$200,000 financial aid scam hits Bay Area college Online classes targeted in widespread scheme

The College of Marin campus in Kentfield, Calif. The College of Marin campus in Kentfield, Calif. Photo: Sharon Risedorph Photo: Sharon Risedorph Image 1 of / 4 Caption Close $200,000 financial aid scam hits Bay Area college 1 / 4 Back to Gallery

Police at the College of Marin are investigating 23 individuals suspected of posing as students in a plot to steal $200,000 in federal financial aid, some of which has already been paid out by the college.

Two vigilant faculty members brought the suspected scam to the attention of college administrators after noticing that several students in their online classes shared the same address and phone number, weren't participating in online discussions and withdrew soon after financial aid had been disbursed.

Such financial aid scams are increasingly seen at colleges across the country. They are estimated to cost taxpayers up to $1 billion a year and have federal investigators stretched to the limit figuring out how to stay ahead of the thieves.

In one recent example, three men posing as students pleaded guilty in February to stealing more than $1 million in financial aid received through City College of San Francisco, Chabot College in Hayward and Ohlone College in Fremont from 2007 and 2011.

In the scam - which targets mainly online programs - the thief enrolls in college and applies for a student loan or a federal Pell Grant, which provides up to $5,730 this academic year. Unlike loans, Pell Grants require no repayment. After the college takes its cut of the grant or loan and forwards the rest to the applicant for approved expenses - books, room and board, commuting - the thief keeps the money, quits attending class, and runs off to repeat the process at another college. The scam has been dubbed "Pell running."

Fake students recruited

A ringleader often recruits fake students who allow their Social Security numbers and other personal information to be used to enroll in courses and to apply for federal aid in exchange for a cut of the cash.

The anonymity of online classes, which are exploding in popularity at community colleges, makes them an easy target.

Community colleges are also vulnerable because their fees are low, so the schools keep little of the Pell Grant money for themselves. In California, they take no fee because those who qualify for a Pell Grant - only needy students - also receive a fee waiver from the state chancellor's office.

The scam usually goes undetected. But at the College of Marin in Kentfield, the two faculty members were paying attention.

Putting 2 and 2 together

"Their information helped us put two and two together," said Jonathan Eldridge, a vice president at the community college who declined to identify the instructors or their courses because the investigation is ongoing and some of those under suspicion are still enrolled. "It's difficult to identify these issues. And once identified, it's difficult to take action.

"Obviously, we want to be doing the right thing. We've involved our campus police, and we're collecting data. Then we'll have as much evidence as possible to give the U.S. Department of Education."

The 23 students are eligible for a total of $200,000, Eldridge said. The college has already given them some of that aid, though Eldridge didn't know how much.

One instructor at the College of Marin discussed the situation with a friend, Mayor David Weinsoff of Fairfax, who grew alarmed at the brazenness of the alleged thieves. "There's not enough money to go around, and here you have people cheating," he said. "They're taking our hard-earned tax dollars."

Collect aid, then drop out

Weinsoff spoke with college officials and learned that 1,290 students who collected nearly $192,000 in federal aid between 2009 and 2013 had quit the College of Marin before completing the course units required for them to keep the money. While those students may have had legitimate reasons for dropping out - and may even have returned the aid - the pool of money could represent earlier fraud.

Colleges are not responsible for paying back stolen money. But if thieves steal student-loan money and never pay it back, it can count against the college by adding to the school's student loan default rate.

In the case involving City College of San Francisco, Chabot and Ohlone, the three men - Kyle Edward Moore, Cortio Detrice Wade and Marcel Devon Bridges - created 104 separate financial aid accounts for "purported students" with the passwords "maubert" or "maubert2," and used two addresses in Oakland and Hayward, according to a federal indictment filed in the U.S. District Court in Oakland in August 2013.

By law, those eligible to receive Pell Grants or federal student loans need to have a high school diploma or equivalent, be enrolled or accepted at a college, and not be incarcerated. In addition, applicants must certify that they are the legitimate applicant and that they will use the funds only for educational purposes.

'Straw students'

In this case, Moore, Wade and Bridges "recruited third parties to serve as straw students" who signed and submitted "false and fraudulent financial aid applications" and had "no intention of attending school or using the funds for their intended purpose."

In August, Bridges was sentenced to one year in prison, three years of supervised release and ordered to pay $73,087 in restitution. Federal officials were unable to confirm the fate of Moore, Wade or Derricka Lynn Fluker, who was indicted with them.

By the end of March, 132 fraud rings were under investigation by the U.S. Department of Education's Office of the Inspector General, up from 16 a decade ago.

In its semiannual report to Congress, the office said it had recovered more than $20 million from more than 478 indictments. These have included thieves who use inmates' identities to apply for aid.

$1 billion nationwide

But the actual number of fraud rings - and the amount of taxpayer money, estimated at $800 million to $1 billion a year - is likely to be far larger.

"It's a serious number," said Howard Sorensen, assistant counsel to the inspector general. "Colleges are choosing to admit students with only minimal checks on their applications - but people aren't always who they say they are, and they aren't showing up for classes."

His office has urged Congress to strengthen requirements for student aid, which relies on the honor system for requirements such as a high school diploma. But Congress has rejected such recommendations as requiring confirmation of diplomas and even identity before awarding financial aid.