• October 2, 2014

Online Scheme Highlights Fears About Distance-Education Fraud

Online Scheme Highlights Fears About Distance-Education Fraud 1

Rio Salado College

Rio Salado College, in Arizona, was the target of a scam that highlights what federal authorities describe as the vulnerability of online education to financial-aid fraud.

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Rio Salado College

Rio Salado College, in Arizona, was the target of a scam that highlights what federal authorities describe as the vulnerability of online education to financial-aid fraud.

An Arizona woman pleaded guilty on Tuesday to running an elaborate scam that highlights what federal authorities describe as the vulnerability of online education to financial-aid fraud. The scheme embroiled Rio Salado College, home to one of America's largest online programs, in a half-million-dollar con.

The defendant, 38-year-old Trenda L. Halton, blended in with the working-adult students at Rio Salado. But the neatly organized records in her suburban Phoenix home held clues to a double life.

Social Security numbers. Tax returns. High-school diplomas. Ms. Halton used those records in a scheme that defrauded the federal government of about $539,000 in student-aid dollars—a scheme that involved dozens of people recruited to pose as phony "straw" students, according to court records.

Ms. Halton pleaded guilty in federal court to conspiracy, mail fraud, and financial-aid fraud. Her lawyer has not responded to requests for comment.

But the high-tech methods she admitted using have already set off alarms at the U.S. Education Department. Ms. Halton made her bogus recruits look like real students by assuming their identities online to "participate" in classes and collect a share of their aid money, authorities say.

The case highlights how the same technology that is expanding access to education for millions of online students may also expose the country's $117-billion federal financial-aid system to supersize fraud.

Confirming whether someone in an online class is a legitimate student represents a "significant challenge," says Mary Mitchelson, acting inspector general for the department. Ms. Mitchelson told Congress in October that her office had opened 29 investigations related to distance education since 2005, 19 of them in the past two years. And the number of distance-education investigations has increased since her testimony.

The targets of such digital crimes tend be community colleges, where requirements to establish financial-aid eligibility may be minimal, tuition is cheap, and distance education is booming. The cases don't always get much public attention. But the University of Phoenix's Axia College, Michigan's Lansing Community College, and Texas' Dallas County Community College were all victims of online financial-aid fraud, according to the inspector general's report to Congress covering April to September of 2009.

Questions of Vulnerability

So does what happened to Rio Salado and others reflect a vulnerable system in need of reform? Or, as Rio Salado officials argue, do the legal charges illustrate that existing safeguards work well?

Fake online students getting financial aid are part of a bigger story of inadequate government oversight, says Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers. Congress has opened the federal purse to the rapidly expanding field of cybereducation, he notes, with decisions like its 2006 rollback of a rule that had prevented institutions that enroll more than half their students through distance education from participating in federal financial-aid programs.

But the government has failed to match that accommodation with "appropriate safeguards that protect against likely abuses that may be uniquely possible only in a distance-education environment," Mr. Nassirian says.

"The advent of the Internet has made abusive practices so much easier, and so much more scalable," he says. "One individual can in fact sign up as 60 people, and click-click-click on a fairly regular basis, and pocket a significant amount of money. It wouldn't be worth doing as one student, physically. But it becomes suddenly profitable if you can be 60 students, virtually."

This singling out of online education infuriates Fred B. Lokken, chair of the Instructional Technology Council, an affiliate of the American Association of Community Colleges. Mr. Lokken argues that the fraud at Rio Salado "could be replicated in a traditional classroom on almost any campus in America." That's because online registrations and applications are common at such places, he says. And do instructors really get to know hundreds of students in an introductory-level lecture class?

Then there's the context. The Rio Salado case represents one flavor in a full menu of financial shenanigans investigated by the inspector general's office, many of which have nothing to do with online education. In highlighting a handful of distance-education cases, Mr. Lokken says, the inspector general is taking "a Chicken Little approach to the process."

"The sky is not falling," he says.

Indeed, many distance-education programs have built-in protection: their high cost. Mark Kantrowitz, publisher of FinAid, an independent Web site about financial aid, says criminals hit low-cost colleges so they can maximize the amount of cash they pull out after financial aid is applied to tuition and fees. Online programs, he says, often aren't cheap enough to make them attractive to crooks.

"This is not at the top of anybody's priority list, except for perhaps the OIG," he says, referring to the inspector general's office. "Yes, there is some fraud, but it's not an overwhelming amount."

To Catch a Thief

The exact nature of online-education fraud is best shown by a close look at Ms. Halton's scheme. It came to light in 2007, when a sharp-eyed part-time employee in Rio Salado's financial-aid office spotted similar handwriting on several student-aid applications. A two-year investigation by federal authorities and college officials culminated in June 2009, when, without explaining the exact reason, the U.S. attorney for Arizona summoned Rio Salado's president, Linda M. Thor, to the attorney's downtown Phoenix office. There, as updates trickled in on arrests in the case, Ms. Thor was given the details of a 130-count indictment against Ms. Halton—and one hour to draft a statement for a news conference.

The indictment accused Ms. Halton, a Rio Salado student who was eventually suspended for failing to make academic progress, of working with four accomplices to find some 136 potential straw students. Ms. Halton would prepare and submit applications for admission and financial aid to Rio Salado on behalf of those people, court records say. The goal was to get federal student-loan and Pell Grant money that is disbursed to financial-aid recipients after the college deducts tuition—leftover money that Linda L. Ross, Rio Salado's former financial-aid director, says can amount to several thousand dollars per student.

"It's supposed to be for educational-related expenses," says Ms. Ross, who led the aid office during the fraud inquiry. "But we're not the police. We don't go out to look to see what they spend it on."

Authorities characterized Ms. Halton as a ringleader who managed what amounted to a small business around the illicit skimming of aid dollars. She pulled it off through an elaborate system of records that held personal information on the straw students, court records say.

But here's where the question of technology comes in. Rio Salado generally won't mail out checks for the extra financial-aid dollars until a student attends a minimum number of classes, either online or in person, the indictment says.

The delay is a safeguard, but it has an expiration date. The college checks to see if first-time financial-aid recipients participated during the first week. Ms. Halton apparently gamed that system by using straw students' user names and passwords to log in to their online classes and read about what participation was required. And then she satisfied the requirement, says Kishia R. Brock, the college's dean of enrollment management and student services.

"We can't hold those funds," Ms. Brock says. "We can't penalize 90 percent of the population who is not trying to commit fraud to prosecute or prevent for the small percentage that is."

In the Rio Salado case, that small percentage managed to accumulate $538,932. The straw students kicked back a portion of the proceeds to Ms. Halton—between $500 and $1,500 apiece from multiple loans and grants, prosecutors say. She also paid a lesser "finder's fee" to her recruiters, according to court records.

Ultimately, 65 people were indicted, most in Arizona but others in Wyoming and California. In her plea agreement on Tuesday, Ms. Halton agreed to repay $581,060. She was released pending sentencing on March 29. As of Wednesday, 23 other defendants had been sentenced and ordered to repay a total of $212,013.

Rio Salado officials argue that their success in busting the fraud ring resulted from the safeguards of the college's system, not a stroke of luck. They caught wind of the scheme early, they said. They called in the authorities. They disbursed money during the investigation as a necessary step in building the case.

The inspector general's office has been sounding alarms over the issue for years. One of its earlier investigations involved Truckee Meadows Community College, where Mr. Lokken, of the Instructional Technology Council, serves as an associate dean. In 2004, the Nevada college found itself ensnared in a $1-million financial-aid scam that featured a 61-year-old grandmother who worked with four of her children and three of her grandchildren to steal student aid through distance-learning programs in Arizona, Colorado, Maryland, Nevada, and Texas.

Plans for Protection

So what is the government doing to protect financial-aid programs from such abuse?

Robert M. Shireman, deputy under secretary of education, describes in limited detail a recent Education Department project, run in conjunction with the inspector general, that mines data such as financial-aid accounting records for risk signs that could trigger follow-up investigations. For example, an unusual number of invalid Social Security numbers at a particular college might suggest a scam.

In 2008, when the inspector general's office revealed plans to create a new central database of computer records to improve the detection of waste and abuse in government programs, higher-education lobbying groups objected on the grounds that it would invade privacy and probably not produce much useful data.

Asked whether he was referring to that same project, Mr. Shireman said in an e-mail message: "No, the joint project with the IG involves no new collection or use of individual data. It is focused on analyzing information about institutions to help guide further monitoring, program reviews, and other appropriate follow-up."

Mr. Shireman also cites a new element in the Higher Education Act that requires accreditors to monitor the steps that colleges take to verify that an enrolled student is the same person who does the work. It was a controversial provision that stoked fear that online education providers would be forced to buy expensive student-surveillance technology.

For now, however, colleges will be able to satisfy the new mandate with techniques like secure log-ins and passwords.

Although passwords failed to prevent the Rio Salado fraud, Mr. Lokken thinks the requirement is adequate at this point, given what could be the crippling cost of more elaborate technologies.

"You can erect so many barriers that you wipe away what has been the great breath of fresh air, allowing people who used to not be able to complete their studies to complete their studies," he says. "We need to be balancing vigilance with the fact that we're in the worst recession we've ever been in."

Comments

1. 11180037 - January 14, 2010 at 06:56 am

This is but the opening introduction to a scandal that will eventually blow-up the defensive posturing of those who, by virtue of either naivete or deceit, have a vested interest in maintaining the status quo. The financial aid fraud and abuse of the 80' will be back soon to haunt us all. Government largess, in this case in the form of financial aid, has all the characteristics of the "tragedy of the commons", where the taxpayers' financial liability for the fraud is a mere after-thought to those who profit.

2. davidbinder - January 14, 2010 at 12:52 pm

First, 11180037 mischaracterizes the concept of the "Tragedy of the Commons" ... that concept is not applicable to this situation.

Second, kudos to the unnamed sharp-eyed person in Rio Salado's financial aid office ... that's an unusual way to spot these things, but it certainly worked this time.

Third, the root issue is the online application and registration systems, not in the online courses. However, inconveniencing (and excluding) the vast majority of legitimate and honest student (and increasing cost of college operations) to stop a few dishonest folks strikes me as inappropriate.

As noted in the article, this same fraud could easily be perpetrated in any large first year course regardless of modality. Given the ease of availability of counterfeit ID documents in all major areas of the country, it is easy for a person to enroll as another person, complete with "state issued ID." 37 of the 50 states currently do not have sufficient security in their design of driver licenses to meet the soon to be implemented TSA standards for passenger identification.

No fraud or crime can be completely prevented ... if it could, there'd be no Madoffs or bank robbers or whatever. Catching and severely punishing perpetrators can reduce the incidence, but there always will be people who believe they are smarter than the system ... and some who are successful for a while until caught.

3. 11291104 - January 14, 2010 at 01:20 pm

In addition to the financial aid fraud described in this article, there is a significant issue of institutional integrity. If a "fake" student can sign up for credits so readily, can a "fake" student also "earn" credits easily? Arguing that there can be fradulent practices in large lecture courses, and that distance education should not be required to institute more security than is presently required, is not wise if the higher education community wishes to encourage public confidence in online education. All higher education institutions need to work to ensure the quality and integrity of ALL of their forms of educational delivery systems. Without necessary oversight to assure integrity and quality, the greater "access" provided through distance education may result in a substandard reputation for the institutions and the students who complete on-line programs and courses.
B. Beno, President
Accrediting Commission for Community and Junior Colleges/WASC

4. johntoradze - January 14, 2010 at 01:26 pm

Come, come, davidbinder. Online classes have a special problem that is exactly the same as that of universities of yesteryear that ran correspondence classes. (University of South Africa has been the world leader in distance education since 1946.) The problem is verification of identity to ensure that the student is who they say they are. Similarly, the GRE and SAT examinations face the same problems.

The solution used in South Africa was to have proctors. A proctor could be a policeman, judge, or other reasonable official. Their job was to verify identity and that the conditions of the examination were fulfilled. Online education is just a much more expensive and less efficient system for delivering distance learning. Since distance learning is novel for most online programs, and each tends to think of itself as inventing this particular wheel, this fundamental problem is ignored - as we see.

The only reason this woman got caught is that she used her own handwriting on so many applications. But that method is never going to catch the student who signs up and then inveigles "friends" into doing the work for them. It is easy to envision a well off student buying the entire package. I am certain that I could enroll as a student and get through a 4 year degree without doing any of the work myself if I chose.

Anyone that has taught undergrads knows how capable they are at cheating. This runs the gamut from the well endowed female who makes a project of showing her stuff to (or hopping in the sack with) appreciative TAs or professors, to sophisticated electronics. Just last year I taught a class with those new "clickers" and assigned credit for questions during lecture. Lo and behold, but some students were found to have as many as 10 of their classmate's clickers, and students went into earlier lecture sections to obtain answers for a later section. Etcetera.

Distance learning has to be run with proper safeguards. They don't exist now.

5. arrive2__net - January 15, 2010 at 03:14 pm

I also agree that the government needs to have greater safeguards against fraudulent abuse of student financial aid, whether in the classroom or in distance education. I have not seen data to compare the rate of fraud between distance and on campus, but if there is fraud in one it stands to reason that it is in both. Either kind of fraud is bad. None-the-less, distance education could be more vulnerable to such frauds and, as an institution, it stands to suffer more if effective methods of reducing or eliminating fraud are not used. Maybe a system of loans converting to grants could be used, like the funding is given as a loan that converts to a grant if the course is completed. Of course if the student is a complete fabrication there would be no one to collect the loan from, but it might discourage some straw-student scams or make them more easy to detect. It seems to me that if students are serious and sincere in getting a distance education they ought to be willing to prove they exist. Its true that distance education is an opportunity for many to get the degree that otherwise they could only dream of, but once they get it, it should really be worth something. Ironically, if the straw-students in the story had done the same thing without being involved in a conspiracy, maybe it would have been legal ... maybe they would then have just seemed to be students who couldn't make it in college and just gave up.
Bernard Schuster
Arrive2.net

6. jarrodmorgan - January 15, 2010 at 06:05 pm

Bravo, Dr. Beno!

Distance Ed is at an important point in history where those involved can either choose to increase integrity or accept that it will evolve into a sub-standard education option.

The tools are already out there to combat this type of scenario. Take a look at www.ProctorU.com, a simple online proctoring service that verifies a student's identity via Acxiom's identity verification services, then monitors them using a webcam and screen watching service. Several institutions are already ahead of the curve on this, and it's not cost-prohibitive.

We can no longer choose to do nothing to prevent this from happening again.

Jarrod
ProctorU.com

7. rpoulin - January 17, 2010 at 12:34 pm

Last year the UT TeleCampus, ITC, and WCET jointly released the document "Best Practice Strategies to Promote Academic Integrity in Online Education". While it was meant to address academic fraud, many of the same principles can be used to combat outright financial fraud. Ms. Hatton gamed the system by meeting minimum participation requirements. The richer the interaction, the more unattractive it is to try to game the system.

The Best Practices document can be found at:
http://wiche.edu/attachment_library/Student_Authentication/BestPractices.pdf

Russell Poulin
WCET

8. nacrandell - January 18, 2010 at 09:15 am

"Indeed, many distance-education programs have built-in protection: their high cost."

No, the programs do not.

If it is a distance learning program with little overhead, then why the high cost? It is not the real estate - they don't have much. It's not the staff - MA's or PhD's who are not tenure tracked aren't paid much. However, the Federal loans are profitable as the students are responsible for repayment, if it repaid at all.

This situation is similar to the real estate bubble - it's a nice thought that everyone owns a house but what happens when people lose their jobs and the lopsided loans become due? It is nice to hope that everyone is able to get an education, however, are distance programs offering an education, or manipulating the loan system with little accountability? What are the program standards and drop-out rates?

9. digitalproctor - January 18, 2010 at 02:18 pm

Authenticating student identities beyond a username/password is critical for preventing these so called "straw students". Ms. Halton was able to pose as multiple students because there was no verification other than the username/password. It is a myth that the only way to verify identities is with cost crippling hardware/proctoring solutions.

Digital Proctor authenticates students using a software only solution. We use students unique typing signatures to make sure they are the appropriate and registered student interacting and completing their assignments. Our technology is also useful in this instance of financial aid fraud...making sure that one student is not posing as 50+.

As institutions discover solutions like ours, safeguarding online education will become a reality.

Shaun Sims
CEO Digital Proctor
ShaunSims@DigitalProctor.com

10. vicden1 - January 19, 2010 at 09:59 am

This kind of fraud is perpetrated daily by students both online and F2F. Students who sign up for classes, go diligently until the day Financial Aid is disbursed, and then they're gone. Some will show up once in a while, with a string of odd and often duplicated excuses. Same thing happens online.
If all an online program asks is that students log in as proof of participation, they get what they ask for. Hopefully in F2F classes you expect more of your students than showing up once, doing nothing and never to be seen again, then give them their aid.

11. dade3397 - January 19, 2010 at 01:03 pm

The issue of who is in your classroom, online or F2F, is one that has always existed. When on-ground colleagues of mine say I don't know my students, I ask them if they card their students on the first day of class and periodically thereafter to be sure the right person is sitting there. No one has ever told me he or she did that on-ground. So, how do they know who is really taking the tests, turning in papers, and sitting in that desk?

I have taught online since 1994. While I don't "know" the students in my class, I do get to know them and we create a learning community in our class. I can tell by their writing styles in discussion questions, if the same student turned in a paper.

My program has strict requirements about participation and students do more than just drop in the first week and never again. The participation requirements are actually stricter than those at the same school for on-ground students and our students have to participate every week of the course.

One thing that bothers me is the tarring of all online programs because there is abuse at some, whether it is from fake students in courses to granting degrees for no work and just paying tuition. Not all online programs are like that, though I will grant you many are. I've worked for some of those and left as soon as I found out that my job was to distribute As and Bs and not educate. That said, this happens on-ground, too, and is getting worse because of the decrease in funding to schools by states as budgets are balanced on the backs of education and other social services.

Deborah S. Adelman, PhD, RN

12. allens - January 19, 2010 at 03:04 pm

I've been a TA for in-person classes, and helped my advisor out for a much larger (200+ student) class, at Rutgers. I'm also currently an instructor in an online program (Kaplan Online University). The only things for which people HAD to turn up in person for in the large class were the exams - which were much too far into the semester for them to be used for financial aid criteria. There were some assignments due earlier - all of which could be done online or with something shoved under a door. Notably, a lot more people showed up for the exams than showed up for the in-person class, despite my advisor being a good teacher and the class not being too early in the morning.

For BOTH Rutgers AND Kaplan, the means of telling - on anything other than exams - of whether people are copying was, and is, identical - turnitin.com. And I caught people cheating in the decidedly in-person (laboratory) class I TAed for. Regarding exams/quizzes, Kaplan is varying them a lot more than the exams at Rutgers were; being online makes it possible to do a random assortment out of a question pool, instead of having a maximum of 4 or so exam versions for an in-person exam. Yes, the Kaplan exams are not proctored - but they're written EXPECTING the students to be able to look up some information (not all of it - there isn't enough time). And the written assignments, with turnitin.com checking, make up more of the course than they did at Rutgers for the large class (the laboratory class did have a larger proportion being written assignments, namely the lab reports... but it was also a class of max 21 people per section, 63 people max per semester).

I don't think it makes any difference whether a program is online or not. It makes a difference how it's done.

BTW, I note a mention of federal student loans above? Exactly how were these fake students expecting to pay these back? If they weren't, and they were able to get loans anyway, then there's a problem with the student loan system (needing to be more merit-based, among other things...).

13. californiabruce - January 23, 2010 at 02:51 am

Dr. Beno:

You say: "All higher education institutions need to work to ensure the quality and integrity of ALL of their forms of educational delivery systems. Without necessary oversight to assure integrity and quality, the greater "access" provided through distance education may result in a substandard reputation for the institutions and the students who complete on-line programs and courses." And, of course, along comes Jarrod who has the technological solution which will cost institutions even more money to put in place: "Take a look at www.ProctorU.com, a simple online proctoring service that verifies a student's identity via Acxiom's identity verification services, then monitors them using a webcam and screen watching service."

Perhaps higher education would be better off investing in their contingent instructors who make up 70 to 80 percent of the faculty at community colleges (and the percentage is increasing)? You know, like better compensation and working conditions? Treating faculty like disposable employees with no involvement in governance, curricular planning, or student interaction jeopardizes their ability to teach and puts the education of students at risk. This is something that, for some reason (?), is off the radar of the accrediting agencies while in the meantime, they whine about SLO's and other nonsense.

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