OIG: Office of Inspector General
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Investigation Report

U.S. Department of Justice

United States Attorney
District of Arizona

September 1, 2010

For Information Contact Public Affairs WYN HORNBUCKLE
Telephone: (602) 514-7573
Cell: (602) 740-2422


PHOENIX - All 64 defendants have been sentenced for their roles in a massive scheme to defraud the United States out of more than a half-million dollars in student loan funds. The case, known as United States v. Halton et. al., saw each of the 64 defendants plead guilty to charges including Conspiracy, Mail Fraud, Financial Aid Fraud, Theft of Government Funds and/or False Statements in Connection with Financial Aid. The final defendant was sentenced on Monday by U.S. District Judge Neil Wake to a term of home detention and ordered to pay $15,295 in restitution.

“Student loans are scarce resources for serious students, not a honey pot for dishonest people,” said U.S. Attorney Dennis K. Burke. “These 64 convictions – the largest number of defendants ever charged in a student loan fraud scheme -- should serve as a strong warning to anyone attempting to defraud the U.S. taxpayers. You will be caught, held accountable and prosecuted.”

The ringleader of the scheme, Trenda Halton, previously plead guilty to ten counts including Conspiracy, Mail Fraud and Financial Aid Fraud. She was sentenced to 41 months in prison and ordered to pay $581,060 in restitution. In sentencing Halton, Judge Wake said, “This was just fraud and dishonesty for greed.” Judge Wake then went on to state, “People who engage in this kind of serious, extensive, costly abuse need to have a public punishment so the other people will see that and not be tempted to make the same decision for themselves.”

From July 2006 through October 2007, Halton and others recruited individuals to act as “straw students” in order to apply for federal financial aid at Rio Salado College. The applicants were neither active students at Rio Salado nor did they intend to become active students. Halton would submit admission and financial aid applications with forged and false information, and then charge a “fee” to straw students ranging from $500 to $1,500. She also accessed online classes using the identity of the straw students, to generate attendance records, which caused Rio Salado to authorize financial aid payments to the straw students.

This investigation was conducted by IRS Criminal Investigation, Social Security Administration- OIG, Department of Veteranˆs Affairs – OIG, and the Department of Education – OIG. Assistant U. S. Attorney Michael D. Johnson is prosecuting this case for the United States.

“This case is an example of how we aggressively pursue anyone who steals or fraudulently obtains federal student aid,” said Natalie Forbort, Special Agent in Charge of the U.S. Department of Education Office of Inspector General's Western Regional Office. “I want to commend all of the federal and state law enforcement agents and the U.S. Attorney Office, whose combined efforts ensured that all of the individuals that participated in this scheme were identified and prosecuted for the role they played. I also want to thank the staff at Rio Salado Community College for their diligence in reporting their initial suspicions to us.”

“Traditional mail fraud schemes rebound as criminals turn to the Internet to operate illegal schemes on a larger scale and with greater anonymity,” said Phoenix Division Acting Inspector in Charge Terry Donnelly of the U.S. Postal Inspection Service. “Government agencies that fall prey to mail fraud scams are afforded the same protection under the Mail Fraud Statute as any citizen. Postal Inspectors will continue working with our law enforcement partners to leverage resources and maximize the expertise of each agency.”

The investigation preceding the indictment was conducted by the U.S. Postal Inspection Service and the U.S. Department of Education, Office of Inspector General with assistance from the Surprise Police Department. The prosecution was handled by Frederick A. Battista and Charles W. Galbraith, Assistant U.S. Attorneys, District of Arizona, Phoenix.

RELEASE NUMBER: 2010-192(Halton et al)

For more information on the U.S. Attorney’s Office, District of Arizona, visit http://www.usdoj.gov/usao/az/

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Last Modified: 09/02/2010