Student-Loan Fraud Rings Call Controls Into Question

To officials of Moorpark College, the conviction of three men for attempting to fraudulently obtain student loans at three Ventura County community colleges, including Moorpark, was evidence that the school has adequate procedures for protecting its financial aid funds.

“The fact that an employee caught this,” said Stan Bowers, vice president for administration, shows “the system . . . is working.”

But Ventura College, another of the schools that was almost victimized, said last week that it would institute new procedures to monitor student loans. And financial aid officials at colleges in Los Angeles and Ventura Counties acknowledged that there is little communication among the institutions, or with law enforcement authorities, about student-loan fraud rings that have become common around the country in recent years.

The assistant dean who supervises financial aid at Mission College in San Fernando said she uncovered a fraud scheme last year similar to the one in Ventura County. Both involved Nigerians using phony names and addresses. But she said she did not alert other colleges or the central office of the Los Angeles Community College District.

2-Year Prison Terms

The Ventura County case concluded Wednesday when three Nigerian citizens were sentenced to two years in state prison. Each had pleaded guilty to one felony count of using false information to obtain a loan.

The three men--identified as Michael Oluwole, 26; Uko J. Abia, 26, and Augustine Rotibi, 29--used names such as “Mike O. Davids” and “Nathel Goldstad,” listed false home addresses, Social Security and driver’s license numbers and used other phony information on 12 loan applications filed at Moorpark, Ventura and Oxnard colleges.

Each application was for the maximum loan amount, $2,500. They began the scheme in January and would have been successful had a student-loan officer not been working at two of the community colleges, investigators said. The loan officer became suspicious when he noticed similarities in the applications that crossed his desk at both colleges.

Nancy Peterson, an investigator for the federal Department of Education, said there is evidence that the men, who were arrested in March by Ventura County sheriff’s detectives, could be part of a local crime ring containing as many as 17 other people.

Used Similar Tactics

Investigators said the group’s tactics were similar to those used by scores of other Nigerians who have been arrested for fraudulently obtaining federally guaranteed student loans in New York, Dallas, Chicago, Denver and Seattle.

Many other groups have also been prosecuted for student-loan frauds, but investigators have reported repeated cases involving Nigerians and other West African nationals. Community colleges, which often will liberally enroll students, have been the most frequent target.

Many of those caught in the frauds--including the three in Ventura County--claimed to have been born in the Virgin Islands and carried expired student visas, said a report written by the International Assn. of Credit Card Investigators. The organization investigated the student loans because many of the same suspects were also tied to credit card fraud.

The federal Guaranteed Student Loan program appears to be the favorite target of the groups because of its liberal eligibility requirements, officials said.

Any U.S. citizen or legal alien can get a loan from the program, as long as the person has not defaulted on a past educational loan and is at least on “half-time status” at a post-secondary school. A student need not even pursue a degree and there is no income limit for participants.

And many financial aid staffs in community colleges are too small to verify all the information placed on an application--a procedure that, if implemented, would uncover this type of fraud, college officials said.

Total Check ‘Unfeasible’

Requiring a check of all the information on an application is “highly unfeasible and impractical,” said Ray Di Guilio, director of financial services at Ventura College. “We have a staff of four people who deal with 1,500 students seeking financial assistance.”

The credit card investigators’ report said another problem is that many of the banks and savings and loans that lend the money through the colleges do not thoroughly scrutinize the student applications because the loans are 100% guaranteed by the U.S. government, regardless of the reason for default.

One federal investigator said that until about two years ago, the fraud schemes also may have been encouraged by lenient prosecutions: In cases like the ones involving the Nigerian nationals, prosecutors would simply have allowed the suspects to be deported. The suspects would then return, or encourage their friends to try the same scheme, said the investigator, who asked not to be identified.

After a major fraud case in Rhode Island, the Department of Education and the U.S. Immigration and Naturalization Service initiated a joint program to investigate the loan fraud rings.

In one case last year, 49 people were indicted on fraud charges in Phoenix and Tucson. Eight of the defendants were from Nigeria and most of the others from Central America, said Assistant U.S. Atty. Sherry Herrgott in Phoenix.

Bowers, the Moorpark College vice president, said the loan officer first became suspicious about the applications after reviewing four applications the Nigerians submitted to Moorpark College. He later confirmed his fears by reviewing applications at Oxnard College, Bowers said.

‘System Is Working’

“The system that is in place here,” Bowers said, referring to the officer’s discovery, “is working.”

But De Guilio said procedures at the Oxnard campus will be changed in July as a result of the fraud case. Applicants will be required to complete a detailed, four-page questionnaire, submit academic transcripts from past schools and undergo a more extensive interview at the time a loan is given to the applicant.

Officials at the Los Angeles Community College District, which operates 10 campuses, including Pierce, Mission and Los Angeles Valley colleges, knew nothing of the similar student-loan fraud rings around the country, including the one in Ventura County, district spokesman Norm Schneider said.

Officials within the district also were unware of the apparent fraud attempt at Mission College last summer.

Marie Brown, an assistant dean at the campus, said three Nigerians submitted three applications for federally guaranteed student loans and one for a federal grant. Brown said she tripped up the scheme when she noticed identical information, such as a birthplace and home address, on more than one form. An investigation found that most of the information on the forms was false, she said.

The case was forwarded to police, but the trio never picked up their checks and avoided a police trap, she said.

Brown said she did not notify district officials of the incident because a centralization of financial aid duties had not been completed. There was no one yet in charge at the central office to contact, she said.

Communication ‘Terrible’

Brown described the communication between financial aid officers at different colleges in the Los Angeles system as “terrible,” leaving officials at one campus unaware of loan problems at other campuses.

The California Student Aid Commission, which monitors state aid and loan programs, has suggested that one remedy for abuses of student-loan programs may be to create a system of distributing the loan money in installments. That would give administrators time to more closely evaluate applicants’ enrollment and loan applications.

Rick Reinhardt, associate director of the commission, said a similar proposal is being discussed on the federal level but has not been approved. California regulators are awaiting federal action before addressing the issue on a state level, he said.

But even such a reform would not eliminate abuse of the program, Reinhardt noted.

“It is not a fail-safe system,” he said. “If there is someone who really wants to rip the system off, and go through the whole process, go to that extent, you can rip off anything.”