Fraud, Waste, and Abuse of Title IV Money Protecting Taxpayer Dollars Office of Inspector General U.S. Department of Education
Agenda OIG Organization and Mission FSA and OIG Coordination Sources of Allegations Statutory, Regulatory Access to Records Standards of Administrative Capability Fraud Indicators Examples of Title IV Fraud Schemes Criminal and Civil Investigations Criminal and Civil Remedies Ways to Help OIG Contact Information 2
OIG Background
Inspector General Act of 1978... promote economy, efficiency and effectiveness... [and] prevent and detect fraud and abuse... in Department of Education programs and operations 4
Organizational Chart Center For Faith-Based & Community Initiatives OFFICE OF THE SECRETARY Office of Communications & Outreach Risk Management Service International Affairs Office Office of the General Counsel Office of the Under Secretary The Office of Inspector General (OIG) is part of Office of the Deputy Secretary Office of Inspector General Federal Student Aid the Department but independent. We examine Office of Safe & Drug-Free Schools Institute of Educational Sciences Office of Vocational & Adult Education allegations of waste, fraud, and abuse, and Office of Innovation & Improvement Office for Civil Rights Office of Postsecondary Education pursue those who seek to enrich themselves at the expense of our nation s students. Office of Special Education & Rehabilitative Services Office of English Language Acquisition Office of Legislation & Congressional Affairs Office of the Chief Financial Officer WH Initiative on Historically Black Colls & Univs Staff WH Initiative on Tribal Colleges &Universities Staff Office of Elementary & Secondary Education Office of Management WH Initiative on Educational Excellence for Hispanic Americans Office of the Chief Information Officer Budget Service Office of Planning, Evaluation & Policy Development 5
OIG Operational Components Audit Services Information Technology Audits and Computer Crime Investigations (ITACCI) Investigation Services 6
Audit Services Types of audits: Structure Nationwide Series + Capping Individual Subject General Oversight Data Reliability Fiscal Compliance Adequate internal controls over: Accounting for and expending Federal funds? Allowability of goods and services? Participant eligibility? Salary expenses? Non-Salary expenses? Electronic Data and Systems? 7
ITACCI Technology Crimes Division TCD centralizes OIG digital investigations and our support missions for traditional OIG services: Comprised of three separate units, each with a distinct mission, that support each other and other OIG components Staffing: Special Agents IT Computer Specialists Investigative Analysts Financial Analysts ELECTRONIC CRIMES TEAM DATA ANALYSIS AND REFERRAL TEAM DIGITAL FORENSIC LABORATORY 8
Investigation Services 80 Special Agents Nationwide Conduct administrative, civil, and criminal investigations fraud, waste, and abuse involving ED funding and employees 9
OIG Special Agents (Criminal Investigators) Special Agents receive training in at the Federal Law Enforcement Training Center in the following areas: Interviewing/Interrogation Criminal Law Civil Law Program and Contract Fraud Firearms/Defensive Tactics Search and Arrest Warrants
Conducting Investigations Phase 1: The Allegation
Sources of Allegations OIG Hotline OIG Audits ED Program Offices School Employees and Officials Contractors and Sub-contractors Grantees and Sub-grantees Citizens and Students Guarantee Agencies / Loan Servicers Other Federal Agencies U.S. Attorney s Offices Other OIG Investigations State and Local Law Enforcement Agencies Federal Bureau of Investigation Qui Tam Actions 12
Subjects of Allegations School Officials Admissions Representatives Financial Aid Representatives School Owners (for-profit schools) Students Parents ED Grantees State Education Employees ED Employees 13
Allegations Involving Students FAFSA Fraud Social Security Number Alien Registration Status Dependency Status Income and Assets Number of Family Members in College Falsification of GEDs/HS Diplomas Identity Theft Distance Fraud Schemes Ineligibility of Programs Offered by Telecommunications https://ifap.ed.gov/dpcletters/gen0611.html Ineligible Courses at Foreign Institutions - https://ifap.ed.gov/dpcletters/gen1420.html 14
Allegations Involving School Officials Ghost students Leasing of eligibility Default rate fraud 90/10 Rule manipulation scheme Financial statement falsification Falsified last date of attendance Obstruction of a federal audit or program review Fraud/theft by school employee FAFSA fraud - enrollment Falsification of GEDs/HS diplomas Falsification of attendance and Satisfactory Academic Progress Falsification of grades Failure to make refunds Loan theft/ forgeries 15
Conducting Investigations Phase 2: Finding the Facts
Gathering Evidence Statutory and Regulatory Access to Records Consensual Search/Access Search Warrant Court Order Subpoenas Grand Jury Administrative Interviews 17
OIG Statutory and Regulatory Access to Records Under the Inspector General Act of 1978, as amended, 5 U.S.C. App., and in Federal regulations at 2 C.F.R. 668.24(f), an institution that participates in any title IV, HEA program and the institution s third-party servicer, if any, shall cooperate with the Department of Education s IG, in the conduct of audits, investigations, program reviews, or other reviews authorized by law. Disclosure to the OIG is specifically exempt from the requirement to obtain student/parental written consent under the Family Educational Rights and Privacy Act (FERPA) because the disclosure is to an authorized representative of the Secretary of Education in connection with the enforcement of the Federal legal requirements which relate to Federally supported education programs. 20 U.S.C. 1232g(b)(1)(C)(i)(II) and (b)(3); 34 C.F.R. 99.31(a)(3)(iii) and 99.35. (http://www2.ed.gov/policy/gen/guid/fpco/index.html) The inclusion of a copy of the OIG s request letter in a student s file will constitute compliance with FERPA s recordation requirement. 20 U.S.C. 1232g(b)(4); 34 C.F.R. 99.32. Records disclosed will be handled in accordance with the requirements in 34 C.F.R. 99.31(a)(3), 99.33, and 99.35. Records disclosed may be re-disclosed to the Department of Justice and its authorized representatives to enforce Federal legal requirements related to Federal education programs. 20 U.S.C. 1232g(b)(1)(C)(ii); 34 C.F.R. 99.31(a)(3)(ii), 99.33(b), and 99.35. 18
Evaluating the Allegations: Fraud Risk Indicators One person in control No separation of duties Lack of internal controls/ignoring controls No prior audits / Repeat audit findings Financial records not reconciled High turnover of personnel Unexplained entries in records Unusually large amounts of cash payments Inadequate or missing documentation Altered records Unauthorized transactions Related Party transactions - Weak controls - Little or no oversight - Lax rules - Everyone does it. - I was only borrowing the money. - I was underpaid and deserve it. - Debt - Addictions - Status - Greed 19
Conducting Investigations Phase 3: Prosecution
Potential Remedies Administrative Civil Criminal 21
Administrative Actions Referral to ED Program Office (FSA, OPE, etc ) Audit Resolution by Program Office Designation as a high risk grantee by the Department Multi-year Compliance Agreement or Memorandum of Understanding between the Department and entity which requires they enter into corrective action plans to reach full compliance with all applicable program requirements in order to continue to receive Federal education funds Coordination with School Administration or Owners 22
Civil Actions Burden of Proof Preponderance of the Evidence (More likely than not). Specific Intent to Defraud the Government not an Element. Penalties Civil Penalties of between $5.5K and $11K per count Plus 3 times the amount of actual damages. Civil False Claims Act 31 U.S.C. 3729 Knowingly presents, or causes to be presented, to the US Government a false or fraudulent claim for payment or approval or makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or to conceal, avoid, or decrease an obligation to the Government. 23
Criminal Actions Burden of Proof Beyond a Reasonable Doubt Intent to defraud the government is an element. Penalties Incarceration Court ordered restitution Fines Examples of Charges 18 USC 371 Conspiracy 18 USC 1001 False Statements 18 USC 1341 Mail Fraud 18 USC 1343 Wire Fraud 18 USC 1344 Bank Fraud 18 USC 641 Theft of Government Funds 18 USC 666 Theft Concerning Federal Programs 24
Examples of Investigations 25
Civil Investigation Allegation: EDMC was accused of violations of the Higher Education Act s Incentive Compensation Ban and of deceptive and misleading recruitment practices. It was accused of running a high pressure boiler room, where administration personnel were paid based purely on the number of students they enrolled. Outcome: In 2015, U.S. Attorney General Loretta Lynch announced that a global civil settlement had been reached with EDMC for $95.5 million. 26
TCD Investigation Allegation: A University of Nebraska student gained unauthorized access to the PeopleSoft CampusVue program used in the administration of Title IV funds and stole the academic profiles of 650k students. The student was allegedly attempting to change his recorded grades. Investigation: TCD, FBI and the University Police investigated and seized the student s personal computers via search warrant. TCD forensically examined the computers and found the student had performed reconnaissance from outside and inside the University s networks. By comparing this data with logs from the university, investigators were able to compile a comprehensive timeline of the student s actions to prove the student committed the crime. Outcome: The student was convicted of violating 18 U.S.C. 1030, fined $107,000 and confined for one year. 18 U.S. Code 1030 - Fraud and related activity in connection with computers 27
School Referral to OIG (Fraud Ring) Referral: Detected by the Rio Salado College and referred to the OIG. Allegation/Investigation: From 2007 to 2011, a fraud ring leader used identities of 52 individuals to prepare, submit applications for FSA funds, many of whom were ineligible for the funds. This resulted in disbursements of about $513,000. A total of 64 individuals charged in this scheme. Outcome: The fraud ring leader was arrested in February 2013. She pleaded guilty to 10 counts of wire fraud, was sentenced to 24 months in prison, and ordered to repay $166,000 to the Department of Education. 28
Terrorism Investigations with the FBI Three Minnesota men convicted of conspiring to join Islamic State U.S. Department of Justice, June 2016 Two of them were also convicted for attempting to use their Federal student aid to purchase a round-trip airline ticket to Greece with the intention of traveling to Syria to fight for ISIS. One of the men was sentenced to serve 15 years in prison; the second was sentenced to serve 10 years in prison. Two Orange County Men Convicted of Conspiring to Join ISIL; They also Engaged in Fraud to Finance One s Trip to Syria U.S. Department of Justice, June 2016 One of the men was also sentenced for attempting to use Federal student aid to purchase a plane ticket for another man to travel to Turkey and eventually to Syria to join ISIS. Both men were sentenced to 30 years in prison and a lifetime of supervised release. 29
Parent of Student Indicted for Fraud In early 2005, the OIG received allegations from a guarantee agency that an individual had fraudulently obtained more than $120,000 in federal student loans and grants by applying in his daughter's name for these benefits, falsely claiming that his daughter was enrolled at Oxford University in Great Britain. The father was alleged to have prepared and submitted fictitious documents purporting to be records of Oxford University to student loan officials in order to deceive those officials into authorizing educational benefit payments for his daughter. On April 13, 2005, the father was arrested in Florida by ED-OIG agents who also executed a search warrant at his residence the same date. The father was charged with a one count indictment of submitting false information to the U.S. Department of Education. On September 22, 2008, the father was sentenced to 21 months incarceration; two years supervised release, and ordered to pay $120,676 in restitution, and a $200 special assessment fee. As part of the sentencing, he forfeited a $175,000 2005 38 Hunter sailboat. 30
Conducting Investigations Phase 4: Reducing Program Vulnerabilities
FSA and OIG Coordination OIG assists the Department in promoting the integrity of the Title IV programs. Reviews and comments on all regulations with suggestions on areas for improvement Regularly exchanges information with FSA to identify current issues in compliance and abuse, and coordinates oversight and investigatory activities, when appropriate Issues Management Information Reports to alert the Department about serious program vulnerabilities, as well as fraud and corruption trends o Distance Education Fraud Ring Investigative Program Advisory Report (IPAR) - http://www2.ed.gov/about/offices/list/oig/invtreports/l42l0001.pdf o Dear Colleague Letter GEN-11-17 - http://www.ifap.ed.gov/dpcletters/gen1117.html o Final Management Information Report PIN Security Vulnerabilities - http://www2.ed.gov/about/offices/list/oig/auditreports/fy2013/x21l0002.pdf o Information for Financial Aid Professionals (IFAP) - http://www.ifap.ed.gov/ifap/ 32
Your Role in Preventing and Detecting Fraud
Why Report Fraud to the OIG Meet statutory and regulatory requirements Comply with ethical responsibility Deter others from committing fraud and abuse Avoid being part of a fraud scheme Prevent administrative action Avoid civil penalties Prevent criminal prosecution 18 U.S.C. 4 (Misprision of a Felony) - Whoever, having knowledge of the actual commission of a felony cognizable by a court of the United States, conceals and does not as soon as possible make known the same to some judge or other person in civil or military authority under the United States, shall be fined under this title or imprisoned not more than three years, or both. 18 U.S.C. 2 (Aiding and Abetting) - Whoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal. 34
Standards of Administrative Capability 34 CFR 668.16 The Secretary considers an institution to have administrative capability if the institution: an (f) Develops and applies an adequate system to identify and resolve discrepancies in the information that the institution receives from different sources with respect to a student s application for financial aid under Title IV. (g) Refers to the Office of Inspector General any credible information indicating that applicant for Title IV, HEA program assistance may have engaged in fraud or other criminal misconduct in connection with his or her application. 34 C.F.R. 668.25(c)(2) School contracts with third-party servicers must contain a provision in which a servicer agrees to refer to the OIG any information indicating there is reasonable cause to believe that the institution or an applicant for Title IV, HEA funds might have engaged in fraud or other criminal misconduct 35
What You Can Do Ensure that staff receive necessary training Review documents thoroughly Question documents/verify authenticity Request additional information if you aren t satisfied Compare information on different documents Contact the OIG if you suspect fraud Cooperate with the OIG in connection with an audit or investigation 36
Report Fraud! Inspector General s Hotline You can reach the Hotline on the web at: OIGhotline.ed.gov For questions, call 1-800-MIS-USED
Questions?