OIG: Office of Inspector General
   Current Section

Investigative Reports

Ohio September 2, 1999

CONTACT: Public Information Office
(614) 469-5715, ext. 365
or (888) 953-2199

Former Resident Indicted for Student Loan and Social Security Fraud

Cincinnati -- Sharon J. Zealey, United States Attorney for the Southern District of Ohio; Christopher Fox, Special Agent in Charge, Department of Education. Office of the Inspector General; and Dennis Neizgoda, Special Agent in Charge, Social Security Administration, Office of the Inspector General today announced that a former resident of Cincinnati was indicted yesterday for defrauding both the U.S. Department of Education and the Social Security Administration. The Indictment was returned by the Federal Grand Jury in Cincinnati

Kenneth Payne. 38, formerly of Mt. Auburn, now believed to live in Maryland, is charged with falsely representing to a psychiatrist in September 1997 that he was unemployed and disabled by mental illness. Payne is accused of fraudulently obtaining the psychiatrist's certification that Payne was permanently and totally disabled for purposes of Payne applying for Department of Education forgiveness of his obligation to repay five student loans. Payne submitted the psychiatrist's certification to the Department of Education, and is relieved him of the obligation to repay $27,855.56.

Payne is also charged with deceiving the Social Security Administration in order to receive disability benefits to which he was not entitled. The indictment alleges that in March 1998 Payne, who was them receiving Social Security disability benefits, told an agency field representative that he had not been employed since 1996, although Payne had been employed full tine since July 1997, Payne received federal disability benefits in the amount of $6,682.32 to which he was not entitled as a result of the misrepresentation.

Both agencies discovered the fraud in 1998. The Social Security Administration stopped Payne's disability benefits at that time. The Department of Education has not collected the unpaid loans from Payne.

With regard to the return of the Indictment, Ms. Zealey said,

"We strongly support the efforts of the Department of Education and the Social Security Administration to fight fraud and abuse in their programs. Our office prosecutes to the fullest those who lie in order to obtain federal benefits they are not eligible to receive. We are equally vigorous in bringing charges against borrowers who falsely claim disability in order to escape their obligations to repay student loans. We believe that citizens want their tax dollars directed to those who truly qualify for federal benefits and want borrowers to repay student loans unless they are truly disabled. We use prosecutions wherever they are appropriate to assure the integrity of such programs. In addition, we regularly use civil actions to collect money owed to the United States by delinquent borrowers."

If convicted, Payne faces up to 10 years in prison, a $500,000 fine, and restitution to the agencies of the amounts unlawfully obtained.

Payne will appear September 23, 1999, in Cincinnati for arraignment. No trial date has been set.

Ms Zealey praised the investigative efforts by Special Agents for both the Department of Education and the Social Security Administration.

An indictment is merely an accusation. The defendant is presumed innocent until and unless proven guilty.

News releases from the U.S. Attorney's Office for the Southern District of Ohio are available on the Internet at www.usdoj.gov/usao/ohs

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Last Modified: 03/03/2005