Government prosecutors have targeted ‘ghost’ or ‘shell’ school operators that defrauded the GI Bill system but have seldom pursued student veterans who enrolled solely to collect housing subsidies, an investigation by The Washington Post reveals.
Blue Star Learning, located next to a fast-food outlet in San Diego, exemplified the fraudulent practice by exploiting GI Bill funds to the tune of $29 million over four years. While over 1,100 veterans enrolled ostensibly for computer skills, their primary aim was to receive monthly housing stipends, documents and law enforcement records show.
Admissions director Justin Foose recounted how veterans logged 18 class hours weekly to appear as full-time students deserving of subsidies but mostly wasted time. Instructors went through the motions of teaching, ensuring the school received millions in tuition from the federal government, according to investigators’ reports.
Defined by federal agents as a ‘ghost’ school, Blue Star Learning was at the forefront of scams mimicking their fraudulent operations nationally. These schools differed from other dishonest enterprises by involving veterans in the cons.
Since the inception of the Trump administration, the Justice Department has secured convictions against a minimum of 12 such school operators for defrauding the Department of Veterans Affairs (VA) through the GI Bill program. The defrauded schools significantly slacked on educational accountability, with large student bodies absenting themselves or participating with little effort, documents indicate.
Besides defrauding taxpayers, such rackets undermine the legitimacy of the GI Bill and make it harder for other veterans to trust that they can get a quality education from any school bearing the government’s stamp of approval.
The original purpose of the GI Bill was to assist veterans in acquiring civilian work skills, offering tuition for 36 months to attend vocational schools or colleges. The GI Bill allocations include a housing allowance often adjusted for regional living costs; the median national monthly allowance was $2,161 last year.
Some veterans uninterested in education continued enrolling in such schemes, Michelle Wasserman, a federal prosecutor, recounted in court. She described the setups as a ‘fakey education,’ benefiting both school proprietors financially and veterans seeking benefits without genuine academic engagement.
Lax Oversight and the Fraud Problem
Lax oversight exacerbates fraud issues. By federal mandate, the VA must audit schools they fund biannually, but loopholes exist. A report showed 479 schools went unvisited for over three years while 153 never underwent compliance checks. When red flags, like tuition spikes or numerous grievances, arose, stricter evaluations were required, but not consistently applied.
Most trade schools are unaccredited, making it difficult to ensure the quality of education, though ten of twelve faulted institutions faced government action. Prosecution mostly eludes veterans, with only one instance of veterans being charged for engaging in such scams in recent decades.
The Justice Department secured a fraud conviction in 2019 against a California truck-driving school owner. Further charges followed against 35 of over 100 veterans involved, though not all faced repercussions. Prosecution required proving fraudulent intent beyond student negligence or poor academic performance.
Regulatory Challenges
Expanding investigations involved accessing GI Bill enrollment and complaint databases via Freedom of Information Act (FOIA) requests. The investigation faced barriers from VA, but legal action compelled some database releases, revealing widespread fraudulent practices.
VA Inspector General Cheryl Mason indicated the blurring line between letting veterans collude for benefits and targeting them as victims. Difficulties in distinguishing veterans seeking shortcuts from legitimate students resulted in minimal attempts to charge veterans.
In a statement, VA Press Secretary Quinn Slaven attributed issues to state compliance failures while stressing new efforts to safeguard against fraud, like a tool that measures school fraud risk. State governments countered by blaming VA and federal policymakers for regulatory resource constraints.
California was particularly embroiled, with the state VA first identifying Blue Star as suspicious in 2016. Eventually, a joint state-federal operation led to its closure, aligning with CalVet’s commitment to protect veterans and taxpayers alike.
Investigative Techniques and Discoveries
The VA inspector general’s specialized unit focused on educational fraud identified numerous irregularities, such as veterans residing far from their schools. These findings often suggested abuse of housing allowances under fraudulent educational pretense. Such investigations revealed extensive ‘ghost’ enrollments at schools like California Technical Academy.
Analysts discovered many registered students living exceedingly far from campuses. Instances like a Las Vegas-based veteran claiming attendance at a California school 230 miles away highlighted clear attendance violations.
Such findings, coupled with revelations from databases matching GI Bill students with VA employment data, exposed fraudulent behaviors. Identified inconsistencies led to prosecution for several school operators while highlighting inherent oversight challenges.
In some cases, official inquiries resulted in indictments against school administrators from several ghost-school operations, including California Technical Academy’s Michael Bostock, who was ordered to pay $105 million in restitution. Despite the costs and clear fraud evidence, most veterans emerged unscathed, eliciting questions from the judiciary on oversight effectiveness.
Systematic Flaws and Reform Needs
VA’s historic initiatives and more robust inspection approaches rarely yielded veteran prosecution, highlighting a legal system delicately balancing fraud identification and veteran welfare. According to testimonies from insiders, the intent was often to dodge scrutiny while exploiting the legal system to maximize financial benefits.
Interviews with Blue Star Learning’s Nimesh Shah revealed complexities. His admissions underscored an inability to resist lucrative schemes and, paradoxically, an inadvertent contribution to corrupt practices despite initially legitimate educational ambitions.
Investigative techniques exposed widespread fraudulent acts. Still, unresolved systemic shortcomings and legal difficulties in charging veterans meant loophole facilitators largely evaded justice. A concerted policy effort may be pivotal in eradicating ghost-school fraud, restoring trust in veteran educational programs.