running for U.S. Senate, said it was purely a personal transaction, with all the costs associated with the property split three ways.
The 42-year-old attorney general also said he has been friends with Nelnet President Jeff Noordhoek, 44, and Chief Financial Officer Terry Heimes, 46, for years.
His political critics, however, say Bruning showed poor judgment in sharing a lake house with Nelnet officials less than a year after trying to save the company $1 million.
"To me, it's incredibly tone deaf," said Paul Johnson, campaign manager for U.S. Sen. Ben Nelson, a Democrat.
"It raises serious concerns," said Chuck Hassebrook, a Democrat and member of the University of Nebraska Board of Regents. Hassebrook has been critical of Nelnet in the past.
Bruning is considered the front-runner in the race to secure the GOP Senate nomination and the chance to unseat Nelson. Four other Republicans are running, including State Treasurer Don Stenberg and State Sen. Deb Fischer.
Nelson still is weighing a run for a third term. He is expected to make his decision later this year, but he already has assembled a team to prepare the groundwork for a campaign.
Last week the Nebraska Democratic Party questioned how the attorney general found time as a state employee to build a large business portfolio, with interests in banks, retirement homes and storage companies worth more than $12 million.
Bruning countered that his involvement in the companies was minimal and that he was investing primarily in Nebraska companies. He said he was not involved in the companies' day-to-day operations.
Bruning said the heightened scrutiny comes with being the front-runner.
He defended his decision to purchase the vacation home with the Nelnet officials, saying the company is not under investigation in Nebraska and there is no conflict of interest.
"Nelnet is a good, homegrown company that employs hundreds of Nebraskans in good jobs," Bruning said.
Stenberg, the state's former attorney general, said Bruning's investments had shown "a reckless disregard of potential conflicts of interest."
He said they raise the question of whether Bruning's investment partners and companies have had business before the Attorney General's Office and how the office handled it.
Nelnet has been embroiled in two national controversies in the past 10 years.
First, the student loan company was accused of overbilling the federal government to the tune of millions of dollars by exploiting a loophole to boost its federal subsidies.
In 2007 the company settled with the federal government. It was allowed to keep $300 million in questioned subsidies but had to forgo future payments of nearly $1 billion.
Later that year the company came under fire again. Then-New York Attorney General Andrew Cuomo and other attorneys general accused the company of making payments — including trips, perks and other gifts — to college officials in a bid to be listed on the colleges' preferred lenders lists.
Cuomo settled with the company for $2 million.
Bruning earlier had entered into a $1 million settlement with Nelnet, saying he hoped to end what he considered an overreaching national investigation led by Cuomo.
He briefly rescinded Nebraska's settlement after the company agreed to pay $2 million to New York. Bruning said he thought the New York settlement was enough.
At the time, Bruning called himself a "friend of Nelnet," and issued press releases in which he quoted Noordhoek.
But, he said, they did not talk about buying a lake house together until nearly a year later, when Bruning said he and his wife, Deonne, began to look for a property on Big Sandy Lake north of Ashland.
The property around the lake has been developed in large part by Mike Dunlap, chairman and chief executive officer of Nelnet, Bruning said.
"My wife and I were looking at homes out there and talking about it," Bruning said. "At the same time, Jeff and Terry were talking about it. I think we actually looked at the same house during the same week."
He said he doesn't remember exactly who initiated the first conversation, but at some point, he and Noordhoek began to talk about purchasing a place together. They later included Heimes.
Bruning said he could not afford a lake house by himself. He noted that although it was expensive, it is one of the most modest properties, relatively speaking, on the lake, with about 1,600 feet of living space.
The Nelnet executives agreed with Bruning that they have been longtime friends and that this was purely a personal transaction.
"They are three good friends who have a lake house together," said Ben Kiser, a spokesman for Nelnet. "They evenly split everything, including time and cost."
It does not appear that Bruning has broken any state disclosure laws, although the cabin purchase was not easily discoverable by looking at his financial disclosure forms required under the Nebraska accountability and disclosure law.
The three men purchased the house under a limited liability company called Sandy Properties LLC, in part to limit their liability to lawsuits. It is a common practice when partners come together to buy property, Bruning said.
He then listed his membership in Sandy Properties on both his federal and state disclosure forms.
The three did briefly transfer the property to a deed in each of their names in 2009. They wanted to refinance the property, and banks do not typically give mortgages to LLCs, Bruning said.
Later, in 2009, they returned the lake house to Sandy Properties LLC. At that time the deed was notarized by Holley Bollen, Bruning's chief of staff.
Bruning said Bollen did not notarize the document in the Attorney General's Office.
"I can't tell you (where it happened), but it wouldn't have been in the office," Bruning said.
He said he hoped the criticism aimed at him from his political opponents over the lake house deal would not negatively affect his partners. "These are good guys. They don't deserve this," he said.
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