The Student Loan Fraud Rings — Staggering Stats

Since 2009, the Apollo Group (corporation that runs the University of Phoenix) has referred 850 potential fraud schemes to the Department of Education because of its suspicions that the “students” receiving the federal funding did not really exist or had used the money obtained for themselves and not for education purposes. Of the 850 referrals, 25 resulted in prosecutions.  Good for Apollo and its efforts to stop education fraud.

The Department of Education’s Inspector General’s 2011 report indicates the fraud is well beyond the University of Phoenix. The DOE OIG opened 100 fraud-ring investigations in 2011.  That figure compares to 16 opened cases in 2005. Since 2005, 215 individuals involved in 42 education fraud rings have been convicted of federal crimes related to the loan fraud. The fraudsters target online programs because it is more difficult to tie in the application process with the loan process and make sure the connections are made between funds dispersed and their use. These fraud rings represent 17% of the DOE OIG’s case load. If the school never has an in-person interview with an individual, it is difficult to know if the individual truly exists, but funds are dispersed, and as long as enrollment continues for 30 days, the funds go to the alleged student. They use those funds for all manner of expenses, iincluding paying a commission to the fraud ring leader who uses their addresses to get the loan funds. You can read the report here: http://www2.ed.gov/about/offices/list/oig/invtreports/l42l0001.pdf.

The fraudsters are the worst, but the educational shops, including the online institutions, need to do a bit more with internal controls, transcripts, ID verification, recordkeeping, and follow-ups on student enrollment. Anne Ryman at the Arizona Republic has a terrific piece on what needs to be done in the December 10th edition. Boys and girls, these are your tax dollars going to fraud rings.  Bless the DOE OIG for working hard on these investigations and Ms. Ryman for bringing public attention to the problem.

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
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