GAO analyzing Connie Lee's performance as Congress eyes bigger role for insurer.

The General Accounting Office is beginrang to compile a report on Connie Lee Insurance Co., which some sources say could be a step toward expansion of the bond insurer's mandate.

Last September, Rep. William Clay, D-Mo.. asked the GAO "to see to what extent Connie Lee is carrying out its mission," said Sheila Nicholson. a member of the evaluation team.

Because of a limited staff, the GAO could not begin the study until this spring, she said. A finished product is not expected for several months.

Congress also has a long-standing request with the GAO for general financial information on Connie Lee, but Nicholson said work has not yet begun on that project.

Clay, a member of the Education and Labor Committee, reportedly played a key role in blocking legislation proposed last spring by the Department of Education to expand Connie Lee's mandate:

The proposal would have allowed Connie Lee to cover elementary and secondary schools in addition to the higher education and teaching institutions it currently serves, but the bill never obtained a sponsor. Clay's opposition was instrumental in keeping the proposal from progressing in the House, despite support from the Clinton Administration, one Washington source familiar with the proposal said.

Clay "wants to know if Connie Lee has been utilizing its resources to the maximum to execute its current mission before it is rewarded with expansion," said another Washington source.

Connie Lee has actively lobbied Congress to further expand its mandate, and Washington insiders say the insurer will probably need Clay's support if it is to succeed.

"Mr. Clay is likely to be the chairman of the Education and Labor Committee and will be critical to" passage of any legislation that goes through that committee, said Linda Berkshire, senior vice president at Connie Lee. "We've been cooperating with the GAO, and it is not an uncommon vehicle for a congressman to use to secure information about a government-sponsored enterprise."

A major element to Clay's inquiry into Connie Lee is the extent to which the insurer "has served the best interest of the financially hard-pressed institutions of higher learning, especially historically black colleges and universities," Clay's letter to the GAO said.

Clay, who is known to be particularly concerned about the plight of historically black colleges and universities, sponsored legislation this year to create a federal bond insurance program for those institutions. Support for the legislation arose, in part, because historically black schools were not being adequately served by Connie Lee or the private bond insurers, those involved in the program have said.

Connie Lee "hasn't been doing a lot of the schools that are below triple-B, and a lot of the original impetus [for the creation of Connie Lee] came from those schools," Nicholson said. "Clay is wondering who they are serving."

Berkshire agreed that Clay is "interested in our ability to serve" historically black college and universities, but said that Connie Lee has "made extraordinary efforts to try and serve those institutions where there's been an opportunity to do so."

The private bond insurers, led by Financial 6uaranty Insurance Co., have fought vigorously against any further widening of Connie Lee's powers, arguing that the company would have an unfair advantage because of the perception that it has the backing of the U.S. government.

Bond insurance officials declined to comment on Clay's request, preferring to wait until the GAO report is released.

Clay was not available for comment.

Separately, Conhie Lee's holding company, College Construction Loan Insurance Association, reported yesterday that it had net income of $3.6 million in the first six months of 1994, up 5.9% from $3.4 million from the prior-year period. The firm had net income of $1.9 million in the second quarter, equal to its total in the second quarter of 1993.

The firm had net premiums written of $8.8 million in the first half of the year, an 11% increase from $8 million the year before. In the second quarter, Connie Lee had net premiums written of $5 million, a 43% jump from $3;8 million in second quarter 1993. At June 30, Connie Lee's statutory capital base was $113.3 million, up from $111.7 million at yearend 1993.

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