Eighteen parents and seven financial-aid advisers in the Chicago area have been charged with federal student-aid fraud for allegedly obtaining more than $2.6-million in funds by purposefully underreporting their income on financial-aid applications. Two of the aid advisers worked at colleges.
The government also has filed more than 100 civil lawsuits against parents who are accused of fraudulently obtaining smaller amounts of Pell Grants. Nearly all of those cases are being resolved with consent judgments in which the defendants agree to pay double the amount of the actual fraud. The judgments currently total more than $825,000, and the money is being returned to the U.S. Department of Education.
The indictments, which were announced at a news conference this month by Scott R. Lassar, U.S. attorney for the Northern District of Illinois, followed a four-year investigation by the Education Department’s Office of the Inspector General.
According to Randall Samborn, a spokesman for the U.S. attorney’s office in Chicago, a sloppy parent sparked the investigation in 1997 by accidentally sending National-Louis University two versions of a tax return -- one accurate and the other with the income grossly underreported.
Much of the inquiry has focused on Marcus Washington, who ran a financial-aid-consulting business in Chicago, said Mr. Samborn. Sixteen of the 18 parents who have been criminally charged were clients of Mr. Washington, who is accused of helping them prepare false income-tax returns that they used when they applied for financial aid.
Mr. Washington has an unpublished telephone number and could not be reached for comment.
Each count of fraud carries a maximum penalty of five years in prison and a $250,000 fine.
At the news conference, Mr. Lassar called the inquiry “the largest such investigation that’s been conducted in this country involving fraud in educational grants,” according to the Chicago Tribune.
Some financial-aid experts said the rampant fraud should serve as a wake-up call for Congress, which currently does not permit the Education Department to use income-tax returns to verify information on financial-aid applications.
“Income is the most basic data element” in determining who qualifies for federal aid, said Brian K. Fitzgerald, staff director for the Advisory Committee on Student Financial Assistance, which advises Congress on student-aid issues. “In light of how important it is, it’s unfortunate that we are not verifying that information directly with the I.R.S.” College officials are required to verify the reported information with applicants, but that process rarely catches students who are intentionally underreporting their income.
Most of the students who benefited from the fraud attended colleges in Illinois, including the University of Illinois at Urbana-Champaign, Illinois State University, and Northern Illinois University.
Mr. Samborn said that as many as 600 people are still under investigation. “This takes money away from more-deserving applicants,” said Mr. Samborn. “This is fraud, and we treat it like any other fraud.”
Daisy O’Connor and Queen Stewart, two former financial-aid advisers at Daley College, of the City Colleges of Chicago, were each indicted on six charges. They allegedly collected fees ranging from $50 to $200 per application over a period of several years for helping students prepare false financial-aid applications. Ms. Stewart’s actions allowed at least 20 students to fraudulently receive $176,712 in aid, while Ms. O’Connor helped a similar number of students fraudulently obtain $157,254, according to the U.S. attorney’s office.
Reached at her home, Ms. Stewart declined to comment on the charges or say how she intends to plead. “I really haven’t gone over this with my attorney yet,” she said.
Ms. O’Connor could not be reached for comment.
Meanwhile, in an entirely separate scheme, Barbara A. Olsen, a former financial-aid counselor at North Park University, was indicted for obtaining $62,836 in aid for herself by falsely claiming that she, her husband, and her mother were students at the institution.
John M. Baworowsky, North Park’s vice president for admissions and financial aid, said that Ms. Olsen revealed her crime to the director of admissions in June 1997 and was fired the same day.
Mr. Samborn said it was merely a coincidence that Ms. Olsen was charged at the same time as the others. “We charge cases when they’re ready,” he said.
Some financial-aid experts said the Chicago indictments are only the latest sign that the department is becoming serious about cracking down on abuses in the federal aid system. Computer Learning Centers filed for bankruptcy protection in January, just a few weeks after the department ordered the for-profit chain to repay $187.5-million in federal student aid, alleging violations of federal laws governing recruitment of students.
“Probably the pressure is on [the department] to cut losses, and they’re doing it any way they can,” said Mark Kantrowitz, the founder and publisher of FinAid!, a Web site about financial aid.
But as Mr. Fitzgerald of the student-aid advisory committee points out, the department would probably catch even more offenders if it were allowed to match a family’s financial-aid application against its income-tax forms. A study by the department’s Office of the Inspector General did exactly that for Pell Grant recipients in 1995-96, and found that 4.4 percent of recipients received more aid than they should have because they had underreported their income.
http://chronicle.com Section: Government & Politics Page: A32
