[Senate Hearing 108-553]
[From the U.S. Government Printing Office]



                                                        S. Hrg. 108-553
 
                 BOGUS DEGREES AND UNMET EXPECTATIONS:
                    ARE TAXPAYER DOLLARS SUBSIDIZING
                             DIPLOMA MILLS?
=======================================================================

                                HEARINGS

                               before the

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                          MAY 11 AND 12, 2004

                               __________

      Printed for the use of the Committee on Governmental Affairs







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                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
ARLEN SPECTER, Pennsylvania          RICHARD J. DURBIN, Illinois
ROBERT F. BENNETT, Utah              THOMAS R. CARPER, Delaware
PETER G. FITZGERALD, Illinois        MARK DAYTON, Minnesota
JOHN E. SUNUNU, New Hampshire        FRANK LAUTENBERG, New Jersey
RICHARD C. SHELBY, Alabama           MARK PRYOR, Arkansas

           Michael D. Bopp, Staff Director and Chief Counsel
               David A. Kass, Chief Investigative Counsel
                        James R. McKay, Counsel
              Eileen H. Fisher, Professional Staff Member
              Claudia C. Gelzer, U.S. Coast Guard Detailee
                   Sarah V. Taylor, Legislative Aide
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                  Mary Beth Schultz, Minority Counsel
                      Amy B. Newhouse, Chief Clerk
















                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Collins.............................................. 1, 31
    Senator Akaka................................................ 4, 65
    Senator Lautenberg...........................................     5
    Senator Carper...............................................    13
    Senator Durbin...............................................    23
    Senator Lieberman............................................    33
    Senator Pryor................................................    53

                               WITNESSES
                         Tuesday, May 11, 2004

Hon. Tom Davis, a Representative in Congress from the State of 
  Virginia.......................................................     7
Robert J. Cramer, Managing Director, Office of Special 
  Investigations, U.S. General Accounting Office, accompanied by 
  Paul DeSaulniers, Senior Special Agent, Office of Special 
  Investigations, U.S. General Accounting Office.................    10
Lauri Gerald, Former Employee, Columbia State University.........    16
Alan Contreras, Administrator, Office of Degree Authorization, 
  Oregon Student Assistance Commission...........................    26

                        Wednesday, May 12, 2004

Alan Contreras, Administrator, Office of Degree Authorization, 
  Oregon Student Assistance Commission...........................    34
Lieutenant Commander Claudia Gelzer, U.S. Coast Guard Detailee, 
  Committee on Governmental Affairs, U.S. Senate.................    38
Andrew Coulombe, Former Employee, Kennedy-Western University.....    43
Sally L. Stroup, Assistant Secretary for Postsecondary Education, 
  U.S. Department of Education...................................    57
Stephen C. Benowitz, Associate Director, Human Resources Products 
  and Services, U.S. Office of Personnel Management..............    60

                     Alphabetical List of Witnesses

Benowitz, Stephen C.:
    Testimony....................................................    60
    Prepared Statement...........................................   141
Contreras, Alan:
    Testimony....................................................26, 34
    Prepared Statement with attachments..........................   106
Coulombe, Andrew:
    Testimony....................................................    43
    Prepared Statement...........................................   132
Cramer, Robert J.:
    Testimony....................................................    10
    Prepared Statement with attachments..........................    79
Davis, Hon. Tom:
    Testimony....................................................     7
    Prepared Statement...........................................    75
DeSaulniers, Paul:
    Testimony....................................................    10
Gelzer, Lieutenant Commander Claudia:
    Testimony....................................................    38
    Prepared Statement...........................................   125
Gerald, Lauri:
    Testimony....................................................    16
    Prepared Statement...........................................   100
Stroup, Sally L.:
    Testimony....................................................    57
    Prepared Statement...........................................   135

                                APPENDIX

Memorandum dated April 15, 2004..................................    47
Questions and responses for the Record from:
    Mr. Cramer...................................................   148
    Ms. Gerald...................................................   151
    Mr. Contreras................................................   152
    Mr. Benowitz.................................................   155

                                EXHIBITS

 1. Lexington University diploma for Susan M. Collins' Bachelor 
  of Science in Biology..........................................   161
 2. Lexington University diploma for Susan M. Collins' Master of 
  Science in Medical Technology..................................   162
 3. Chart entitled ``5 Diploma Mills Generated $111 Million in 
  Revenue (1995-2003)''..........................................   163
 4. ``Federal Government Checks''--made out to diploma mills....   164
 5. ``Head Start Checks''--displays checks from Head Start 
  grantees made out to Kennedy-Western University on behalf of 
  students.......................................................   165
 6. Poster: ``The Legendary Entertainer Dr. Dante''.............   166
 7. Poster: ``Dr. Dante and Friends . . . Hypnotist to the 
  Stars''........................................................   167
 8. Poster: ``Zimmer Motor Cars''...............................   168
 9. ``Columbia State University's Accreditation,'' Columbia 
  State University Catalog, page 5...............................   169
10. ``Columbia State University's Acceptance Letter'' (from 
  CSU's catalog). This letter notes that honorary Ph.D.'s have 
  been awarded to Jonas Salk, M.D., among others. It also states 
  in the seal ``Columbia State University--Since 1953''..........   170
11. ``Testimonial by a former Columbia State University 
  `Student' '', by Thomas Rothchild, B.S., M.S., Ph.D. (from 
  CSU's catalog).................................................   171
12. ``U.S. Government Checks Toward Federal Employees' Tuition 
  at Columbia State University,'' (four checks)..................   172
13. Chart of list of ``Degrees Available from Columbia State 
  University'' (from CSU's catalog). This chart highlights 
  engineering, psychology and health fields......................   173
14. Chart of Columbia State Photos: one fake, one real. One 
  photo is from CSU's catalog, and actually depicts Lyndhurst, a 
  historic home in Tarrytown, NY (Hudson River Valley)...........   174
15. Sample of ``Columbia State University Official Transcript,'' 
  (from CSU's catalog)...........................................   175
16. ``How to Earn Academic Credit at Columbia State 
  University,'' (from CSU's catalog). This chart lists activities 
  worth academic credit such as playing tennis, buying a Persian 
  carpet, pressing flowers, etc..................................   176
17. ``Luxury Yachts International''.............................   177
18. Chart of ``Columbia State University on the Academic 
  Process'' (from CSU's catalog).................................   178
19. Chart of letter from Oregon's Department of Justice to 
  Kennedy-Western University. This letter threatens enforcement 
  action against Kennedy-Western University......................   179
20. ``List of Organizations that have reimbursed their 
  employees' Kennedy Western University Tuition,'' from the 
  Kennedy-Western University catalog, pages 10-11. This chart 
  highlights government and military agencies that have paid 
  employee tuition at Kennedy-Western University.................   180
21. Chart of ``Kennedy-Western Students on Exam Quality,'' 
  Excerpts from ``The Pub''......................................   181
22. Chart of ``Kennedy-Western Students on Taking Tests,'' 
  Columbia State University......................................   182
23. ``CAEL* Standard I: Credit should be awarded only for 
  learning, not for experience,'' * Council for Adult and 
  Experiential Learning (CAEL) assessment of Kennedy-Western 
  University's experiential award process........................   183
24. ``CAEL Standard IV: The determination of competence levels 
  and of credit awards must be made by appropriate subject matter 
  and academic experts''.........................................   184
25. ``CAEL Standard IV: The determination of competence levels 
  and of credit awards must be made by appropriate subject matter 
  and academic experts'' (2 charts)..............................   185
26. ``Kennedy-Western Students on the Program,'' Excerpts from 
  ``The Pub''....................................................   187
27. Kennedy-Western Students on Degree Recognition,'' Excerpts 
  from ``The Pub''...............................................   188
28. Kennedy-Western Students on Tuition Reimbursement.'' 
  Excerpts from ``The Pub''......................................   189
29. Kennedy-Western University ``Tuition Reimbursement 
  Statement''--altered bill to make it look like students are 
  being charged per class........................................   190
30. Chart of ``Kennedy-Western's Catalog's Claims of `Careful 
  Consideration' Given to Work Experience and Granting of 
  Academic Credit.'' Their catalog claims of ``Careful 
  consideration is given to your work experience and the granting 
  of academic credit''...........................................   191
31. Kennedy-Western University's List of Employees..............   192




















                        BOGUS DEGREES AND UNMET
                   EXPECTATIONS: ARE TAXPAYER DOLLARS
                       SUBSIDIZING DIPLOMA MILLS?

                              ----------                              


                         TUESDAY, MAY 11, 2004

                                       U.S. Senate,
                         Committee on Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:35 a.m., in 
room 216, Hart Senate Office Building, Hon. Susan M. Collins, 
Chairman of the Committee, presiding.
    Present: Senators Collins, Akaka, Carper, Lautenberg, and 
Durbin.

             OPENING STATEMENT OF CHAIRMAN COLLINS

    Chairman Collins. The Committee will come to order.
    Good morning. In hearings today and tomorrow the Committee 
on Governmental Affairs will explore the problems that 
unaccredited, substandard colleges and universities, often 
referred to as diploma mills, pose to the Federal Government 
and to private-sector employers.
    Three years ago I became concerned by what appeared to be a 
proliferation of schools advertising degrees either for no work 
whatsoever or for only a nominal or token effort. At that time 
I served as Chairman of the Permanent Subcommittee on 
Investigations, and I asked the General Accounting Office to 
look into this problem. The GAO queried a government-sponsored 
database that included approximately 450,000 resumes to 
determine how many individuals listed degrees from diploma 
mills.
    The results were disturbing. GAO found more than 1,200 
resumes that included degrees from 14 different diploma mills. 
The GAO used a list of diploma mills compiled by the Oregon 
State Office of Degree Authorization which at that time 
included 43 schools. Now that list has grown to 137.
    The GAO also purchased two degrees in my name from a 
service called Degrees-R-Us. The degrees were for a Master's of 
Science and Medical Technology. Here is my nice Degree in 
Medical Technology.\1\ And also a Bachelor's of Science in 
Biology from a fictitious school called Lexington 
University.\2\
---------------------------------------------------------------------------
    \1\ The chart appears as Exhibit No. 1 in the Appendix on page 161.
    \2\ The chart appears as Exhibit No. 2 in the Appendix on page 162.
---------------------------------------------------------------------------
    Degrees-R-Us also provided the GAO with an official-looking 
transcript in my name. It shows my grades for 4 years' worth of 
course work. I did not do that well in Spanish but I aced 
finite mathematics. And there was even a number provided that I 
could have prospective employers call to verify my so-called 
academic credentials.
    The GAO paid $1,515 for the package. I would note that I 
have not taken a course in biology since my sophomore year in 
high school and yet here I have a degree in biology.
    Degrees-R-Us is a fitting jumping off point for our current 
hearings. Degrees-R-Us is what most people probably think of 
when they hear the term diploma mill, because cranking out 
bogus diplomas is all that it does. It does not offer classes, 
it has no professors, and it does not require any work. It is 
essentially a printing press or a vending machine that takes in 
$1,000 bills and pops out phony diplomas.
    The General Accounting Office has defined diploma mills as 
businesses that sell bogus academic degrees based upon life or 
other experience, or substandard or negligible academic work. I 
would add that diploma mills are generally unaccredited 
schools, though people should not make the mistake of 
automatically assuming that all unaccredited schools are 
diploma mills because some of them are not.
    Similarly, many colleges and universities offer excellent, 
fully legitimate distance-learning programs that provide 
invaluable course work, particularly for working students. 
Degrees-R-Us is obviously not one of those. It is an example of 
a rather blatant type of diploma mill.
    But others are not so obvious. The schools that we will 
examine today and tomorrow practice a more sophisticated form 
of deception and they charge students accordingly. All of the 
schools we investigated gave credit for prior work or life 
experience, even for advanced degrees, which is very rare among 
accredited institutions. One institution's list of life 
experiences that could qualify for academic credit included 
horseback riding, playing golf, pressing flowers, serving on a 
jury, and planning a trip. The schools we examined also 
required their students to do some modicum of work, either 
tests or papers or both, and they at least give the impression 
that the school includes professors with suitable academic 
credentials who actually play a role in the school's academic 
programs.
    Yet for all their pretense, the diplomas that these 
businesses offer may not be worth much more than the ones that 
GAO purchased in my name. The danger of these more 
sophisticated diploma mills is that they can attract a far 
broader range of students. I think it is safe to say that very 
few Degrees-R-Us diploma holders believe that they have earned 
their degrees. Indeed, the GAO interviewed a sampling of 
individuals who purchased their degrees from Degrees-R-Us and 
found that they were not candid in discussing why they 
purchased their degrees or how they used them.
    In contrast, the schools that we investigated take pains to 
try to convince prospective students that they are legitimate 
and that students have to earn their degrees. That is why a 
healthy dose of credit for work and life experience becomes 
such a critical component of their business model. That is what 
permits these more sophisticated diploma mills to assume an air 
of legitimacy while minimizing the actual amount of work 
required.
    The financial results can be impressive. According to the 
GAO, Degrees-R-Us grossed only about $150,000 in a 2-year 
period. In contrast, as the chart now displayed indicates,\1\ 
the five unaccredited schools that we examined have taken in 
more than $110 million. One diploma mill that we will hear more 
about today, Columbia State University, took in roughly $18 
million in an 18-month period. According to the FBI, 
approximately $12 million of that amount was pure profit.
---------------------------------------------------------------------------
    \1\ The chart appears as Exhibit No. 3 in the Appendix on page 163.
---------------------------------------------------------------------------
    Today and tomorrow we will focus on the challenges posed by 
diploma mills to the Federal Government. I am very pleased and 
honored that Congressman Tom Davis, the Chairman of the House 
Government Reform Committee, will lead off our witnesses today. 
Ten months ago, Chairman Davis and I asked the General 
Accounting Office to examine two issues. First, whether some 
Federal employees are using taxpayer dollars to enroll in 
diploma mills. And second, whether high-level Federal officials 
have listed diploma mill degrees on official employment or 
security clearance application forms or resumes in their 
personnel files.
    We also asked GAO to examine whether any such high-level 
officials have attempted to use these degrees for advancement. 
We will hear the results of the GAO's investigation this 
morning.
    Later in this hearing we will hear from Lauri Gerald, who 
helped run a successful diploma mill and who has been convicted 
for doing so. Ms. Gerald will provide us with an insider's 
perspective on how remarkably simple it is to set up a diploma 
mill, provided one finds that winning marketing formula.
    Finally, we will hear testimony today from Alan Contreras, 
the Administrator of Oregon's Office of Degree Authorization. 
He established his State's list of diploma mills, which in the 
absence of action by the Federal Department of Education, has 
become the most widely cited and respected list of its kind.
    I began this investigation because I suspected that the 
Federal Government was not doing enough to combat the problem 
of diploma mills which posed problems on many levels. First, 
they devalue education by deliberately making it difficult to 
distinguish between a legitimate and a sham degree. Many 
diploma mills, for example, use names that are close to those 
of well-known institutions. Thus, Columbia State University 
attempts to approximate the excellent reputation of Columbia 
University, and Hamilton College becomes Hamilton University.
    Second, diploma mills are unfair to those who work long and 
hard for legitimate degrees and who might get passed over for a 
hiring, a raise, or a promotion based on an employer's 
misunderstanding of what a diploma mill degree truly 
represents.
    Third, they are unfair to their students who enroll and 
only later realize that the academic program that they have 
paid thousands of dollars for is little more than smoke and 
mirrors, and that their degree is not accepted by many 
prospective employers.
    Fourth, they are unfair to potential employers whether in 
the public or private sector who might assume that a bogus 
degree actually reflects mastery of materials needed to perform 
a particular job.
    Fifth, if a job is critical to public safety or involves 
significant responsibility, then a bogus degree can do tangible 
and substantial harm.
    And finally, if taxpayers are paying for such degrees then 
all of these problems are compounded by inexcusable waste.
    The laws, regulations, and guidelines regulating payment 
for training for Federal employees and employment in the 
Federal Government at first glance appear to reject diploma 
mills outright. Yet after looking at only five schools we found 
that agencies have paid for more than 70 Federal employees to 
enroll in degree programs at diploma mills and other 
unaccredited institutions. I believe that this is just the tip 
of the iceberg because we only looked at five such schools. But 
you could see the number of Federal checks that we found, and 
this is just a partial list.\1\
---------------------------------------------------------------------------
    \1\ The chart appears as Exhibit No. 4 in the Appendix on page 164.
---------------------------------------------------------------------------
    As we will discuss some today and more tomorrow, the 
problem is a loophole in the law. While agencies cannot pay for 
an employee to get a degree from a diploma mill, there is no 
prohibition against them paying for individual courses at such 
an institution. In the course of our investigation we found 
evidence that recipients of funds from at least one Federal 
program have used Federal dollars to pay for diploma mill 
degrees. As the chart shows,\2\ while looking for agency 
payments to diploma mills we happened across three checks from 
Federal Head Start program grantees in three different States 
made out to Kennedy-Western University.
---------------------------------------------------------------------------
    \2\ The chart appears as Exhibit No. 5 in the Appendix on page 165.
---------------------------------------------------------------------------
    The issues that we have encountered while investigating 
diploma mills, particularly during the past year, are many and 
varied. I look forward to hearing from our witnesses today. 
Their testimony will be very helpful, not only to Congress but 
to Federal agency heads, human resources coordinators, and to 
prospective students across the country whom diploma mills seek 
to attract through promises they fail to keep.
    Senator Akaka.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Madam Chairman. I wish 
to thank you for holding this hearing today and for bringing to 
our attention the use of diploma mills by Federal agencies and 
their employees. I also want to add my welcome to Congressman 
Tom Davis, as well as thank our witnesses. Be assured that your 
testimony will aid this Committee tremendously.
    As our Chairman noted, our witnesses will confirm the 
Internet is allowing diploma mills to use highly sophisticated 
and creative ways to reel in prospective clients. Their 
activities have helped to propel diploma mills into a $500 
million a year industry. As a former educator I am alarmed 
because I understand the threat diploma mills pose to the 
integrity of our educational system. I have witnessed how 
education opens doors, and I know that when sound instruction 
takes place students experience the joys of newfound knowledge 
and the ability to excel. Diploma mills fail to provide the 
rewards and returns of a true education.
    Up until 5 years ago, my State of Hawaii was a haven for 
these businesses. Faced with an influx of unaccredited degree-
granting schools, the Hawaii State legislature passed a bill 
that tightened requirements on diploma mills. The new law 
requires a school to have a physical presence in the State, 
employ at least one person who resides in the State, and have 
25 students enrolled within the State.
    Although these steps alone will not eliminate such schools, 
the numbers have dropped significantly. More importantly, 
Hawaii now has the legal means to close down schools and file 
lawsuits against those who claim they are operating under State 
law.
    As one who has long championed making sure that the Federal 
Government has the resources to recruit, retain, and train 
employees, I do not condone agencies funding training courses 
offered by diploma mills. I am disheartened to learn that these 
businesses may be providing the very training that I have 
worked so hard to promote. Although current rules prohibit 
agencies from funding non-accredited degrees, loopholes exist 
which enable employees to obtain a degree by applying for 
reimbursement of individual classes at non-accredited 
institutions. The use of taxpayer money to fund diploma mill 
programs is the essence of government waste.
    Again, I commend our Chairman for holding these hearings 
which I believe will guarantee that Federal employees have the 
academic qualifications and training that enable them to bring 
value to their agencies and the Nation. I look forward to 
hearing from our panels today.
    Thank you very much, Madam Chairman.
    Chairman Collins. Thank you, Senator. Our first witness 
today is the Hon. Tom Davis, who is Chairman of the House 
Committee on Government Reform.
    Senator Lautenberg. Madam Chairman, may I make a quick 
statement?
    Chairman Collins. If it would be very brief, Senator, 
because Congressman Davis needs to get back to the House.

            OPENING STATEMENT OF SENATOR LAUTENBERG

    Senator Lautenberg. We are glad to see Congressman Davis, 
and I will try to--just to say that I apologize for my 
tardiness here because I think this is a very important 
hearing. I understand that you, Madam Chairman, have been able 
to purchase a couple of graduate degrees. I do not know whether 
we call you Doctor or Dr. Chair or whatever, but the fact is, 
the title goes, maybe the knowledge does not.
    Unfortunately, the so-called diploma mills are not a 
laughing matter. They represent an important and increasingly 
serious problem. The problem attracted attention last year when 
a high-ranking official at the Department of Homeland Security 
was discovered to have purchased degrees from Hamilton 
University. I know several young people whose families have 
sent them to Hamilton College, which is a distinguished 
educational institution in New York State. So Hamilton 
University looks like a pure cop out. They said that this is an 
institution that grants degrees based on life experiences. Some 
people knowingly buy these pseudo-credentials so they can trick 
an employer. Many others, however, are simply being scammed 
themselves and they do not realize that what they are getting 
is not worth the paper it is printed on.
    Diploma mill operators often portray themselves as 
legitimate institutions and are accredited. The problem is that 
the accrediting organizations are often bogus as well. Diploma 
mill degrees also represent a significant waste, fraud, and 
abuse problem for all of us, for the entire Federal Government 
which may be offering tuition assistance for individuals to get 
degrees from these bogus institutions. Madam Chairman, again I 
salute you for doing this. The individuals getting these 
degrees are taking advantage of the public and the Federal 
Government and they both lose.
    While some States, including my State of New Jersey, have 
passed tough laws against unaccredited academic institutions, 
the Interstate Commerce Clause makes it difficult to enforce 
these laws. That is why it is important for the Federal 
Government to seek remedies to this problem.
    So Madam Chairman, I will conclude with that and ask 
permission that my full statement be included in the record. I 
am called to other places and will submit questions if the 
record stays open. I thank you very much.
    Sorry, Congressman Davis. Good to see you here.
    Chairman Collins. Thank you, Senator. Your full statement 
will be entered into the record.
    [The prepared statement of Senator Lautenberg follows:]
                PREPARED STATEMENT OF SENATOR LAUTENBERG
    Madam Chairman: Thank you for holding this important hearing.
    I understand that you have been able to purchase a couple of 
graduate degrees. Should we be calling you ``Doctor'' instead of 
``Madam Chairman''?
    Unfortunately, so-called ``diploma mills'' are no laughing matter. 
Rather, they represent an increasingly serious problem.
    The problem attracted attention last year when a high-ranking 
official at the Department of Homeland Security was discovered to have 
purchased degrees from Hamilton University, an institution that grants 
such degrees based on ``life experiences.''
    Some people knowingly buy these pseudo-credentials so they can 
trick an employer. Many other people, however, are being ``scammed.''
    They don't realize that what they're getting isn't worth the paper 
it's printed on.
    Diploma mill operators often portray themselves as legitimate 
institutions and claim they're accredited.
    The problem is that the accrediting organizations are often bogus, 
too.
    Diploma mill degrees also represent a significant waste, fraud, and 
abuse problem for the Federal Government, which may be offering the 
tuition assistance necessary for individuals to get the degrees from 
these bogus institutions.
    In my view, the individuals getting the degrees and the Federal 
Government both lose.
    While some States--including New Jersey--have passed tough laws 
against unaccredited academic institutions, the Interstate Commerce 
Clause makes it difficult to enforce these laws. That's why it is 
important for the Federal Government to seek remedies to this problem.
    The unemployment rate for people with college degrees is at an all-
time high. More and more employers want job applicants with graduate 
degrees. So the pressure to have academic credentials is growing.
    Some people want to cut corners to meet the criteria needed to get 
a job or be promoted. Others are well-meaning in their pursuit of a 
degree, but they get duped.
    Either way, we need to crack down on diploma mills to protect 
consumers and tax-payers.
    Thank you, Madam Chairman.

    Chairman Collins. Chairman Davis is the House leader in 
investigating diploma mills. He has a strong commitment to the 
integrity and quality of the Federal workforce. We jointly 
requested the GAO investigation, the report of which is being 
released today. I am delighted to have him be our lead-off 
witness.
    Chairman Davis.

 TESTIMONY OF HON. TOM DAVIS,\1\ A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF VIRGINIA

    Mr. Davis. Thank you very much. Let me thank Senator Susan 
Collins for inviting me to join this hearing today and for her 
groundbreaking work on this very important issue.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Davis appears in the Appendix on 
page 75.
---------------------------------------------------------------------------
    In a world where citizens increasingly need reassurances 
that they can trust their Federal Government to competently do 
the job of protecting and securing this Nation and its 
families, it is more important than ever that we ensure that we 
are hiring, properly training, and appropriately rewarding and 
advancing the Federal workforce.
    Last year, as Senator Lautenberg alluded to, the Department 
of Homeland Security launched an investigation of allegations 
that Laura Callahan, a senior official in the Chief Information 
Officer's office had used, in connection with her Federal 
employment, a bogus degree from Hamilton University in Wyoming. 
Any claim that such a degree represents legitimate educational 
achievement is at a minimum fundamentally dishonest and cannot 
be tolerated within the Federal service. In some cases, such a 
claim could also be a prosecutable crime.
    As the Internet and new methods of communications make it 
easier and easier to create and market bogus diplomas, along 
with legitimate education, the time has come for Congress and 
the Administration to develop a coherent policy to permit 
Federal managers to know whether a degree represents completion 
of a legitimate course of study.
    The Committee on Government Reform has focused its efforts 
on studying the use of diploma mills in the Federal civil 
service to help develop a coherent government-wide policy that 
will enable Federal employers to more easily identify and 
discourage the use of these degrees.
    Last summer we joined with Senator Collins and the Senate 
Committee on Governmental Affairs in commencing a GAO study 
into the purchase and use of degrees from diploma mills by 
Federal employees in selected Federal agencies. At the same 
time, we asked the DHS IG's office to keep us apprised of its 
progress in looking at the Laura Callahan matter. We also asked 
the Office of Personnel Management to provide us with any 
policies that instruct agencies on how to address the use of 
diploma mill degrees by Federal officials.
    At that time, OPM responded that there were no specific 
policies that required all agencies to screen current employees 
to discover whether the degrees claimed came from legitimate 
institutions. As a result, last fall I opened a dialogue with 
the Department of Education seeking to discover whether it had 
any resources that OPM could use for this screening process. My 
staff also participated in a meeting of the Department of 
Education, OPM, the FBI, the FTC, and several States to discuss 
methods of identifying diploma mills and making that 
information widely available within the Federal Government and 
among the general public. Most recently, we have exchanged 
letters with OPM regarding the definitions of legitimate 
educational achievement that can be used for Federal employment 
purposes.
    To date, the Department of Education and OPM have been very 
responsive to our concerns and we have worked well together to 
begin developing a solution. OPM has recently announced that it 
will hire additional staff to verify educational backgrounds. 
OPM is also reviewing government-wide forms to ensure that 
responses to questions about academic backgrounds will enable 
Federal managers to root out phony degrees more easily. 
Finally, OPM will also hold a second seminar to educate all 
Federal human capital officers, especially with respect to 
rules for reimbursement.
    Essentially, Congress and the Administration must define a 
diploma mill for the purposes of Federal employment. The 
quintessential diploma mill presents itself as a valid 
institution of higher learning that offers advanced degrees for 
a fee while requiring no legitimate academic work. The problem 
is that in the commercial world, institutions are not so kind 
as to group themselves according to neat paradigms. Some 
diploma mills require an exhaustive listing of all job training 
activity, some require testing, and some have limited written 
requirements.
    Moreover, the purchasers of these degrees are often willing 
to participate in the fraud. They want the degree and they are 
not going to report that it is not legitimate. Federal criminal 
prosecutions of diploma mill operators usually involve mail and 
wire fraud charges arising from false representations that a 
school was accredited or approved in some way by a State. 
Ronald Pellar, the operator of Columbia State University was 
recently sentenced to 8 months in jail for just such a scheme.
    As an example of how complex it can be to categorize a 
school, one of today's witnesses, Alan Contreras of the Oregon 
Office of Degree Authorization refers in his written statement 
to the Berne University fiasco. Yet on the ODA web site, Berne 
University is not listed as either substandard or a diploma 
mill. ODA classifies Berne as simply an unaccredited 
institution that appears to supply degrees that cannot be 
classified by ODA owing to insufficient information. The 
official categorization clearly does not justify the term 
``fiasco.''
    I believe the solution to the use of bogus degrees involves 
fundamentally changing government classification of 
institutions of higher education. Currently, the Department of 
Education only makes determinations regarding eligibility for 
certain government aid or reimbursement, such as federally 
guaranteed student loans. This determination relies on whether 
an institution has been accredited by a recognized accrediting 
agency.
    But other schools provide legitimate education as well. We 
have many excellent community colleges and many more excellent 
commercial and vocational training schools that may not be 
accredited. There are also foreign universities and legitimate 
distance-learning institutions that are not accredited that may 
provide legitimate educational opportunities. We have to be 
sure not to confuse these forms of education with diploma 
mills.
    We need to look at how we track accreditation over time. 
Occasionally, a college may lose accreditation for one program 
while retaining overall accreditation, and some schools simply 
go out of business altogether. At this time, no one 
organization tracks and organizes this information into a 
usable format.
    So who is responsible? Congress, the Department of 
Education, and OPM all have important roles to play in 
preventing the use of diploma mills in Federal employment. I 
understand that the Department of Education is studying the 
feasibility of developing and publishing a list of accredited 
schools. But that list should also include any school which is 
offering a legitimate course of study toward a degree.
    OPM has to use this resource to establish an effective 
policy for human capital officers to use in enforcing a zero-
tolerance policy on the use of diploma mill degrees in Federal 
service. Reformatting government-wide forms and holding 
seminars will also help to suppress the use of these degrees.
    But OPM needs to do at least two more things in my opinion. 
It must provide regular training and provide the resources to 
allow agency verification of educational achievements, even 
when a job does not specifically require a degree for 
employment. OPM has stated that the knowing use of a bogus 
degree can give cause for removal since the employee has 
attempted to violate the merit system. It is, therefore, 
logical that OPM should actively encourage agencies to verify 
all employee records and provide the resource agencies need to 
complete this job.
    Finally, Congress may need to consider granting additional 
authority to both the Department of Education and OPM to ensure 
that this sort of work can be effectively conducted. Congress 
may also need to consider whether new criminal laws are needed 
to allow Federal law enforcement to investigate and prosecute 
diploma mill activity. Or perhaps the Federal Trade Commission 
should do more to stop false claims by diploma mills.
    Diploma mills are not merely a problem for the Federal 
Government. State and local governments are also struggling 
with how to handle this problem. Recently one of the top DMV 
officials in California resigned after it was discovered that 
he used degrees from a school considered by some to be a 
diploma mill. In Georgia it was recently discovered that 11 
educators were found to have degrees from a foreign school in 
Liberia that may be a diploma mill. And in northern Virginia, 
where I come from, an elementary school principal has been 
found to hold a bogus degree. Clearly, this nationwide problem 
merits a Federal response.
    The Federal Government also needs to set the tone for the 
corporate community. It is unthinkable that while the 
government is sending people to jail for other forms of 
corporate dishonesty, we would allow this practice to fester in 
our own ranks.
    This problem can be solved. Congress' job is to provide the 
oversight, and if necessary, the authority to solve it. Diploma 
mills will not go away. It is time to make an unequivocal 
statement that fake degrees have no place or value in the 
Federal workforce.
    Thank you very much.
    Chairman Collins. Thank you very much for your excellent 
statement. I know that you are on a tight schedule so I am 
going to submit any questions that I might have for the record, 
but I just want to give my colleagues an opportunity, if they 
have something that they are just burning to ask you. When 
Senator Carper comes in it is usually because he has a burning 
question to ask the witness.
    Mr. Davis. Thank you all very much for your interest in 
this. We look forward to working with you on this issue.
    Chairman Collins. Thank you.
    Our second witness today is Robert Cramer, the Managing 
Director of the GAO's Office of Special Investigations. He is 
accompanied by Special Agent Paul DeSaulniers, of GAO's Office 
of Special Investigations. Mr. Cramer will discuss the GAO 
report that Congressman Davis and I commissioned. We are very 
interested to hear the results of that investigation. I want to 
thank you for your work and for being with us this morning.
    Mr. Cramer.

TESTIMONY OF ROBERT J. CRAMER,\1\ MANAGING DIRECTOR, OFFICE OF 
SPECIAL INVESTIGATIONS, ACCOMPANIED BY PAUL DeSAULNIERS, SENIOR 
 SPECIAL AGENT, OFFICE OF SPECIAL INVESTIGATIONS, OF THE U.S. 
                   GENERAL ACCOUNTING OFFICE

    Mr. Cramer. Good morning, Madam Chairman, Members of the 
Committee. I am pleased to be here today to talk about the most 
recent work performed by the Office of Special Investigations 
at GAO relating to diploma mill issues and other unaccredited 
secondary schools. As you mentioned, Special Agent Paul 
DeSaulniers who performed this investigation is with me here.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Cramer with attachments appears 
in the Appendix on page 79.
---------------------------------------------------------------------------
    As you requested, we conducted an investigation to 
determine whether the Federal Government has paid for degrees 
from diploma mills and other unaccredited schools. You also 
asked us to determine whether senior level Federal employees 
have degrees from such schools. My testimony here will 
summarize our findings.
    We searched the Internet for non-traditional, unaccredited 
post-secondary schools that offer degrees for a relatively low 
flat fee, promote the award of academic credits based on life 
experience, and do not require any classroom training. We 
requested that four such schools provide information on the 
number of current and former students in their records who were 
identified there as Federal employees, and payment of fees for 
those students by Federal agencies. We also requested that some 
Federal agencies examine their records to determine whether 
they had made payments to diploma mills and other unaccredited 
schools.
    In summary, on the Federal payments question, only two 
schools gave us the records that we asked for. Those records, 
together with records that we obtained from two Federal 
agencies, the Departments of Energy and Transportation, showed 
total Federal payments of nearly $170,000 to just two 
unaccredited schools by Federal agencies. The chart to the 
right here summarizes the information that we obtained.\1\
---------------------------------------------------------------------------
    \1\ The chart appears in the Appendix on page 82.
---------------------------------------------------------------------------
    As I said, we asked four schools, California Coast, 
Hamilton, Pacific Western, and Kennedy-Western Universities, to 
provide information on the number of their current and former 
students who were Federal employees and any Federal payments 
for those students. The first column gives you the information 
that three schools gave us. One school, Hamilton, gave us no 
records. The other three schools did give us records of the 
number of students. You have the agencies for which they work 
as well as the number of students at each agency.
    Only two schools gave us the financial information. They 
were California Coast and Kennedy-Western. Column three on the 
chart \1\ shows the number of Federal employees at each agency 
for whom Federal agencies made tuition payments. There were 64 
such employees. Column four shows the total tuition payments 
for those 64 employees, which was more than $150,000.
    However, the records provided by the schools understate the 
extent of Federal payments. It is very difficult to get an 
accurate snapshot of the true extent of Federal payments to the 
schools.
    First, our investigation showed that some diploma mills and 
other unaccredited schools modified billing practices so 
students can obtain payments for degrees by the Federal 
Government. Purporting to be a prospective student who works 
for a Federal agency, Agent DeSaulniers placed telephone calls 
to three schools that award academic credits based on life 
experience and require no classroom instruction. These were 
Barrington, LaCrosse, and Pacific Western Universities. Each of 
these schools charge a flat fee for a degree.
    For example, Pacific Western for its Hawaii degree charges 
$2,295 for a bachelor of science, $2,395 for a master's degree, 
and $2,595 for a Ph.D. Representatives of these three schools 
emphasized in their conversations with Agent DeSaulniers that 
they are not in the business of providing course training. They 
are not in the business of charging fees for individual 
courses. They are in the business, they market degrees for a 
flat fee.
    However, representatives of each of these schools told 
Agent DeSaulniers that they would structure their charges to 
facilitate reimbursement or payment by the Federal Government. 
Each agreed to divide the degree fee by the number of required 
courses, thereby creating a series of payments as if a per-
course fee were actually being charged. All of the 
representatives he spoke to said that they had had students at 
their schools who obtained reimbursement for their degrees or 
payments for their degrees by the Federal Government.
    Further, the Departments of Energy and Transportation 
provided data that identified payments of about $19,000, in 
addition to those listed in this chart to the two schools that 
gave us information. Thus, we found that Federal payments to 
just these two schools of nearly $150,000.
    Additionally, a comparison of the data that we got from the 
schools with the information that we got from the two agencies, 
shows that both the schools and the agencies have likely 
understated Federal payments. For example, Kennedy-Western 
reported total payments of $13,500 from the Energy Department 
for three students, while Energy reported total payments of 
$14,500 to Kennedy-Western for three different students. Thus, 
Energy made payments of at least $28,000 to Kennedy-Western.
    Additionally, the Department of Transportation reported 
payments of $4,550 to Kennedy-Western for one student, but 
Kennedy-Western did not report any receipt of money for that 
particular student.
    The second question you asked was whether senior level 
Federal employees have degrees from diploma mills and other 
unaccredited schools. The answer is that some do. We requested 
that eight Federal agencies provide us with a list of senior 
employees and the names of any post-secondary institutions from 
which those institutions reported receiving degrees. The eight 
agencies we contacted informed us that their examination of 
personnel records revealed 28 employees who listed degrees from 
unaccredited schools. However, we believe that this number 
understates the number of Federal employees at these agencies 
who have such degrees.
    The agencies' present ability to identify degrees from 
unaccredited schools is limited by a number of factors. As you 
have heard and as you have said, diploma mills frequently use 
the names of accredited schools, which often allows the diploma 
mills to be mistaken for accredited schools. For example, 
Hamilton University of Evanston, Wyoming, which is not 
accredited by any accrediting body recognized by the Department 
of Education, has a name which is quite similar to and could 
well be confused with that of Hamilton College, a fully 
accredited institution.
    Additionally, Federal agencies told us that employee 
records may contain incomplete and misspelled school names 
without addresses. Thus, an employee's records may reflect a 
bachelor's degree from Hamilton but it will not reflect whether 
it is Hamilton University, the unaccredited school, or Hamilton 
College, the fully accredited school.
    We interviewed six Federal employees who reported receiving 
degrees from unaccredited schools. These included three 
management level Department of Energy employees who have 
security clearances and emergency operations responsibilities 
at the National Nuclear Security Administration. One of these 
employees referred to his master's degree from LaSalle 
University as a joke. We also found one employee in the senior 
executive service at Transportation and another at the 
Department of Homeland Security who received degrees from 
unaccredited schools for negligible work.
    In conclusion, the records that we obtained from schools 
and agencies likely understate both the extent to which the 
Federal Government has paid for degrees from diploma mills and 
other unaccredited schools, as well as the true extent to which 
senior level Federal employees have diploma mill degrees.
    At this time, with your permission, Agent DeSaulniers will 
play for you excerpts of his conversations with three 
representatives of schools that charge flat fees for degrees, 
are not in the business of providing individual training 
courses, but who sell degrees. In these excerpts, school 
representatives talked to Agent DeSaulniers about assisting him 
to obtain payment for his degree from the Federal agency that 
he said he worked for.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Madam Chairman, before these recordings are 
played, I would just like for the record to show, our 
Congressman Mike Castle, former Governor Mike Castle, is a 
graduate of Hamilton, and I would like for the record to show 
he is a graduate of Hamilton College. [Laughter.]
    Chairman Collins. I am sure he will appreciate that you 
made that very clear for the record.
    Senator Carper. I just gave the Chairman a note, I am 
supposed to be in a meeting on asbestos. We are trying to find 
a path forward on asbestos litigation reform legislation and it 
is important to me. I apologize for slipping out.
    Thank you for the good work that you are doing. Madam 
Chairman, I know that this is going on because of your efforts 
and interest. I think you are on to something and we are 
interested in being part of cleaning this up. Thank you.
    Chairman Collins. Thank you, Senator.
    [Audio tape played.]
    Mr. Cramer. That completes our presentation. At this time 
we would be happy to take any questions you might have.
    Chairman Collins. Thank you very much, and thank you for 
that excellent presentation.
    Mr. DeSaulniers, I just want to clarify what we just saw. 
It looked to me that the officials at these various schools 
with whom you talked were working to structure the billing so 
that you could get reimbursed by a Federal agency for the 
course work; is that correct?
    Mr. DeSaulniers. Yes, that is absolutely correct. They were 
trying to structure the billing to facilitate Federal 
reimbursement.
    Chairman Collins. Yet since these are unaccredited 
institutions, is the Federal Government supposed to be 
reimbursed at all for this so-called educational course work?
    Mr. DeSaulniers. For these unaccredited schools, for a 
degree, which is all they grant is a degree, from an 
unaccredited school, no, not at all.
    Chairman Collins. Did you find any indication that some of 
these schools actually market to Federal employees? That was a 
long list of agencies in the last example that you gave us.
    Mr. DeSaulniers. Yes. They list Federal agencies on their 
websites, so they are trying to show that if you are an 
employee of these different agencies that it is acceptable. So 
in that sense, absolutely, they would be marketing to them.
    Chairman Collins. Mr. Cramer, I understand that the Federal 
Government has some 330,000 jobs that require some sort of 
degree or a minimum amount of completed course work. Is it your 
conclusion that despite the restrictions on the Federal 
Government not paying for degrees from unaccredited 
institutions that in fact we are paying for those degrees?
    Mr. Cramer. Clearly, the evidence shows that the Federal 
Government has paid towards degrees for people from 
unaccredited schools. I think you would characterize what we 
have gathered to date, the information we have to date, as a 
window on this problem. What has emerged is there is a problem. 
The extent of the problem is not altogether clear at this 
point.
    We know for a certainty, for example, that what we have is 
only part of the picture. We did not, for example, get any 
records of reimbursement to employees. All of the money that we 
have talked about are direct payments to the schools. The 
Department of Health and Human Services, for example, told us 
that they have employees who charge on credit cards payments 
for education expenses and they did not have access to the kind 
of information we were trying to get from those sources. So we 
know it is a much larger problem than the evidence we have to 
date shows.
    Chairman Collins. Mr. DeSaulniers, I am very interested in 
whether or not the Federal employees whom you interviewed 
understood that they were paying for bogus degrees. Could you 
report to us on what your experience was when you interviewed 
Federal employees holding diploma mill degrees?
    Mr. DeSaulniers. I think clearly one of the employees I 
spoke with called the degree a joke so obviously was aware that 
it was bogus. And certainly, the other employees that I spoke 
with, whether they would acknowledge it or not, had to have 
known that the degree was not good. Some somewhat admitted it 
but tried to give the impression of legitimacy because they 
were trying to defend the degree.
    Chairman Collins. Mr. Cramer, what was the motivation of 
the Federal employees who sought out diploma mills and got 
degrees that in many cases they knew were bogus?
    Mr. Cramer. It is difficult for us to describe other 
people's motivation. We do through our conversations with 
people, however, and Agent DeSaulniers can pitch in here to the 
extent that he has additional information to offer on this, but 
they told us of motivations including advancement as well as 
ego satisfaction.
    Chairman Collins. Mr. DeSaulniers, do you have anything to 
add?
    Mr. DeSaulniers. Certainly those would be the two, 
advancement is an obvious one, but ego would probably be a very 
big part of it, to be able to call yourself a doctor.
    Chairman Collins. Could you describe for the Committee some 
of the positions that are held by individuals in your survey 
who have these bogus degrees and are working for the Federal 
Government?
    Mr. DeSaulniers. Sure. There were people that were 
responsible for classifying and declassifying documents in the 
Federal Government, people with emergency response 
responsibilities, to make decisions on emergency responses. I 
do not want to get too specific because it would somewhat 
identify the person, but they certainly had people that had 
security clearances and were in very sensitive positions and 
that had significant responsibility.
    Chairman Collins. Could you give us some idea of the level 
of these employees?
    Mr. DeSaulniers. Program managers. People that were also 
perhaps at a director level where they were running a program 
or running an information technology area perhaps, SES level 
positions.
    Chairman Collins. So weren't these GS-15's and above that 
you were looking at?
    Mr. DeSaulniers. That is correct. They were all, at a 
minimum, GS-15's.
    Chairman Collins. So these are responsible positions of 
authority or program managers or individuals who have 
significant jobs?
    Mr. DeSaulniers. That is absolutely correct.
    Chairman Collins. Based on your review of these individuals 
and their diploma mill degrees, do either of you have any 
concerns about whether there could be a possible compromising 
of public safety or national security? Do we have people in 
these jobs who might represent a threat to our national 
security or their ability to carry out these jobs?
    Mr. DeSaulniers. Certainly if someone has listed a degree 
that they have not done the work for and do not have the 
knowledge and they are working in a position where that 
knowledge might be critical, I think it would definitely have 
an impact. We were looking at positions--we tried to look at 
positions in the Federal Government that impacted safety and 
health. So the people that we identified, since they were 
people with fake degrees, absolutely, without the knowledge it 
might have a negative impact on their performance.
    Chairman Collins. So we really have two issues here, it 
seems to me. One is whether these individuals with bogus 
degrees are qualified for the positions that they are holding. 
But the second is an issue that goes to the trustworthiness of 
the employee. If the employee is willing to cite a bogus degree 
on a security clearance form or a resume, that raises concerns 
in my mind of whether they have the level of character that we 
look for before granting a security clearance. Do you share 
those concerns, Mr. Cramer?
    Mr. Cramer. Yes, there is clearly a concern there, 
particularly someone who is handling classified information. 
One could envision a situation in which they have degrees which 
another person knows are bogus and they might be subject to 
blackmail as a result of it. So there are certainly some 
possibilities for some problems out there if people who get 
security clearances in fact have bogus degrees. It is something 
to look at.
    Chairman Collins. Now obviously, in some cases these 
individuals may be well-qualified for the jobs despite the 
presence of a bogus degree, but it certainly is a red flag. 
Could you inform the Committee what you intend to do with the 
information that you collected that identified these Federal 
employees?
    Mr. Cramer. We have alerted each of the agencies which are 
involved with respect to our findings and referred specifically 
each case in which we have uncovered a problem to the inspector 
general or other appropriate authority.
    Chairman Collins. Thank you. Finally, I want to go back to 
an issue, Mr. Cramer, you raised in your opening statement. You 
said that in looking at just two institutions, two diploma 
mills, that you uncovered nearly $170,000 worth of Federal 
checks. Is it your belief that were you able to go to the 137 
diploma mills that is the commonly used number, that you would 
find many more examples? Did you find some cases where you 
asked for the checks from a diploma mill, did not receive them 
from the institution but found them in the agencies' files?
    Mr. Cramer. Actually, we had more luck going to the schools 
than we did going to the agencies.
    Chairman Collins. Which is a comment as well.
    Mr. Cramer. This was a very difficult investigation getting 
information. It was very difficult. The agencies really do not 
have their information organized in such a way that what we 
were asking for was readily accessible.
    But that being said, we went to four schools and asked for 
the records. Only two produced them. So clearly one has 
questions about why the other two did not, why they would not 
cooperate with us. I think it is fair to say that there is 
something there that we ought to be able to uncover and if we 
can pursue it some day perhaps we will.
    Chairman Collins. I think you have brought up another very 
important issue which is, it seems that Federal agencies are 
not keeping the data necessary to make sure that they are 
paying for only appropriate course work. Would you agree with 
that?
    Mr. Cramer. It is true. In fairness to the agencies, the 
law which now permits payments only to accredited schools is a 
relatively recent one. Prior to that, although payment for 
academic degree training was permissible, it was only 
permissible if the head of the agency determined that it was 
necessary in order to recruit or retain an employee for a 
position for which the government had a shortage of qualified 
people. It happened very rarely is our understanding. So this 
was not something that agencies did on a regular basis, and 
they just do not seem to have geared up their record-keeping 
systems in order to keep track of this.
    With the passage of the new law, the agencies perhaps will 
now recognize the importance of this issue and the need for 
them to adapt their practices.
    Chairman Collins. Thank you very much. I very much 
appreciate your work. The Committee looks forward to continuing 
to work with you on this issue. We appreciate your testimony.
    Mr. Cramer. Thank you.
    Chairman Collins. I would now like to call forward our 
third witness today. It is Lauri Gerald. She is a former 
employee of Columbia State University and of Columbia State 
University's founder Ron Pellar, who has been sentenced for his 
role in establishing this diploma mill. Ms. Gerald recently 
pleaded guilty to one count of mail fraud in connection with 
her activities at CSU. She will be able to give us a firsthand 
look at the inside of a highly successful diploma mill.
    Ms. Gerald, we appreciate your cooperation with the 
Committee's investigation and your willingness to testify 
today. I would ask that you proceed with your statement.

 TESTIMONY OF LAURI GERALD,\1\ FORMER EMPLOYEE, COLUMBIA STATE 
                           UNIVERSITY

    Ms. Gerald. Madam Chairman, Members of the Committee, my 
name is Lauri Gerald. I recently plead guilty in the U.S. 
District Court for the Central District of California to one 
count of mail fraud in connection with my involvement with 
Columbia State University. Together with Ron Pellar I am 
charged with executing a scheme to defraud individuals through 
the operation of a diploma mill. I am currently awaiting 
sentence.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Gerald appears in the Appendix on 
page 100.
---------------------------------------------------------------------------
    In its charging documents the government defines the term 
diploma mill to mean a business that pretends to be a 
university or other educational institution with qualified 
faculty, curriculum, classes, educational facilities, academic 
accreditation, and that solicits money from various individuals 
in the form of enrollment and tuition fees in return for the 
issuance of degrees with purported career advancement value, 
but which in truth hires no qualified faculty, has no 
established curriculum, classes, campus or educational 
facilities, and has no legitimate academic accreditation, and 
merely distributes purported degrees that do not have 
legitimate career advancement value. According to this 
definition, Columbia State University was a diploma mill before 
it was shut down by the authorities in 1998.
    Columbia State University had no faculty, qualified or 
otherwise, no curriculum, no classes, no courses, no tests, no 
one to grade tests, no educational facilities, no library, no 
academic accreditation. In short, Columbia State University was 
a business conceived and set up by Ron Pellar, not to educate 
students but to make money, and it made plenty of it.
    I think it might be helpful if I give you a little 
background on Ron Pellar. He was a successful and professional 
hypnotist by trade and his career literally spanned five 
decades. The two boards on display depict the front and back of 
a glossy poster Ron put together to promote himself.\2\ The 
poster shows Ron photographed with the likes of Johnny Carson, 
the Beatles, Bob Hope, and Ron said that he was listed in the 
Guinness Book of World Records as the highest paid hypnotist 
and indicates that he played before two U.S. Presidents and the 
Queen of England. I do not know whether all of this is true, 
though I strongly suspect that some of it is not.
---------------------------------------------------------------------------
    \2\ The charts appear as Exhibit Nos. 6 and 7 in the Appendix on 
pages 166 and 167.
---------------------------------------------------------------------------
    But what you need to know about Ron Pellar is that he is 
charismatic, very well read and researched, fascinating to talk 
to, and a world class self-promoter. He was also narcissistic, 
egotistical, and a user of people. He was motivated by one 
thing: Money.
    In fact, the money and material wealth were so important to 
Ronald Pellar that he kept them close at hand. He wore 
expensive clothes and bought a fancy car called a Zimmer with 
gold inlay.\3\ There is an example of it there. I have a 
picture of one on the board, as I said. He regularly carried 
around a briefcase containing $100,000 or more at a time. He 
even buried his gold coins in his backyard.
---------------------------------------------------------------------------
    \3\ The chart appears as Exhibit No. 8 in the Appendix on page 168.
---------------------------------------------------------------------------
    I came to know Ronald Pellar because he was married to my 
cousin. In 1992, I took a leave from my job as a program 
manager with BellSouth Telecommunications and moved to 
California to live with Ron and my cousin and work for Ron. At 
that time, Columbia State University was already in existence 
and had been since the mid-1980's. It was run along with two 
other of Ron's education related ventures by five or six 
employees in a small office. I worked at that office until some 
time in 1996 for one of the other education ventures, though 
from time to time I did work for Columbia State.
    The three schools made money, but none of them made enough 
to satisfy Ron. Each school had its own scam. One of the 
schools was for paralegals. Ron took out advertisements, one 
depicting himself in a wheelchair with an open book on his lap, 
that featured false testimonials indicating that graduates from 
his school could make hundreds of thousands of dollars per year 
as a paralegal. Another school called American Nursing 
Tutorial, charged $1,000 to $1,500 for study materials that Ron 
plagiarized in their entirety from a legitimate school or 
company called Moore Educational Services. Columbia State 
University, for its part, offered bachelor's, master's, and 
doctorate programs in a variety of fields, all requiring little 
work but a lot of money to complete.
    In 1996, Ron moved his offices and charted a new course for 
Columbia State University, a course that caused the school to 
take off financially. Ron hit upon a formula that worked, a 
formula that was deceptively simple and remarkably effective. 
It was basically a marketing strategy that targeted people who 
never finished college or graduate school but who could be led 
to believe that through their life and work and academic 
experience they had more or less earned their bachelor's degree 
or master's or doctorate degree already. All they had to do was 
complete a minimal amount of work, pay the tuition, and 
Columbia State University would award them the degree that they 
deserved.
    The cornerstone of the new marketing effort was a promise 
that a student could obtain a degree in 27 days. Ron called 
this Columbia State University's shortcut, internationally 
known and respected, adult degree program. He claimed that the 
school had the same government approval as Harvard, Yale, and 
the University of Illinois, and other accredited and respected 
schools. I am not certain what he meant by that, but I recall 
that Ron told me at one time he managed to license Columbia 
State University as a corporation with the State of Louisiana 
and may have been granted a tax-exempt status by the IRS.
    Columbia State was never actually accredited, though Ron 
falsely claimed it was. This board shows here a page from 
Columbia State University's catalog.\1\ It depicts a bogus 
accreditation certificate that Ron simply made up. Ron often 
disparaged accreditation in general but was smart enough to 
know that tricking people into thinking Columbia State 
University was properly accredited was to his benefit.
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    \1\ The chart appears as Exhibit No. 9 in the Appendix on page 169.
---------------------------------------------------------------------------
    Ron took a number of other steps to make it seem as though 
Columbia State University was a legitimate school. For example, 
you made up a school logo and letterhead which falsely stated 
that the school had been about since 1953. The board shows a 
blown-up version of this form acceptance letter Ron put 
together.\1\ As you can see, the stationery shows a 10-member 
board of advisers, all of which had advanced degrees. In fact 
there was no board of advisers and Ron Pellar was Columbia 
State University. He simply made up the names and titles for 
the so-called board.
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    \1\ The chart appears as Exhibit No. 10 in the Appendix on page 
170.
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    The stationery also lists honorary Ph.D. recipients. You 
will note that the man who discovered the polio vaccine, Jonas 
Salk, is listed among them. When Dr. Salk discovered that his 
name was being used on Columbia State University's letterhead 
he wrote a letter to Ron demanding that it be removed, which 
Ron did.
    As I mentioned earlier, Ron sought to prey upon people who 
could be convinced that they deserved a college or graduate 
degree. This acceptance letter is a good example of Ron's 
technique. It reads: Many individuals with superior talent, 
ability and training are being denied raises, promotions, new 
jobs or the prestige they deserved just because they have not 
obtained the appropriate degree. Your intelligent decision, 
however, will not permit this travesty to happen to you.
    At the same time, Ron would criticize traditional 
accredited schools in the hopes of making Columbia State's 
method look more sensible and therefore more legitimate by 
comparison. For example, another piece of promotional material 
reads as follows, how insulting can it be to anyone's 
intelligent to have your tax money pay for students taking 
subjects like wine-tasting, windsailing, how to make love, 
Western line dancing, etc., as an elective add to their credits 
for any degree? This is all for greed to keep you in school 
longer
    Ron liked to advertise through testimonials and he used 
this technique to promote Columbia State University. The 
problem was that the testimonials were not real. Ron obtained 
stock photos from random people and simply made up the success 
stories. The board shows an example of a Thomas Rothchild.\2\ 
Mr. Rothchild notes that he was a computer programmer for 13 
years, got a Ph.D. from Columbia State University, and 1 year 
later became president of the company pulling down a salary of 
$484,000 per year. Ron made it up. All of it.
---------------------------------------------------------------------------
    \2\ The chart appears as Exhibit No. 11 in the Appendix on page 
171.
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    People were taken in by Ron's scheme. Lots of them. They 
each paid roughly $1,500 to $3,600 for a degree. I say they 
paid for the degrees because in truth they had little else to 
do. Generally, a student would be sent a book and told to read 
it and prepare a summary. I am not talking about one book per 
class, but one book per degree. One of the workers at Columbia 
State University would give the summary a cursory review and 
that is it, and a bachelor's degree complete with a made-up 
transcript, would be awarded. If a student wanted a master's 
degree he would have to do a book summary and a six-page 
thesis. A doctorate meant a book summary and a 12-page 
dissertation.
    I think you get the idea. There was nothing that could pass 
for academic rigor, however, at Columbia State University. Ron 
saw the school as a cash cow and it was. During its 2-year 
heyday from 1996 to 1998 I understand that Columbia State 
University grossed roughly $20 million. I personally saw it 
pull in over $6 million in a 6-month period in 1998.
    I understand from my deposition with your staff of this 
Committee that some Federal Government employees went to 
Columbia State University, at least in part at taxpayers' 
expense. Your staff showed me checks from the Department of 
Justice and the Bureau of Prisons which are now on display.\1\ 
They also showed me a graduate survey that Ron put together 
indicating that a long list of Fortune 500 companies and 
Federal agencies had paid for their employees' schooling at 
Columbia State University. I was not personally aware of 
Federal agencies that were paying for their employees to attend 
Columbia State University, but that does not surprise me. Ron 
advertised Columbia State University very aggressively. As I 
recall, at one point he ran ads designed to attract potential 
students from the U.S. Army.
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    \1\ The chart appears as Exhibit No. 12 in the Appendix on page 
172.
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    I learned a lot from my association with Ron Pellar and 
Columbia State University and I deeply regret that I had any 
role in those schools' lies and deceptions. That is the end of 
my prepared testimony and I am willing to answer any questions 
that you may have.
    Chairman Collins. Thank you, Ms. Gerald. We appreciate your 
testimony and giving us the view from the inside.
    Shortly there will be a poster put up that lists all of the 
various degrees available from Columbia State University. It is 
Exhibit No. 13 \2\ in your exhibit book. Let me ask you a 
couple of questions about that.
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    \2\ The chart appears as Exhibit No. 13 in the Appendix on page 
173.
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    First of all, there is a wide range of degrees that could 
be purchased from Columbia State University. It offered 
diplomas not only in subjects like business administration, 
sociology, and classics but also in subjects like mechanical 
and chemical engineering. Are you testifying that a student 
could receive a degree in any one of these subjects, many of 
which are extremely complicated such as aeronautical 
engineering, in just 27 days; is that correct?
    Ms. Gerald. That is what he advertised, yes, ma'am.
    Chairman Collins. Putting outside how unfair this process 
could be for a potential employer who thinks that he or she is 
hiring someone with a degree in mechanical engineering, for 
example, do you think that offering a degree in 27 days could 
also pose a threat to public safety in some of these areas?
    Ms. Gerald. Absolutely. I think that Mr. Pellar was 
intending to appeal to the individual on the basis that they 
had previous experience in that particular field and thus their 
life and work experience and whatever education that they had 
prior to that would be to their benefit. But the truth of it 
is, in 27 days, 6 months, or a year, one needs to go through a 
series of processes in a class like a typical university would 
do in having internships, test methods and all kinds of 
schooling that would back that up as opposed to just reading a 
book.
    Chairman Collins. Do you think your students knew that they 
were getting bogus degrees, or do you think that some of them 
were hopelessly naive about what a college degree entails?
    Ms. Gerald. I think both is probably the situation. There 
were probably more than the majority that were quite sure that 
what they were getting was what they needed to promote 
themselves just by simply paying $1,500 for a bachelor's 
degree. There were those, however, that sent in vast amounts of 
homework, summaries, dissertations that were quite lengthy and 
I would assume that they felt like that was being judged, 
graded, assessed to their benefit.
    Chairman Collins. Did anyone actually read that work, grade 
it, assess it, provide feedback to the students, to your 
knowledge?
    Ms. Gerald. Not that I am aware of. If it was, it was only 
cursory.
    Chairman Collins. Yet these students actually received 
transcripts showing grades, showing a completion of courses; is 
that correct?
    Ms. Gerald. Yes, ma'am.
    Chairman Collins. I would like to put up the exhibit that 
purports to be an official transcript for a bachelor's degree 
in aviation.\1\ This is just one of dozens of similar 
transcripts that have been provided to the Committee. Now this 
appears to me to be preprinted. It lists a number of grades and 
classes including advanced airline performance, rules of the 
air, security and accidents, and it awards usually the grade of 
A for the work completed in each of those classes.
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    \1\ The chart appears as Exhibit No. 15 in the Appendix on page 
175.
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    In fact did the students actually take such classes for an 
aviation degree and receive these grades, or were these 
transcripts preprinted with the grades and the courses just 
made up?
    Ms. Gerald. Obviously, that one is preprinted, it has got 
the grades on it already but there is no student name. I never 
saw any one in particular based on aviation. However, to give 
you an example of what that represents, business 
administration, for example, the titles of the courses were 
versions of titles of the chapters of the book. So it would 
probably be fair to state that that particular transcript right 
there, those course titles are the chapters of the book that 
the student was given.
    Chairman Collins. Your point is well taken. How can it be 
all filled out with the courses and the grades when there is no 
student name? So these are printed up in advance.
    I would like to turn to some of the marketing materials for 
Columbia State University, in particular the cover of CSU's 
catalog.\2\ As you can see, on my left there is a black-and-
white photograph of a rather elegant building. It looks very 
impressive, maybe it is Gothic in style. Does that building 
have anything to do at all with Columbia State University?
---------------------------------------------------------------------------
    \2\ The chart appears as Exhibit No. 14 in the Appendix on page 
174.
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    Ms. Gerald. No, ma'am.
    Chairman Collins. So that is not the headquarters or a 
classroom?
    Ms. Gerald. No, ma'am, it is a residence, a mansion I 
believe in New York State.
    Chairman Collins. Now the other photograph, the one in 
color, it is my understanding is a San Clemente, California 
storefront office and it has a sign identifying it as the 
American Consumer Protection League. Now there is quite a 
difference between those two locations. It is my understanding 
that Mr. Pellar also registered to receive mail for Columbia 
State University at the San Clemente address using a false 
name. Can you explain any of this to us, what it is that we are 
seeing on my right?
    Ms. Gerald. Actually 930 Calle Negocio in San Clemente was 
a complex of industrial business locations, meaning that they 
had a storefront, an office front, in the rear had a shipping 
type arrangement with a garage door. All of the offices there 
were the same way.
    The receiving of mail was this: He had an arrangement with 
a secretarial service in Metairie, Louisiana that would go in 
and pick up his mail on Mondays and Thursdays, ship that mail 
overnight to that address, and it would be received on Tuesdays 
and Fridays. So it was packaged, bulk mail scenario sent from 
Metairie to that address. In other words, students when they 
enrolled, they did not know anything about the San Clemente 
address. They sent their mail to New Orleans or Metairie.
    Chairman Collins. I want to ask you one final question 
before turning to Senator Durbin. It is my understanding that 
Columbia State University provided generous credit for life 
experience and I would like to turn your attention to the 
posterboard that is now being displayed.\1\ Are you familiar 
with the kinds of experience that would qualify for credit? 
Have you seen this list before?
---------------------------------------------------------------------------
    \1\ The chart appears as Exhibit No. 16 in the Appendix on page 
176.
---------------------------------------------------------------------------
    Ms. Gerald. Yes, ma'am.
    Chairman Collins. It is my understanding that some of the 
activities listed for which CSU would grant college credit or 
graduate-level credit, included playing tennis, eating in 
exotic restaurants, pressing flowers, buying a Persian rug, 
watching public television, and playing the game Dungeons and 
Dragons. Did this actually happen? Did CSU actually give 
college credit for activities like that?
    Ms. Gerald. If I can give you a broad answer, I think that 
was born out of--one of the examples I gave in my earlier 
testimony was that Ron had a school called American Nursing 
Tutorial. The premise of that school was that one would get a 
bachelor's degree and go to work as an LVN and spend maybe 10 
years working in that particular field. And then maybe by that 
time have gotten married, had a couple of children in the home 
to take care of and not have the time to go to school. So you 
could enroll with your former credits accrued from your 
bachelor's degree and your life-work experience, meaning the 10 
years that you worked as an LVN as a technical employee.
    Now from that he drew this up which gave the prospective 
student the idea that any life-work experience that they had, 
be it technical or otherwise--and I would not call dining out 
in a restaurant necessarily technical--but that you could get 
credit for that. However, going back to a previous poster up 
there, the pre-prepared transcript showed no indication that I 
saw of life and work history because it did not have the 
student's name on there, and how would one know prior to 
completing the degree what they asked to have credit for? I do 
not recall having ever seen that done, but it may very well 
have been done.
    Chairman Collins. Thank you. Senator Durbin.

              OPENING STATEMENT OF SENATOR DURBIN

    Senator Durbin. Thank you very much, Madam Chairman, and 
thank you for this hearing. You have done an extraordinarily 
good job of investigating this issue and I am particularly 
proud to be a Member of the Committee when I consider the 
effort that you put into this and the fine witnesses that we 
brought forward today. If watching public television can earn 
you a degree, I suppose watching C-SPAN could get you an 
advanced degree in something, but I am not sure what it might 
be.
    Aside from the humor that might be associated with it, 
there are some serious aspects. A few years ago a technician at 
the Clinton nuclear power plant in my home State of Illinois 
was interviewed for a story about the problem. He had received 
a bachelor's and master's degree from Columbia State 
University. According to the news story, both the individual 
interviewed and another person involved indicated they did not 
realize they were receiving fraudulent credentials and ended up 
working at a nuclear power facility.
    We have ample evidence that there was at least one person 
working at a very high level job in the Department of Homeland 
Security fighting terrorism who turns out to have a bogus 
degree. I think what you found, Madam Chairman, is that there 
are people purporting to have medical training who have made 
some rather disastrous decisions on behalf of patients, and it 
turns out they had little or no training for their credentials.
    I guess, Ms. Gerald, the thing that strikes me as well is 
the fact that as terrible as this fraud may be, the taxpayers 
are subsidizing it. We are providing hard-earned tax dollars by 
way of grants and loans to students at these bogus 
institutions. And the money involved is absolutely stunning in 
terms of how much the Federal Government may have financed the 
process. I do not know if I have all of that right at my 
fingertips here but I think the information that has been 
provided to us by GAO suggests that it could be substantial.
    I note that five diploma mills the Committee surveyed 
brought in a combined revenue of $112 million over a 4-year 
period, the most profitable Kennedy-Western, revenues of $73 
million between 2000 and 2003; another institution $20 million. 
The one that was bringing in $20 million had 30 people working 
for it. Talk about a gold mine that they have discovered.
    I guess the question I have to ask is, and maybe you could 
tell us your own personal experience on this relating to Mr. 
Pellar and others involved in the institution, what did law 
enforcement do about this ultimately? Were there efforts such 
as criminal or fraud charges brought to try to recover some of 
this money that went from taxpayers to these institutions?
    Ms. Gerald. I can tell you from personal experience the 
answer to that is absolutely yes. The FBI came in, I think it 
was July 3, 1998, to Ron's offices, confiscating files, 
computers, and other materials there at that business location 
that was shown on the board. They also came to my home, they 
came to the home of the manager at the time, and took 
information from those premises and then ultimately took other 
possessions and so forth.
    Possessions meaning that, there were items, for example, in 
our case where Mr. Pellar had purchased automobiles directly 
with a CSU or Columbia State University checks for his 
daughters, so those automobiles were taken. So there were 
efforts. I understand that were made to get a yacht that Ron 
had purchased after he had fled the country. So there were many 
items of personal possession of his and ours that were taken, 
yes.
    Senator Durbin. Do you have any idea how much money was 
recovered from Mr. Pellar?
    Ms. Gerald. I have absolutely no idea. I can tell you 
exactly how much was taken from us.
    Senator Durbin. Would you tell us?
    Ms. Gerald. I think overall the value of things that were 
taken from us and----
    Senator Durbin. Meaning your family?
    Ms. Gerald. Meaning our family. There was myself, his wife, 
and his two daughters. Also we were defined as being part of 
the eligibility for seized items that were actually none of 
ours, like Ron's Columbia State University business account. 
None of that belonged to any of us but our names were on those 
documents. So if you look at all of that information there was 
a total of approximately $842,000.
    Senator Durbin. What marketing ploys did he use that were 
most successful in bringing students in?
    Ms. Gerald. I would say the actual aesthetics of the 
materials that were sent out was one. He made them look fairly 
professional. Also, the appeal to the individual that their 
previous accrued credits, whether they had actually gotten a 
degree or not but had earned credit, would be accepted across 
the board.
    For example, in today's university environment in the State 
of California, for example, if you go to school in Sacramento, 
University of California but you transfer to a city in Southern 
California you may lose some of your credits. This was not the 
case with Ron's school. He advertised that he would accept the 
credits that you had earned, and that was very appealing to the 
potential student. Then, of course, anything related to work 
and life history, that potential student felt like they would 
get credit for whatever school of hard knocks education that 
they had earned.
    Senator Durbin. I will tell you what is interesting, too, 
is that he also spawned a new generation of those involved in 
this fraudulent practice. Loyola State, which is offensive to 
those of us who have such respect for Loyola University in my 
home State, was a diploma mill that was uncovered by Illinois 
Attorney General Lisa Madigan and her predecessors. According 
to one of the news stories, the proprietor of Loyola State had 
a diploma from Columbia State. So they used their academic 
credentials from Columbia State to found a new university, 
which turned out to be totally fraudulent. Mr. Pellar himself 
plagiarized to launch one of his new schools, starting his 
nurse's tutorial by borrowing from another program. Do you know 
to what extent Mr. Pellar's operation may have led to others 
instigating copycat schemes?
    Ms. Gerald. No, I am not familiar with any that spun off of 
that other than what you have just mentioned. I have no idea. I 
am sure there were many, but I could not define anything in 
particular.
    Senator Durbin. I have just been notified that it was 
former Attorney General Jim Ryan who was involved in that. I 
thought it was Lisa Madigan but it was Jim Ryan who did it in 
our State.
    Thank you very much for your testimony.
    [The prepared statement of Senator Durbin follows:
                  PREPARED STATEMENT OF SENATOR DURBIN
    Madam Chairman, when you ably chaired the Permanent Subcommittee on 
Investigations in previous Congresses, your leadership helped expose to 
public scrutiny an array of serious consumer protection lapses 
including medicare fraud, safety of food imports, telephone service 
slamming and cramming, and sweepstakes fraud.
    This week's hearings on the extent to which taxpayer funds are 
being expended for bogus degrees from diploma mills continue that noble 
quest to investigate and combat another situation vulnerable to waste, 
fraud, abuse, and mismanagement. I commend your initiative to confront 
this problem.
    Diploma mills unabashedly exploit fraud on society by cleverly 
adopting institutional monikers that mimic legitimate and esteemed 
educational establishments. Some of the operators of these outfits even 
create their own bogus credentialing entities with lofty-sounding 
titles that appear perfectly reputable. Diploma mills also pose 
problems for the expanding arena of distance learning and credentialed 
on-line courses.
    According to John Bear, who spent a dozen years as the FBI's 
principal consultant and expert witness on diploma mills and fake 
degrees, ``it's not uncommon for a large fake school to `award' as many 
as 500 Ph.D.'s every month.'' [Source: ``Diploma Mills: The $200 
Million A Year Competitor That You Didn't Know You Had'' University 
Business (March 2000)]
    My home State of Illinois is among the few, but growing number of 
jurisdictions which have addressed the problem of fraudulent use of 
academic credentials by enacting specific legislation prohibiting the 
conduct.
    The Academic Degree Act (Illinois Public Act 86-1324), enacted in 
1989, makes it unlawful for a person to knowingly manufacture or 
produce for profit or for sale a false academic degree, unless the 
degree explicitly states ``for novelty purposes only.'' It is also 
unlawful under this act for a person to knowingly use a false academic 
degree for the purpose of obtaining employment or admission to an 
institution of higher learning or admission to an advanced degree 
program at an institution of higher learning or for the purpose of 
obtaining a promotion or higher compensation in employment.
    This law established as a matter of public policy that deception of 
the public resulting from the offering, conferring and use of 
fraudulent or substandard degrees must be prevented.
    In 1997, the Illinois Attorney General filed a lawsuit against 
``Loyola State University,'' which had been offering bachelor's, 
master's, and doctoral degrees based on ``life-learning experiences.'' 
These experiences could include eating in an exotic restaurant, hooking 
a rug, visiting a museum and watching public TV, and would be matched 
with course names and numbers and listed on a transcript.
    A Chicago Sun-Times story in March 1997 reported that Loyola State 
University's chancellory building was a private mail drop in Itasca, 
Illinois, a community of about 8,300 residents just outside of Chicago. 
Mail and phone calls were forwarded to California. The Executive 
Director of ``Loyola State'' was accused of violating the State's 
consumer fraud and deceptive practices acts and the Illinois Academic 
Degree Act, which requires regional accreditation for colleges and 
universities.
    Furthermore, as our inquiry continues, I think we should also 
seriously question whether any individuals performing Federal sector 
work under contract are being bid for and selected for jobs based on 
credentials procured from fly-by-night schemes.
    Moreover, there should be zero tolerance for the use of phony 
degrees for anyone seeking or holding a Federal security clearance, 
whether the applicant be an employee, a Federal contractor, or other 
requestor.
    As competition for Federal jobs becomes more fierce, and as we 
tackle the heightened challenge of attracting the best and brightest to 
public service, I think we need to ask how we can do a better job of 
safeguarding the integrity of the hiring and promotional processes.
    When individual educational achievement is so often a material 
element in selecting top candidates to fill coveted high-level civil 
service posts--and when a failure to scrutinize and validate claimed 
credentials appears to be a material deficiency across agencies--it's 
time for urgent and effective corrective action.
    GAO's conclusions that the extent of this problem may be even worse 
than the data reflect should be a stark eye-opener. If agencies lack 
systems to properly verify academic degrees or detect fees spent for 
degrees but masked as fees for training courses, if there are no 
routine and standard verification protocols to check out academic 
references, and if there are no uniform government-wide practices to 
conduct queries on particular schools and their accreditation status, 
then it's high time that this situation changes.
    With GAO's assessment that the Federal Government is itself a 
victim of these scams, I hope we will act with dispatch to close any 
statutory loopholes, require heightened vigilance by human resources 
officials across all agencies, and invoke remedial action to recover 
any misspent funds.
    U.S. statesman, inventor, and founding father Benjamin Franklin 
observed that ``there is no kind of dishonesty into which otherwise 
good people more easily and frequently fall than that of defrauding the 
government.'' Franklin also quipped that ``an ounce of prevention is 
worth a pound of cure.''
    Madam Chairman, I find these two enduring adages particularly 
apropos for the topic we are exploring in these hearings.
    I appreciate your initiative to shed light on the scope of damage 
to the Federal Government by the deceptive practices of diploma mills. 
I trust that public exposure of this problem will accomplish several 
things: Help officials recover financial losses and prosecute fraud; 
strengthen and augment available enforcement tools; spur agencies to 
become more vigilant in reviewing credentials of applicants for 
employment, promotions, and security clearances; educate the workforce 
about how to avoid becoming unwitting victims of schemes; discourage 
the proliferation of deceptive ripoffs; and stem the tide of 
misappropriating taxpayer resources for illegitimate academic 
credentials.
    Thank you for holding these hearings. I look forward to 
participating.

    Chairman Collins. Thank you, Senator.
    Thank you for your testimony. We may have a few additional 
questions for the record to clarify some issues, but we very 
much appreciate your coming forward and sharing your assessment 
with the Committee.
    Ms. Gerald. Thank you for the opportunity.
    Chairman Collins. Our final witness this morning is Alan 
Contreras. He is the Administrator of the Office of Degree 
Authorization at the State of Oregon's Student Assistance 
Commission. He has long lead the charge at the State level to 
curb the proliferation of diploma mills and he will discuss the 
various forms that diploma mills can take. We are really 
delighted to have one of the country's foremost experts on 
diploma mills with us this morning.
    Mr. Contreras.

TESTIMONY OF ALAN CONTRERAS,\1\ ADMINISTRATOR, OFFICE OF DEGREE 
      AUTHORIZATION, OREGON STUDENT ASSISTANCE COMMISSION

    Mr. Contreras. Thank you, Senator. I appreciate the chance 
to be here today and I hope that some of my comments will be of 
some use to the Committee.
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    \1\ The prepared statement of Mr. Contreras with attachments 
appears in the Appendix on page 106.
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    I think some of the basic issues about diploma mills have 
already been brought out by the earlier witnesses and I am 
going to just hit some of the high points in my testimony and 
then talk about what the State of Oregon is trying to do about 
this problem at a local level.
    I think the key driving force behind the modern expansion 
of diploma mills, which after all have been around for a long 
time, is certainly the Internet, the ease of advertising via E-
mail, combined with the ease of putting up a web site that 
makes you look like a legitimate institution that has some of 
these nice pictures that we just looked at, most of which are 
stolen from real institutions or from things that are not 
colleges at all. So it is very easy now to make yourself look 
like you are a college when in fact you are not.
    We often get asked, as has come up earlier, why do people 
care about these degrees and what are some of the issues that 
come up because people use them? Certainly, the public safety 
and national security issues that have been mentioned earlier 
would be in that category. But I want to add something to the 
national security item, which was mentioned earlier by the 
gentleman from the GAO, and that is the problem of potential 
blackmail.
    One aspect that was not really discussed is what happens 
when a Federal employee based in Virginia or somewhere else, 
ends up moving to New Jersey, North Dakota, Oregon, Indiana, a 
State that has a law saying that these degrees are not valid? 
If you get transferred to Minot Air Force Base in North Dakota 
and you are an Air Force officer or a civilian employee and you 
have a degree from one of these bogus suppliers and that is 
your credential, that is a felony in the State of North Dakota. 
There is no exception for Federal employees, obviously, 
committing felonies in the State of North Dakota. So you are 
instantly subject to blackmail in a very sensitive institution.
    Or for example, if you were in a border situation, a Coast 
Guard situation, things of which you are very familiar. So that 
is one additional item I wanted to add to the national security 
discussion.
    I think we have already covered the questions of the 
problem of the waste of resources, both public and private, of 
people who buy and use these degrees. There is also the 
question of the devaluation of legitimate degrees, especially 
those from non-traditional providers that are legitimate; the 
University of Phoenix, Thomas Edison, Charter Oak, Capella in 
Minnesota. There are lots of places that are accredited, non-
traditional degree providers. They are the ones that are really 
harmed by these bogus operators out there who are using similar 
techniques to offer a bad product.
    Finally, I think you get down to the question of equity. If 
you are a Federal employee and you have worked there for 10 
years and you earned your degrees the old-fashioned way, by 
actually taking the classes, and all of a sudden somebody gets 
promoted into a position that you would have been qualified 
for, because they bought their degree last week for $900 over 
the Internet, I think there is a very fundamental equity issue 
there that has nothing to do so much with the expenditure of 
public funds but with the nature of public policy. I hope that 
is an issue that the Committee will spend some time and energy 
on.
    The question came up earlier of whether all unaccredited 
colleges are diploma mills. The answer is clearly no, and I 
will go over the Oregon procedure for evaluating these things a 
little bit later. But there are a number of unaccredited 
schools that are perfectly legitimate post-secondary providers. 
There are ways that you can determine what they are, and that 
they are not a pure mail-order house such as the previous 
witness described.
    But right now in the United States, the only meaningful, 
transportable, national interstate standard to decide whether a 
post-secondary provider is legitimate or not, is accreditation. 
That is what we use in the United States. Not every country 
does that, but that is what we do.
    So as you may have noticed with things like Pacific 
Western, if you have a State-approved school somewhere else and 
somebody moves from one State to another and wants to use that 
degree, if it is not accredited, we have no idea what it is 
really, if they have not gone through our own evaluation 
process.
    I have been asked to comment on what some of the most 
common professions are in which we in our office have found 
people using these bogus credentials. Certainly, K-12 
education, both teachers and administrators, police, 
corrections and other public safety, counselors, public 
administrators, medical administrators would be in that 
category. We get a fair number of cases of referrals or 
comments coming up about people who serve as expert witnesses 
who want to be able to call themselves doctor in order to make 
a better impression, and so on, that sort of thing. And quite a 
few in business, although most of the complaints we actually 
get are from the public sector.
    I will talk briefly about what the Oregon legislature has 
decided to do about this problem. Most people seem to think 
that we are the only State that has, and that is actually not 
true. New Jersey, North Dakota, and Indiana have done a fair 
amount. Illinois has recently passed a partial bill, and the 
Nevada legislature is considering it. It is a more popular item 
for discussion than it was 10 years ago.
    What the Oregon legislature decided to do was adopt a very 
straightforward mechanism dealing with these things. In the 
State of Oregon today it is illegal, both a violation of 
criminal and civil law, to use an accredited degree as a 
credential for anything, employment, starting your business, 
whatever it is that you would require the credential for. That 
is both a crime and civil fraud, you cannot do it. The same is 
true in a couple of the other States I mentioned.
    What that means as a practical matter is that if an 
unaccredited entity wants its degrees to be validated for use 
in the State of Oregon it has to go through our office and we 
have to do a screening. We have to do an evaluation of the 
provider to make sure that it meets certain minimum basic 
standards to be usable in Oregon. I wanted to just briefly let 
you know what those standards are and then I will go back to 
make a couple of comments about the Federal issues.
    In order to be legitimate for use in Oregon, a degree has 
to be from an institution that has adequate faculty 
qualifications, adequate program length. That is, in terms of 
the student having to do a certain amount of work to get the 
degree and not get it in 27 days, or in 27 hours, because we 
all know how that happens. The content of the curriculum has to 
be something that is recognizable as belonging to a post-
secondary offering and not simply something that looks more 
like a high school term paper.
    Requirements on the award of credit. You cannot have people 
getting a full year's credit for work that they do on a Friday 
night. There has to be some indication that credit is awarded 
in an organized method over time.
    There also has to be some evidence that the entity has 
admission standards that you and I would recognize as 
legitimate. For example, you do not start giving out Ph.D.'s to 
people who have never completed high school. There needs to be 
some kind of linkage there as you go through the process.
    Now in the case of foreign degree suppliers we also look at 
whether the entity has legitimate approval within the Nation it 
comes from, whether that Nation has an adequate process in 
place, some related issues like that.
    Finally, I think there are some basic things the Federal 
Government could do that would be very helpful in this process. 
The States, we can really take care of our own up to a point. 
Each State can make a decision about how to regulate these 
things. But I think if the Federal Government does not have a 
law on the books about qualifications necessary, you really 
need to move toward something that has these standards in it. 
You need to look at whether degrees used by Federal employees 
are from federally-recognized accreditors, whether you paid for 
them or not. The question you are looking at is partly whether 
my tax dollars and your tax dollars were used to buy these 
things. But the fact that we bought them or the individual 
bought them, they are still sitting there with a bogus 
credential in a sensitive position. That is really the basic 
problem: Whether these people are capable of performing.
    Then I think you need to look at--if you are going to look 
at unaccredited institutions as being legitimate institutions, 
which a few of them are, you need some mechanism in place, 
through the Department of Education or possibly OPM, to 
determine whether the unaccredited entity is capable of meeting 
certain basic standards that an accredited entity normally 
would, or that an entity approved by an attentive State unit 
like ours really would.
    So that is basically what the Oregon legislature has done 
when faced with this situation. North Dakota, New Jersey, 
Indiana have done similar things.
    I would be glad to answer any questions you might have.
    Chairman Collins. Thank you so much. Your testimony is 
excellent. It really gives us a fuller understanding of the 
issues involved.
    Unfortunately, we are in the midst of two roll call votes 
on the Senate floor. There is only one minute remaining in the 
first one so I am going to have to spring away. I would like to 
ask, if possible, if you were planning to stay overnight here 
in Washington, that we could start our hearing tomorrow morning 
and allow the opportunity for myself and other Members to 
engage you in questions at that time.
    Mr. Contreras. I plan to attend the entire hearing 
tomorrow.
    Chairman Collins. Wonderful. That would be great.
    In that case, we will see you tomorrow and this hearing is 
now recessed until 10 a.m. tomorrow morning when we will 
reconvene in room 342 of the Dirksen Senate Office Building.
    [Whereupon, at 12:16 p.m., the Committee was adjourned.]





                        BOGUS DEGREES AND UNMET
                   EXPECTATIONS: ARE TAXPAYER DOLLARS
                       SUBSIDIZING DIPLOMA MILLS?

                              ----------                              


                        WEDNESDAY, MAY 12, 2004

                                       U.S. Senate,
                         Committee on Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:05 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Susan M. 
Collins, Chairman of the Committee, presiding.
    Present: Senators Collins, Lieberman, Akaka, and Pryor.

             OPENING STATEMENT OF CHAIRMAN COLLINS

    Chairman Collins. The Committee will come to order.
    Good morning. This is the second of two hearings that the 
Committee on Governmental Affairs is holding this week to 
examine the problems that substandard, unaccredited schools, 
often referred to as diploma mills, pose to the Federal 
Government.
    Yesterday, we heard testimony from the General Accounting 
Office's representatives, from a person who has been convicted 
for helping to run a successful diploma mill, and from an 
Oregon official who enforces one of the Nation's toughest anti-
diploma mills laws.
    Throughout this investigation, I have been struck by how a 
simple marketing strategy has propelled some diploma mills to 
financial success to the tune of millions of dollars. By hiding 
behind a mask of legitimacy, diploma mills can be used by the 
unethical and can fool the unwary student or employer into 
believing that their degrees are as legitimate as a degree from 
an accredited university that provides a quality education and 
plays by the rules.
    Today, we will hear from three witness panels. On the first 
is Alan Contreras, the Administrator of Oregon's Office of 
Degree Authorization. He gave his statement yesterday, but the 
Committee did not have an opportunity to engage him in 
questions due to a series of votes. He has been gracious enough 
to join us again today so that the Committee can ask him 
questions about his extensive experience in combatting diploma 
mills, and I very much appreciate his willingness to stay over 
and join us again today.
    The second panel will focus on Kennedy-Western University, 
an unaccredited school with academic requirements that fail to 
meet the standards of legitimate institutions. The Committee 
became interested in Kennedy-Western because its catalog 
boasted that a number of Federal agencies had paid for their 
employees' education at the school.
    The poster now on display is a page from the Kennedy-
Western catalog.\1\ Highlighted in yellow are more than a dozen 
different Federal agencies, including the Departments of 
Defense, Justice, Energy, Agriculture, Transportation, and 
Health and Human Services, that purportedly paid for their 
employees' course work at Kennedy-Western.
---------------------------------------------------------------------------
    \1\ The chart appears as Exhibit No. 20 in the Appendix on page 
180.
---------------------------------------------------------------------------
    The General Accounting Office found that Federal agencies 
had paid for 50 employees to enroll at Kennedy-Western. The GAO 
did not find payments from all of the agencies listed in the 
business's brochure. But it is important to remember that the 
GAO was only able to capture direct payments from agencies to 
unaccredited schools. It has no way of looking at the payments 
that agencies make directly to reimburse employees who 
initially paid for diploma mill tuition themselves.
    The witnesses on the second panel will offer an insider's 
perspective on Kennedy-Western's academic program, as well as 
on its aggressive marketing and sales methods. I want to note 
for the record that one of the reasons we have been able to 
examine Kennedy-Western in such detail is its cooperation with 
the Committee, which we do appreciate. Too often, individuals 
or organizations under investigation by a Congressional 
Committee adopt a bunker mentality, refusing to provide 
information unless and until they feel they have no choice but 
to do so. I would also note that we have looked at other 
diploma mills, some of which, for example, Columbia State 
University, were discussed at yesterday's hearing.
    The third panel consists of representatives of the 
Department of Education and the Office of Personnel Management. 
We will learn what initiatives these agencies are undertaking 
to prevent taxpayer dollars from subsidizing diploma mill 
degrees and to make it clear to prospective and current 
employees that such credentials are not accepted in the Federal 
Government.
    I want to thank both agencies for working closely with the 
Committee to help address these issues, and in particular, I 
want to recognize the leadership of OPM Director Kay Coles 
James and the Secretary of Education, Rod Paige.
    The question on the minds of many individuals watching 
these hearings must be. ``How is it possible that Federal 
agencies spend our tax dollars on these worthless degrees?'' 
The answer is far from simple when what at first glance appears 
to be a clear rule and policy prohibiting agencies from paying 
for diploma mill degrees are in reality subject to a loophole 
that can be easily exploited. And as the numerous Federal 
checks that we have found that have been written to diploma 
mills clearly indicate, that loophole is frequently and 
successfully exploited.
    This loophole, which we will discuss in detail this 
morning, allows agencies to pay for classes, individual 
courses, at diploma mills. It must be closed. We owe students, 
taxpayers, and employers no less, and working together with the 
agencies represented here this morning, I am certain that 
whether through new legislation or new regulations, we will be 
successful in closing that loophole once and for all.
    Senator Lieberman.

             OPENING STATEMENT OF SENATOR LIEBERMAN

    Senator Lieberman. Thank you very much, Madam Chairman. Let 
me start by thanking you and your staff for the excellent work 
that you have done on this investigation and for your 
initiative in calling these hearings. I appreciate your 
leadership in focusing our Committee on the topic of these 
substandard, unaccredited schools.
    The Committee's investigation has left no doubt that 
diploma mills deserve a failing grade. Sham degrees undermine 
the public's confidence in our educational institutions, in 
employee qualifications, and in the quality of the workforce. 
The Federal Government, as you have said, simply cannot afford 
to waste precious taxpayer dollars to subsidize employees who 
wish to obtain degrees that are worth less than the paper they 
are printed on.
    Of course, the public interest may be at risk here, as 
well, when public employees are on the job without the 
educational credentials needed to do their jobs. Phony degrees 
from phony schools are unfair to honest people who work hard 
for their degrees and on their jobs, and they also can be 
unfair to those who seek them and are deceived by their value. 
No job applicant should be denied a position, no employee 
denied a promotion because a competitor has presented false 
qualifications.
    As I followed this investigation, Madam Chairman, I would 
say that each of these diploma mills seems to work somewhat 
differently, but they all mock hard work and traditional 
intellectual pursuit. Many provide substantial credits for life 
experience, which led me to conclude that you and I are both 
probably Ph.D.'s right now. [Laughter.]
    In some cases, students didn't have to complete much, if 
any, coursework to obtain a degree because their life 
experience was study enough. One diploma mill didn't have 
professors or teachers on staff, didn't bother to grade student 
assignments and suggested to potential students that they could 
get credit toward their degrees for such life experiences as 
playing tennis or eating in exotic restaurants.
    This same school advertised that students could earn a 
Bachelor's degree, Master's degree, or Ph.D. in just 27 days 
without attending any classes. I mean, this is unbelievable. If 
it wasn't produced by the investigation that the staff has 
done, it would be hard for me to believe.
    The tactics of some of these outfits in soliciting 
prospective students are really unbelievable. At one 
unaccredited school, according to the staff's investigation, 
so-called admissions counselors were actually telemarketers who 
used pressure tactics and misleading statements to lure 
students. These self-described admissions counselors were 
actually paid commissions based on the number of students they 
enrolled, and in some instances were fired for not meeting 
their sales goals. Yet even though these diploma mills offer 
next to nothing in terms of the education they provide, they, 
of course, are often quite profitable.
    I believe that you have done a great service in uncovering 
and drawing these shameful practices out into the sunshine. We 
have a very good group of witnesses this morning. I look 
forward to hearing particularly about the Office of Personnel 
Management's stepped-up efforts to address issues concerning 
educational credentials of current and prospective government 
employees, including the amendment of Federal personnel forms 
to more readily identify unaccredited and substandard schools.
    So again, Madam Chairman, I thank you for your leadership 
here. I congratulate you and your staff for what you have 
uncovered and I look forward to working with you either to pass 
legislation that would close the loopholes which you have 
described or to encourage the Executive Branch to take 
regulatory action that will do so. Thank you very much.
    Chairman Collins. Thank you, Senator.
    Our first witness today is Alan Contreras. As I mentioned 
in my opening statement, he delivered his statement to the 
Committee yesterday, but due to a series of votes, we were 
unable to question him at that time. He is the Administrator of 
the Office of Degree Authorization at the State of Oregon's 
Student Assistance Commission and is one of the Nation's 
foremost experts on diploma mills.
    We very much appreciate your flexibility in joining us 
today and we will go straight to questions unless you have some 
comments that you felt you didn't get to make yesterday before 
we had to adjourn.

 TESTIMONY OF ALAN CONTRERAS, ADMINISTRATOR, OFFICE OF DEGREE 
      AUTHORIZATION, OREGON STUDENT ASSISTANCE COMMISSION

    Mr. Contreras. I am done with my formal presentation and 
would be glad to take questions.
    Chairman Collins. Thank you. It is my understanding that 
your State's law prohibits schools from awarding degrees unless 
they are approved by the State Office of Degree Authorization. 
Could you explain more about the Oregon State law, what brought 
it about and how it affects employers in your State?
    Mr. Contreras. Well, Oregon has had some kind of law on the 
books for well over 20 years, but the current version was 
passed in 1997 by the legislature, prior to my arrival in this 
position. What it does is it says that in order to be valid for 
use as a credential for any purpose in the State of Oregon, a 
degree has to be from a school that is accredited by a 
federally-recognized accreditor or that is evaluated and 
approved by our office using the standards adopted by the 
commission for which I work.
    So what that means is that for any employment situation, 
public or private, in the State of Oregon, there is a built-in 
screening situation. It doesn't mean that occasionally somebody 
doesn't get through, but when we catch up with them, we can 
enforce the law in that situation.
    Chairman Collins. Are there fines or other penalties if 
unaccredited schools operate in your State? How does that work?
    Mr. Contreras. There are fines or penalties both for an 
unaccredited school operating in the State or for an individual 
who uses a degree from an unaccredited school in the State. It 
is a Class B misdemeanor under the criminal law. It is also 
considered civil fraud on the part of an individual and would 
be an unlawful trade practice on the part of a commercial 
entity. And their fines range up to $1,000 per incident, and 
under the Class B misdemeanor, there is a potential of 1 year 
in jail.
    Chairman Collins. When the Committee first began its 
investigation, which was actually 3 years ago, and we looked at 
your website and the list of diploma mills, at that time, I 
believe there were about 40 that were listed. Could you tell us 
how that list has grown, how many schools--``schools'' I put in 
quotes--you list as diploma mills and how you determine--what 
standards do you apply to determine whether an institution is a 
legitimate school or simply a diploma mill?
    Mr. Contreras. I do appreciate you putting the word 
``school'' in quotes. We use the term ``supplier''----
    Chairman Collins. That is a better term.
    Mr. Contreras [continuing]. Which I think covers it pretty 
well. [Laughter.]
    The list that Oregon has right now has maybe 170 or 180 
names on it. The State of Michigan maintains a similar list, 
the State Human Resources Office there. These are by no means 
complete lists. Some estimates are that there are up to 2,000 
of these suppliers out there.
    Really, the list is intended as a guideline, as a way of 
letting consumers, employers, anybody else know that we know 
that these suppliers do not provide a degree that is legal for 
use in the State of Oregon. What that means is we know they are 
not accredited and they have never gone through any of the 
evaluation processes that we would require in order to make 
those degrees legal for use in the State. There are a very 
small number of unaccredited schools that have gone through 
that process. It is fewer than ten. But that is basically what 
the list is for.
    Chairman Collins. Our investigation has revealed that there 
seem to be two kinds of diploma mills. One is simply a printing 
press. That is how I got some very fancy degrees, Senator 
Lieberman. All I had to do was send a check and I received very 
nice looking degrees, complete with transcripts. It was just a 
matter of paying the money and out popped the degree.
    Others, such as Columbia State University, Kennedy-Western, 
and some of the others we have looked at, are more 
sophisticated. They require a modicum of work, but nothing 
close to what should be required for a legitimate degree. 
Obviously, you shouldn't be able to earn a degree in 27 days, 
the example we discussed yesterday and Senator Lieberman cited.
    Do you find that diploma mills are becoming more 
sophisticated? Is it becoming more difficult for a student who 
perhaps does not have any experience with higher education to 
distinguish between a diploma mill and a legitimate 
institution?
    Mr. Contreras. Well, in our experience, the great majority 
of people who buy these degrees are people who already have a 
legitimate Bachelor's degree, not all, but most. What that 
suggests to me is that we have people who already know what 
post-secondary education is supposed to be. These aren't people 
who just came in off the bog, as my Irish ancestors might have 
said. They have been to college. They have earned a degree.
    And I think Senator Lieberman is right on. What we are 
talking about here is the notion that working for something 
doesn't mean anything anymore. I don't know where we lost the 
idea of that. I don't know where we got the idea that a degree 
ought to be something fast and easy. But I am not persuaded 
that most of the people who get these degrees don't know 
exactly what they are.
    Chairman Collins. One final question from me. You have 
provided the Committee with a letter that is dated September 
15, 1997, from your predecessor as Administrator of the State 
Office of Degree Authorization and it is to a Ph.D. recipient 
from Kennedy-Western University. The letter discusses the 
recipient's doctoral dissertation, but it also comments on 
Kennedy-Western. It says, for example, ``Your dissertation also 
confirms that Kennedy-Western University is not truly a 
university and does not engender or require any doctoral-level 
research for the Ph.D., which is the ultimate research 
degree.''
    Is there anything that you have learned about Kennedy-
Western's academic program since that time that would lead you 
to conclude that it is now a legitimate university? Is it 
still--does it meet your State's standards for a legitimate 
institution?
    Mr. Contreras. It does not. It was on our list very early 
on and the Oregon Attorney General has an agreement in place 
with Kennedy-Western from about 4 years ago under which they 
are no longer allowed to offer degrees to residents of the 
State of Oregon. Since that time, of course, we haven't had any 
reason to look at them because that agreement has been in 
place, but we certainly have not seen any new information.
    Chairman Collins. Thank you. Senator Lieberman.
    Senator Lieberman. Thanks, and thanks so much for your 
testimony. In your work on this, I am curious whether you have 
reached any conclusions about the kind of people who are 
organizing these diploma mills. Are they, if we can put it this 
way, educators who have gone bad, or are they just out-and-out 
sham artists, con artists who just have found this to be the 
latest way to make a quick buck?
    Mr. Contreras. My impression is that there are some of 
each. The ones that you might call a pure mail order house, the 
St. Moritz's and the Harrington's and all that sort of thing, 
appear to have no connection with anybody, as far as I can 
tell, who used to be a professor or was in higher education in 
some way.
    But a number of the other unaccredited suppliers do have 
people working for them in some cases that did come out of a 
higher education background, or at least who have graduate--
seem to have graduate degrees from a legitimate institution. Of 
course, without investigating that, we don't really know. So I 
would say there are some of both.
    Senator Lieberman. A mixture. Let me ask you, I am 
impressed by the program you have and wonder if you have had 
any way to measure the deterrent effect of what you are doing 
either on prospective students or on employers? Has the 
existence of your program made each of them more vigilant, 
particularly, I suppose, the employers, because to some 
extent--you have said to us your judgment on the students is 
that most of them are going into this knowingly?
    Mr. Contreras. My impression is that most of them go into 
it knowingly, or by the time they get out of it, they certainly 
know what they have.
    Senator Lieberman. Right.
    Mr. Contreras. The deterrent effect is probably the most 
important aspect of what we do. Our law is designed so that 
when we find someone who is using one of these degrees, they 
have one chance to stop using it within 30 days with no penalty 
at all. We aren't really interested in penalizing people. We 
are interested in getting bogus credentials out of the market.
    Senator Lieberman. Right.
    Mr. Contreras. So our whole system is set up that way. Our 
website, I think serves a great purpose that way and we get 
many comments on it. Certainly, it has had a big effect among 
public employers in the State. I have less idea about its 
effect on private employers because we don't connect with them 
as often, but we do hear from them occasionally.
    Senator Lieberman. A final question--in your testimony I 
was interested that you mentioned that several occupations seem 
to have more common involvement with diploma mill degrees. 
Could you just mention those and tell us whether you have any 
explanation as to why you think those occupations tend to use 
these degrees more.
    Mr. Contreras. Well, the ones that I have seen a lot of, 
and I have confirmed this with my colleagues in seven or eight 
other States before coming here, are K-12 education; police, 
corrections, and other emergency services; professional 
counselors; public administrators; administrators of medical 
facilities; providers of alternative medicine; mid-managers in 
business; and persons who work as expert witnesses, for which 
that is their main profession.
    As to why these particular professions attract the diploma 
mill market, I think it has to do with our expectations as a 
society that people constantly gather paper credentials or they 
aren't worth anything, they can't advance, they can't get 
promoted. I think we tend to over-emphasize paper credentials 
and that is especially true in certain professions. My 
impression is that it is more true in the public sector than it 
is in the private sector, and that is my gut feeling, I guess, 
about why these professions might attract them more.
    Senator Lieberman. Am I right that in some cases, such as 
K-12 education and maybe in some of the other civil service 
professions, the holding of a graduate--I presume, obviously, 
most of the people have an undergraduate degree--but the 
holding of a graduate degree automatically gives you an 
increase in compensation?
    Mr. Contreras. It does in most K-12 education situations--
--
    Senator Lieberman. Right.
    Mr. Contreras [continuing]. And that actually is where 
there is--of course, a major case in Georgia right now where 
there are 11 teachers, I think, that are going to have to 
resign or give back their raises because they went through the 
St. Regis scam.
    In some of these other professions, I don't work with the 
managers often enough to know whether they give raises or not. 
Certainly in police and public safety, I am aware that there, 
that kind of situation is true.
    Senator Lieberman. Thanks very much, Mr. Contreras. You are 
doing a really good job and you point the way for the rest of 
the country. Thank you.
    Mr. Contreras. Thank you, sir.
    Chairman Collins. Thank you very much, and thank you so 
much for coming back today so that we could get the benefit of 
your expertise.
    Our second panel today includes Claudia Gelzer, a 
Lieutenant Commander in the U.S. Coast Guard who is currently 
detailed to the Governmental Affairs Committee, and Andrew 
Coulombe, a former employee at Kennedy-Western University.
    I would note that Ms. Gelzer will describe her experience. 
She went undercover and actually enrolled in Kennedy-Western, 
so she can tell us what her experience was like, both as a 
prospective student and as one who actually enrolled.
    Mr. Coulombe graduated from the University of California at 
Berkeley with a bachelor's degree in historical archeology and 
geology. Because he was interested in working in higher 
education, he answered a job posting as an admissions counselor 
at Kennedy-Western University. Today, he will describe his 
experiences recruiting students to Kennedy-Western and the 
tactics he employed in doing so.
    I would like to welcome you both to the Committee today. 
Your testimony is very important to our investigation and we 
appreciate your being here. Lieutenant Commander, we are going 
to start with you.

TESTIMONY OF LIEUTENANT COMMANDER CLAUDIA GELZER,\1\ U.S. COAST 
 GUARD DETAILEE, COMMITTEE ON GOVERNMENTAL AFFAIRS, U.S. SENATE

    Lieutenant Commander Gelzer. Good morning, Madam Chairman, 
Senator Lieberman. My name is Claudia Gelzer. I am a Lieutenant 
Commander in the U.S. Coast Guard. I joined the staff of the 
Committee on Governmental Affairs a year ago as a detailee.
---------------------------------------------------------------------------
    \1\ The prepared statement of Lieutenant Commander Gelzer appears 
in the Appendix on page 125.
---------------------------------------------------------------------------
    As part of the Committee's team investigating diploma 
mills, I enrolled at a non-accredited school and took classes. 
Our goal was to conduct a first-hand evaluation of the quality 
of education provided by an institution in this category.
    The school that I attended, Kennedy-Western University, is 
successfully attracting thousands of students each year. The 
school earned almost $25 million in 2003. It has nearly 10,000 
students currently enrolled in its programs.
    I would like to point out that Kennedy-Western is just one 
of many like institutions operating in the Nation today. It is 
not our intention to single them out as the only example of a 
non-accredited school. The reason, as you mentioned in your 
opening, Madam Chairman, the school became a focus of our 
investigation is because of the claims in its catalog that some 
20 Federal agencies and entities have paid for employees to get 
degrees from the school.
    Kennedy-Western has been operating for 20 years. It has a 
professional-looking website, a glossy brochure, and offers 19 
areas of study, including business, engineering, and health 
administration. The school operates strictly online and through 
the mail. It has no physical campus, only office buildings in 
California and Wyoming. Kennedy-Western offers Bachelor's, 
Master's, and Doctorate degrees. The school is not currently, 
nor has it ever been, accredited.
    I first called Kennedy-Western in July 2003. I introduced 
myself as a Coast Guard officer looking to earn a Master's 
degree in environmental engineering. I was connected to an 
admissions counselor who told me I was in good company. The 
engineering programs were among the school's most popular. 
Given my military background, she said I was probably well on 
my way to earning a Master's degree already. She told me 
Kennedy-Western believes students should get credit for what 
they have already learned. An admissions board would evaluate 
my experiences and determine how much credit I should receive 
and how many classes I would actually have to take to get my 
Master's.
    In the weeks following my initial contact with the school, 
I received and submitted an application to Kennedy-Western 
which asked about my life and work experience. I provided a 
current resume, which listed my Bachelor's degree in journalism 
and my 12 years of work experience in the Coast Guard. I only 
removed reference to a Master's degree I hold in environmental 
public policy.
    The application also asked for any seminars, workshops, or 
on-the-job training I completed. I listed six seminars and four 
training courses I had attended in the Coast Guard related to 
oil spill response and boat accident investigation. This 
information was accepted at face value by Kennedy-Western. They 
asked for no proof or documentation. As a note, I have no 
formal engineering training.
    Not long after I was admitted into the program. My 
counselor was effusive about how well my qualifications had 
rated with the school admissions board. In fact, she said, my 
rating was one of the highest she had ever seen. As a result, 
the school was immediately prepared to grant me credit for 43 
percent of the degree requirements. To drive this point home, 
my counselor paused and said, ``Claudia, you are only five 
classes away from your Master's.'' I would also have to write a 
final paper worth 12 credits. In other words, Kennedy-Western 
was prepared to waive six Master's level classes in engineering 
based solely on my claims of professional experience.
    As part of the investigation, the Committee on Governmental 
Affairs staff wanted to compare Kennedy-Western's policy for 
granting life experience with those of accredited schools. We 
surveyed 20 accredited schools that offer a Master's degree in 
environmental engineering. None of them offer credit for life 
experience. A more expansive survey of 1,100 accredited 
institutions and their life experience policy conducted by the 
Council for Adult and Experiential Learning revealed that only 
6 percent of these schools offer credit for life experience at 
the Master's level.
    In response to a formal query from the Committee, Kennedy-
Western told us they only admit students who can demonstrate 
applicable work experience. We were told that every student in 
the Master's program is awarded between 33 and 60 percent 
credit toward a degree for their experience. In fact, documents 
produced by Kennedy-Western indicated that nearly half of all 
students in the Master's programs have received more than 55 
percent credit for their experience. Again, I received roughly 
43 percent toward an engineering Master's degree.
    After discussing the results of my evaluation, my 
admissions counselor told me she had good news for me about the 
tuition. My degree would fall at the lower end of the school's 
tuition scale because of all my experience. That amount was 
$6,525, payable all at once or in installments, but with no 
less than 25 percent down to start.
    I asked why the school charged for its degrees in a lump 
sum. As you know, the Federal Government can only reimburse 
students or employees for courses, not for a degree. So I told 
my counselor the Coast Guard would only reimburse me by the 
class. She said not to worry. Kennedy-Western could make it 
look like they were charging me per class by drawing up a bill 
reflecting a course-by-course breakdown. She said they had just 
done this for a student from NASA.
    This is a chart that shows what they drew up for me to 
accommodate the Coast Guard's tuition reimbursement policy for 
my first class.\1\ In our interviews with former Kennedy-
Western employees, we were told that it was common practice for 
the school to alter the bill to satisfy private and Federal 
employers for reimbursement purposes.
---------------------------------------------------------------------------
    \1\ The chart appears as Exhibit No. 29 in the Appendix on page 
190.
---------------------------------------------------------------------------
    My counselor wanted me to get started right away. I needed 
only to select a payment option. I told her, before I could 
sign up, I needed to make sure the Coast Guard would pay for a 
Kennedy-Western degree. At that point, she asked if it would 
help to see some canceled checks the school had received from 
other Federal agencies. I could show them to my boss to prove 
to him that other agencies had paid for the program.
    The next day, she faxed me three canceled U.S. Treasury 
checks payable to Kennedy-Western. They were tuition payments 
for employees of the Air Force, the Army, and the Defense 
Finance Accounting Service in amounts ranging from $3,400 to 
$4,800. Upon receipt of the checks, I paid my first installment 
of 25 percent down using a GAO credit card used for undercover 
work.
    I chose two classes, ``Hazardous Waste Management'' and 
``Environmental Law and Regulatory Compliance.'' I got the 
textbooks for about $100 each from a book distributor 
affiliated with Kennedy-Western. The course guidelines arrived 
by E-mail and contained no actual syllabus. Instead, the 
guidelines included three basic instructions: Read your 
textbook cover to cover at least twice; take the enclosed 
sample exam; and take the final exam. No papers, homework 
assignments, online discussions, or interaction with the 
professor was required.
    Kennedy-Western courses are not what most of us have 
experienced at the university level. Instead of structured 
interaction between professors and fellow students in the 
classroom, including homework, papers, and a series of exams, 
Kennedy-Western requires students to pass one open-book 
multiple-choice test for each class. A student can retake the 
exam if they don't pass the first time.
    Once enrolled in my classes, I was assigned a student 
advisor. I called her to ask how long I had to wait before I 
requested my final exams. There was no time restriction, she 
said. If I felt prepared to take the tests the day after 
tomorrow, that would be fine.
    I ordered the Hazardous Waste Management test first. I had 
neither read nor reviewed the textbook. My objective was to 
determine whether the test was, in fact, legitimate. If so, 
having not prepared, I assumed I would not be able to pass it.
    I had 3 hours to complete 100 questions, and I was able to 
answer most of them by simply looking up a key word in the 
index, turning to that section of the text, and finding the 
answer. However, I got stuck on several questions, some that 
were worded unclearly and several for which there appeared to 
be no correct answer provided on the test. Ultimately, I ran 
out of time.
    After submitting the test, the school notified me that I 
had not passed. In that same letter, I was offered a make-up 
exam for $50. I began to think perhaps Kennedy-Western's 
program might be more rigorous than we had heard. But then I 
took a closer look at my test. While reviewing my answers, I 
noticed that a number of questions had been graded incorrectly. 
I had given the right answer, but the questions were still 
marked wrong. I also confirmed that several questions had no 
possible correct answer provided in the choices.
    The school has an active online chat room for students 
called ``The Pub.'' I had seen a lot of complaints from other 
students about the quality of Kennedy-Western exams when I was 
reading ``The Pub.'' In this chart,\1\ you can see one student 
who said, ``I do not know about yours, but some of my exams 
were terrible. One referred to a diagram that was not on the 
test, and others you can barely read because of very poor 
English.'' Another student said, ``My advice to those who are 
studying hard is to recheck their exam results and challenge 
the score if you believe you have the right answers. I was 
surprised to find out that all my exams contained some errors, 
which I had to challenge and correct. I guess a lot of us are 
experiencing similar issues across different majors.''
---------------------------------------------------------------------------
    \1\ The chart appears as Exhibit No. 21 in the Appendix on page 
181.
---------------------------------------------------------------------------
    So I filed a grade challenge. Ultimately, the school 
declared the test invalid, acknowledging, ``significant 
errors.'' I received several calls from the class instructor, 
who apologized for the poor quality of the test and 
acknowledged that in addition to making administrative 
corrections, she would also reword several of the questions to 
make them clear.
    The school also sent a letter of apology and I was told 
that my grade would be expunged and I could order a retake exam 
at no charge. Before ordering a new test, I reviewed the 
textbook layout and I took a practice exam. I spent just under 
8 hours on these activities.
    I assumed the school would send a different version of the 
exam the second time. The retake, however, was identical to the 
first with the exception of the corrections the instructor had 
made. I had no trouble passing it.
    I then focused on my second course, ``Environmental Law and 
Regulatory Compliance.'' The textbook for the course was not a 
textbook at all, but rather a lawyer's desk reference entitled, 
Environmental Law Deskbook. This presented a problem. This is a 
988-page reference guide containing 22 environmental statutes 
written in ten-point typeface. It contains no legal summaries, 
annotations, or any type of analysis of environmental law, in 
short, no context for the class whatsoever.
    Again, the course guidelines recommended that I read the 
book twice in its entirety and then review questions at the end 
of each chapter. But this book had no study questions. It 
consisted of nothing more than the text of each statute. I 
wasn't sure how to study a book like this, so to prepare for 
the exam, I found on my own an environmental law treatise and I 
studied it for about 8 hours.
    Again, the test was open-book, multiple-choice, 100 
questions, and largely with the help of the alternative text I 
had found, I was able to pass it without a problem. 
Nevertheless, the class was a disappointment. The textbook 
prescribed by Kennedy-Western was essentially useless as a tool 
to increase a student's understanding of environmental law or 
to help to analyze environmental statutes and their genesis. 
After passing the test, I E-mailed the professor through my 
student advisor asking why he had selected such an ineffective 
book. I never heard back.
    Not long after, I withdrew from the school, as by then we 
had a good sense of Kennedy-Western's academic program. With 
just 16 hours of study, I had completed 40 percent of the 
course requirements for my Master's degree.
    In reviewing student dialogue in the school's online chat 
room, I found numerous postings about the quality of Kennedy-
Western's program and its lack of accreditation. I sensed 
genuine disappointment and even desperation from some students, 
questioning whether they had made a mistake. Many admitted they 
hadn't understood the importance of accreditation when they 
enrolled. Some students spoke of feeling duped by the school. 
Several questioned why it seemed like so many students at 
Kennedy-Western had to take only four or five classes.
    On the other hand, there were students who seemed 
completely at ease with the lack of program exams. The chat 
room included regular exchanges about how to prepare for 
Kennedy-Western exams. It was openly acknowledged that test 
answers could often be found in the textbook glossaries.
    This is a chart that shows some actual quotes from the chat 
room on the issue.\1\ One student said, ``I would like to share 
general advice that helped me score an A on four of my courses. 
I highly recommend that you be familiar with the glossary and 
the index of the textbook. Some of the questions were copied 
from the glossary.'' Another student echoed that sentiment. ``I 
took the test this morning and got a 91 percent. I was 
surprised myself on how many answers were straight from the 
glossary.'' There were multiple postings like this.
---------------------------------------------------------------------------
    \1\ The chart appears as Exhibit No. 22 in the Appendix on page 
182.
---------------------------------------------------------------------------
    As for my first-hand experience with Kennedy-Western 
courses and passing the tests, I found that basic familiarity 
with the textbook was all that I needed. I was able to find 
answers without having read a single chapter of the text. As 
for what I learned, the answer is very little. The coursework 
provided only a cursory insight into the management of 
hazardous waste or environmental regulations and law, certainly 
not at the level one would expect from an environmental 
engineer.
    Aside from a multiple-choice exam and someone to grade it, 
based on my experience, a student at Kennedy-Western receives 
little value for their roughly $6,000 in tuition. I think that 
is why I found so many who expressed disillusionment on the 
school's chat room. Having stood in their shoes for a few 
months, I can understand why they feel betrayed.
    I can also understand the feelings of a number of Kennedy-
Western employees who we interviewed during our investigation. 
A former admissions manager stated that there was no value to a 
Kennedy-Western education and that he was embarrassed to have 
ever been a part of the school. A former faculty member said 
Kennedy-Western's curriculum development system is broken. A 
former employee of the student services department said the 
work at Kennedy-Western simply does not qualify a student for a 
Bachelor's degree.
    This concludes my written testimony. I would be happy to 
answer any questions that Members might have.
    Chairman Collins. Thank you very much. Mr. Coulombe.

   TESTIMONY OF ANDREW COULOMBE,\1\ FORMER EMPLOYEE, KENNEDY-
                       WESTERN UNIVERSITY

    Mr. Coulombe. Good morning. Madam Chairman, thank you for 
inviting me to testify about my experience at Kennedy-Western 
as an admissions counselor at Kennedy-Western University. I 
worked at Kennedy-Western for 3 months before quitting in 
February 2003.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Coulombe appears in the Appendix 
on page 132.
---------------------------------------------------------------------------
    First, let me provide my personal background. I received a 
Bachelor's degree from the University of California at Berkeley 
in 1997 in historical archaeology and geology. After graduating 
from college, I was looking to work in the field of higher 
education and I saw a listing on the employment website 
Monster.com for a position as an admissions counselor at 
Kennedy-Western University. I had not heard of Kennedy-Western, 
but was eager to work in academia and to advise students. 
Therefore, I applied for the job.
    Shortly after being hired, I started training at Kennedy-
Western. I soon discovered this was like no other school I had 
ever seen. I saw immediately that I had been mislead by 
Kennedy-Western's recruiter. I was not going to be counseling 
anyone. I had been hired to be a telemarketer, using a script 
to sell Kennedy-Western just like any other product.
    As an admissions counselor, I was required to call between 
120 and 125 prospective students per day, trying to convince 
them that they should apply to Kennedy-Western. If I convinced 
a student to apply, he was then handed over to a senior 
admissions specialist, who tried to get the student to enroll 
and pay for his degree. These senior admissions specialists 
were generally regarded as the experienced hard-core closers 
who would close the sale and bring in the money. Once the 
student paid, he was then turned over to the student services 
department to select his classes.
    I generally called between 400 and 500 potential students 
per week, and of these, only a small number would usually 
submit an application. Admissions counselors like me were 
taught to use a negative-sell approach with prospective 
students. Generally, we would tell them that they were not very 
qualified, they did not have a strong academic background, and 
they did not have a good chance of getting into a prestigious 
school like Kennedy-Western. We told prospective students that 
we would do him a favor and submit his name to the admissions 
board and see what the board decided. Then once he was 
accepted, we would tell him the unbelievable news that he has 
been accepted.
    The problem is, much of our sales pitch was not true. There 
is no admissions board. Applications were reviewed by one 
person. Of course, the applicant had excellent chances of 
getting in. In fact, I had never heard of an applicant being 
rejected.
    We were also instructed to tell applicants that at Kennedy-
Western, they would be taking the same classes that students 
took at real schools, like Harvard or Princeton. I went to a 
real school. Kennedy-Western is not a real school.
    Admissions counselors work in a boiler room atmosphere, 
where we were under significant pressure to meet lofty sales 
goals. We were paid a low base salary and made over half of our 
pay in commissions. We were paid a commission of $15 per head 
on every application we brought in. If a student actually 
enrolled, we would get roughly $100 per student.
    Admissions counselors' names were also listed on a large 
white board in our sales room, indicating how many sales we had 
made and whether or not we had met our sales goals. There was 
enormous turnover in Kennedy-Western's sales force. Many 
counselors quit once they discovered they were going to be 
telemarketers, not admissions counselors. Others could not meet 
the sales goals set by Kennedy-Western. Others simply could not 
stomach what they were being asked to do.
    When a person gave their 2 weeks' notice, they were usually 
fired on the spot and locked out of the building's controlled 
access. These conditions alone sent up numerous red flags in my 
mind. No real school I had ever heard of operated like Kennedy-
Western. At Kennedy-Western, everything was about the pursuit 
of cash.
    I don't know where Kennedy-Western got all of the names 
that I was calling on a daily basis. The school's management 
told us that everyone we called had requested information on 
Kennedy-Western. However, my experience suggests that this was 
not true. Once, I called a name provided to me by Kennedy-
Western and the person I called said that he worked for what he 
called the lead company and that his name had been included as 
a test lead. He explained that his company sold names to 
Kennedy-Western.
    Because I had been told that everyone we called had 
expressed interest in Kennedy-Western and requested 
information, I was alarmed to hear that a company was selling 
names to the school. When I asked the school's management what 
was going on, they denied that they had us cold-calling 
applicants, but did not explain what had happened.
    However, it did not require great detective work to figure 
out that we were cold-calling people to ask them to apply to 
Kennedy-Western. Most of the people we called had never heard 
of Kennedy-Western. I often joked with my fellow admissions 
counselors that people kept referring to the school as 
``Kennedy Who?'' and ``Kennedy What?'' I know that the 
management denies that we cold-called potential students, but 
that simply is not my experience.
    Many of the people I called were down on their luck. Many 
lacked a college education and held dead-end jobs. Many had 
families and full-time jobs and did not want to take a lot of 
time to get a degree from an accredited school, and those were 
the buttons we pushed when trying to get them to apply to 
Kennedy-Western. We used negative-sell tactics to convince them 
that they did not have many options in life and that Kennedy-
Western was their best chance to improve their lot.
    The problem is, the school did not deliver what it 
advertised and I believe that these students could have done 
much better than to spend their money on Kennedy-Western. In 
the end, I felt that what I was being asked to do as an 
admissions counselor was unethical.
    One issue I understand is of particular interest to the 
Committee is whether the Federal Government made payments for 
Federal employees to obtain degrees from Kennedy-Western. I 
know that prospective Kennedy-Western students were usually 
interested in trying to get their employers, whether private 
company or Federal Government, to cover the costs of the 
degree. Kennedy-Western did everything it could to help 
students get reimbursed. We would provide employers with 
letters explaining that other large companies and government 
agencies had paid for Kennedy-Western degrees in the past. 
Sometimes we were successful and sometimes we were not. Having 
worked at Kennedy-Western, I can say that as a Federal 
taxpayer, I am upset that tax dollars have been spent there.
    I would like to make a couple of additional observations 
about the severe shortcomings of a Kennedy-Western education. 
Part of my job was to have applicants fill out applications and 
list their prior work experiences. I know that Kennedy-Western 
made no efforts to verify the work experience claimed by the 
applicant. I also know that Kennedy-Western gives applicants a 
substantial amount of credit for the prior work experience, 
even if they are inconsequential. I saw this happen numerous 
times.
    Second, based on my observations during the time I worked 
at Kennedy-Western, I can tell you that there is no value to a 
Kennedy-Western education. Anything you learn there can be 
learned by buying a book and reading it on your own.
    Madam Chairman, thank you for inviting me to discuss my 
experiences at Kennedy-Western. That concludes my prepared 
statement and I will be happy to answer any questions that you 
may have.
    Chairman Collins. Thank you very much for your testimony. 
Lieutenant Commander, you were applying for a Master's degree, 
is that correct?
    Lieutenant Commander Gelzer. Yes, ma'am.
    Chairman Collins. Did Kennedy-Western ever require you or 
suggest to you that you needed to take the Graduate Record 
Exam, the GREs that are typically required for graduate school 
work?
    Lieutenant Commander Gelzer. No, ma'am. There was no 
mention of any kind of entrance or qualification exam 
requirement.
    Chairman Collins. Were you asked to provide a transcript or 
some proof of your undergraduate degrees?
    Lieutenant Commander Gelzer. The school admitted me before 
ever seeing any evidence of my undergraduate degree. Their 
policy was that you had to send it in within 30 days, and I was 
able to start my classes long before they ever saw it.
    Chairman Collins. Did you have to verify or submit examples 
of the work experience for which you were receiving graduate-
level credit?
    Lieutenant Commander Gelzer. No. I had certificates, 
graduate certificates from Coast Guard classes and different 
seminars I had attended, but they said it wasn't necessary to 
send any of that in. I just listed the names and the dates on 
the application.
    Chairman Collins. So there was no evaluation of the so-
called life experience for which you were receiving graduate-
level academic credit?
    Lieutenant Commander Gelzer. No one ever asked me about the 
claims I made.
    Chairman Collins. Now, it is legitimate in some cases for a 
school to give credit for life experience. According to the 
Council for Adult and Experiential Learning, which is known as 
CAEL, establishing equivalents between work experience and 
academic credit requires two things, and I think we have a 
chart on this.\1\ First, the experience has resulted in 
specific learning, and second, the learning must correspond or 
at least be similar to the learning that is expected in the 
more traditional academic courses for which credit is being 
awarded.
---------------------------------------------------------------------------
    \1\ The chart appears as Exhibit No. 23 in the Appendix on page 
183.
---------------------------------------------------------------------------
    We asked CAEL to review Kennedy-Western's process for 
assessing credit for experience and I am going to ask unanimous 
consent that the full text of the April 15, 2004, memorndum be 
entered as part of the official hearing record.
    [The information of Chairman Collins follows:]


    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    
    Senator Collins. What we found and what the posterboard 
shows \1\ is a CAEL representative wrote to the Committee, ``My 
reading of the Kennedy-Western material that you forwarded to 
CAEL leads me to conclude that Kennedy-Western does not observe 
this standard.''
---------------------------------------------------------------------------
    \1\ The chart appears as Exhibit No. 23 in the Appendix on page 
183.
---------------------------------------------------------------------------
    Based on your investigation, do you believe that Kennedy-
Western's policies in awarding credit for prior work experience 
differ from those that are more commonly accepted and from the 
standard established by CAEL?
    Lieutenant Commander Gelzer. I do. As mentioned in my 
testimony, we know that only a very small percentage of schools 
even allow for the award of credit for experience and that 
those schools make sure to verify that the student has actually 
had the experience that they are claiming. We also interviewed 
a former Kennedy-Western employee who had actually worked at 
several accredited distance-learning schools and he said the 
way accredited schools do business is entirely different.
    If they give credit for experience, they make sure that a 
student can test out using something like the Educational 
Testing Service's CLEP test, and also if they do pass those 
tests, they will only allow them a certain percentage of credit 
over their entire degree, and we know that Kennedy-Western will 
waive as much as 60 percent of a student's degree requirements 
based on experience credit.
    Chairman Collins. You paid careful attention to the website 
on which other students enrolled at Kennedy-Western posted 
comments about their experience. Did you ever find postings on 
the chat room website from other Federal employees who were 
attending Kennedy-Western, and, if so, what sense did you get 
of their experience?
    Lieutenant Commander Gelzer. I did see a couple of postings 
that made me believe these people were working for the Federal 
Government or they said they were in the military or something, 
and I pulled a couple quotes that are on this chart.
    One student wrote, ``I work for the Federal Government and 
recently read an article in the Government Computer News 
magazine that stated the Federal Government required accredited 
degrees. I verified this information and it's true. I'm 
crushed. I'm almost finished with the program and I don't know 
if I want to go to the trouble of writing my dissertation.''
    Another posting went like this. ``I'm in the military and I 
read the claims from Kennedy-Western of how many Federal 
employees were reimbursed. I found out quickly that the 
military or Federal Government will not even consider a school 
that is not accredited. I did complete the degree since I had 
already paid for it. I guess that was money lost.''
    In general, they were of this kind of tone. These students 
sounded really despondent, disappointed, disillusioned. They 
were really surprised to have found out after the fact, after 
they put their money down, that their degree couldn't be used.
    Chairman Collins. And this is an important point, because 
yesterday, we talked about individuals who knew very well when 
they were enrolling in diploma mills that they were buying a 
bogus degree. But in some of the cases that you have cited, 
students in good faith enrolled in Kennedy-Western, only to 
discover after they had paid their tuition that it did not meet 
the standards of a legitimate academic institution, is that 
correct?
    Lieutenant Commander Gelzer. That is right, both private 
and public sector people.
    Chairman Collins. Senator Lieberman.
    Senator Lieberman. Thanks, Madam Chairman. Commander, 
thanks for your service to the Committee. Chairman Collins has 
covered most of my questions----
    Chairman Collins. Sorry.
    Senator Lieberman. No, they are good. They are naturally 
very brilliant questions. [Laughter.]
    I wanted to ask you whether there was any way in which the 
so-called professors at Kennedy-Western made themselves 
available to you over the Internet. For instance, was there 
ever a way given to you that you could contact anybody that 
seemed to be a professor if you had a question about a course?
    Lieutenant Commander Gelzer. You were supposed to be able 
to contact your professor for what they called tutorial advice. 
You weren't allowed to contact your professor directly. You had 
to make a request to your student advisor and then they would 
forward it on to the professor, and the only time I reached out 
to a professor, I never got a response.
    Senator Lieberman. OK. And again, my inference from some of 
the testimony that you have given and other parts of the 
investigation I have read about, is that in this case a lot of 
the students who signed up knew that the program was 
unaccredited, is that right?
    Lieutenant Commander Gelzer. They did, because Kennedy-
Western is really careful about that. They never claim that the 
school is accredited. They come out and say, we are not 
accredited, but in the very same breath, my admissions 
counselor ran through all the reasons why that didn't really 
matter. She said that accreditation does not have much to do 
with the quality of a school, but it has more to do with 
whether a school has things like a certain number of tenured 
professors or has a certain number of hours a student has to 
spend in an on-campus classroom or whether they are dependent 
on Federal loans. And I think if you didn't know better, you 
would be convinced that accreditation was more of an 
administrative designation.
    Senator Lieberman. Do you think most of the students were 
willing, I don't want to say co-conspirators, but willing 
participants in what was essentially a fraud, or were they 
deceived?
    Lieutenant Commander Gelzer. I would say I saw more 
evidence of students who were surprised and seemed a little 
deceived that all of a sudden, they realized their company 
wouldn't reimburse them, or they put their degree on a resume 
and they went to apply for a job and they were questioned about 
it and they had to ultimately take it off their resume.
    Senator Lieberman. A final question for you, Commander. Did 
Kennedy-Western do any follow-up with you after you dropped 
out?
    Lieutenant Commander Gelzer. Well, I called them to say I 
was going to disenroll and they did call me to try to talk me 
into staying and see if they could adjust my payments and that 
kind of thing. But once I told them the Coast Guard wouldn't 
accept an unaccredited degree or pay for it, they said, if you 
want to, you can be reinstated for a fee later down the line if 
you would like to come back.
    Senator Lieberman. Thanks. Mr. Coulombe, you mention in 
your testimony that Kennedy-Western paid commissions based on 
the number of students someone in your position enrolled. I am 
just curious whether there were any other incentives or 
pressures placed on you, whether you had sales goals or 
anything of that kind internally.
    Mr. Coulombe. Yes, there were incentives. Obviously, it was 
the mainstay of our income as employees that was not 
necessarily a salary but success-based initiatives.
    Senator Lieberman. Right.
    Mr. Coulombe. We did----
    Senator Lieberman. Were you salaried at all?
    Mr. Coulombe. We did have a very small base salary. The 
bulk, 50, 60, maybe even 70 percent if you stayed for a longer 
tenure than I did, would be based strictly on commission. I did 
see during our Christmas party that gifts and vacations and 
awards and certificates to shopping malls were handed out to 
successful employees. As well, to answer one part of your 
question about the goals, sales goals there were very lofty and 
there was only a handful of long-term successful, ``admissions 
counselors'' that were able to meet these sales goals.
    Senator Lieberman. I take it that you never, or did you 
visit the offices at any time?
    Mr. Coulombe. Before I applied, no. After I applied, yes, I 
did work in their offices. They are just as they represent 
themselves in the catalogs and their paperwork. They come off 
as being very structured and very professional to the outside 
eye.
    Senator Lieberman. Right. Was it a large facility that you 
worked in?
    Mr. Coulombe. It was three suites of a bigger office 
building. I believe they had the whole upstairs and a piece of 
the downstairs.
    Senator Lieberman. Right.
    Mr. Coulombe. There was a central conference area that was 
kind of the centerpiece with the hardwood and the nice 
furniture, and then there were the other office buildings in 
there that were more just boiler room type situations.
    Senator Lieberman. Some of your testimony touched on the 
manipulative tactics that were used on prospective students. Is 
there anything else beyond what you mentioned that you were 
asked to do that you concluded was unfair?
    Mr. Coulombe. A lot of it was unfair. I think I touched 
upon the major aspects of it. There were other things that were 
said along the lines of once we got their attention and 
convinced them that they were interested, to get them to apply, 
we were told to mention that tuition was going to be increased 
real shortly, so it was in their best interest to apply as soon 
as possible, hopefully today. It was just--it was an emotional 
play on people.
    Senator Lieberman. Sure.
    Mr. Coulombe. It was people who were not having a very good 
run with life and we played on the fact that this was their 
solution.
    Senator Lieberman. You mentioned this before and I was 
really interested--in terms of the list of names that you were 
given to call and your discovery that, at least in some cases, 
Kennedy-Western was buying lists--could you reach any 
conclusions from the people you were calling about what kind of 
lists they were buying?
    Mr. Coulombe. The one commonality that I found was the 
names, more so than anything. It was people in transitional 
phases in their life. They had recently either been fired or 
divorced or had a death in the family. It was a very traumatic 
list to say the least. People were not having a--we weren't 
calling successful business people, even though some people 
were the mid-level management type of person. But if there was 
one thread of commonality through it, it was the fact that 
people really needed something in their lives to get them over 
a hump of some sort, be it career or personal or financial.
    Senator Lieberman. So this pattern you have described leads 
us to, I think, not to alter our conclusion that most of the 
students involved are willing participants, but on the other 
hand, there is obviously an extent to which there was a 
solicitation, a kind of not quite entrapment, but tempting to 
participate in this fraud. That is what comes out of your 
testimony. I appreciate it.
    Senator Pryor is here and I was thinking, both of us having 
been former State Attorneys General, I don't know the extent to 
which--I know there was some testimony that at least one AG has 
focused on this. These things really ought to be closed down, 
or life ought to be made difficult enough for them in terms of, 
cost enough, for them that they can no longer afford to go 
forward. And I am sure if you and I were still AGs, that is 
exactly what we would be doing.
    Senator Pryor. We would be right on top of it. [Laughter.]
    Senator Lieberman. Thank you, Madam Chairman.
    Chairman Collins. Thank you. Senator Pryor.

               OPENING STATEMENT OF SENATOR PRYOR

    Senator Pryor. Thank you, Madam Chairman.
    Yes, in the world of attorneys general, we look at 
deceptive trade practices, so the question is how deceptive is 
this and what sort of techniques are being used. It would be 
interesting to pursue that on the State level, as well.
    I have a couple of questions for you.
    Mr. Coulombe. Yes, sir.
    Senator Pryor. We know that this school, Kennedy-Western, 
was not accredited. How would you handle that on the phone when 
your prospective students would ask about that?
    Mr. Coulombe. Like most everything at Kennedy-Western, we 
were held to a strict script. We had no liberty to deviate from 
a prepared statement. The statements are, like we had heard 
from the Lieutenant Commander here, strictly in the same voice. 
They always mentioned up front that they were a non-accredited 
university. However, in the same breath of air, they gave a 
list of reasons as to why they were not accredited.
    I completely agree with her that the script read out in a 
way that if you didn't know better, you would leave thinking 
that accreditation basically meant that you had to have a 
brick-and-mortar building with actual professors in it and 
actual student classes and it had nothing to do with the fact 
that there was a difference in the education.
    Senator Pryor. Do you know if Kennedy-Western ever tried to 
become accredited?
    Mr. Coulombe. I don't know specifically. What I do know is 
that they were vocal about being in a niche market and they 
didn't pursue being accredited while I was there, nor did they 
show any interest in the past, as far as I could tell.
    Senator Pryor. Do you know, do you remember off the top of 
your head, how much it costs to be a student at Kennedy-
Western? I assume the cost was by the credit hour?
    Mr. Coulombe. Yes.
    Senator Pryor. But how did that work?
    Mr. Coulombe. I believe that it was a sliding scale 
depending on the quantity of classes you needed to take. It has 
been a while, but I believe that it could range anywhere from 
$6,000 to $9,000, or $10,000.
    Senator Pryor. Would that be to get a degree from there?
    Mr. Coulombe. As far as I can recall, yes, that would be 
enough to pay for the tuition.
    Senator Pryor. You said you could not deviate from the 
script at all?
    Mr. Coulombe. No. There was no counseling that was going 
on. It was strictly a sales script like you would sell any 
other product that relied heavily on a proven sales tactic. We 
were told many times that if you called this number of people 
and you don't deviate from this script, you will have this type 
of success.
    Senator Pryor. Do you remember what type of success you had 
in trying to get people to sign up?
    Mr. Coulombe. I personally was very successful. One of the 
things I did before I left so that I didn't leave defeated was 
to show them that I was leaving out of an ethical, moral ground 
and not out of a defeated sales position. So I had success. The 
first couple months of working there, I didn't really realize 
what was going on until the last part of the month there, where 
I finally had a conversation with the gentleman who sold us the 
leads, and that was really kind of the straw that broke the 
camel's back as far as me believing in what was happening.
    Senator Pryor. Did you receive any training at the school?
    Mr. Coulombe. We did receive training. To my surprise, 
there was a week-long training period. The training was sales 
training. It was not academic or admissions training.
    Senator Pryor. It was basically like telemarketer-type 
training?
    Mr. Coulombe. It was very sophisticated. It was more than 
just, here are some numbers and here is a script. They 
explained why the reverse take-away sale works, how to install 
it in an emotional manner, and not only telling us why not to 
deviate from the script, they explained how it worked and the 
success they have had from it. So it was a week-long sales 
training.
    Senator Pryor. Do you know about how large the sales force 
was there?
    Mr. Coulombe. If I recall correctly, the sales force was 60 
to 70 percent of the actual total employed people at the 
university.
    Senator Pryor. So what would that number be?
    Mr. Coulombe. Sixty or 70 people.
    Senator Pryor. OK. Do you know how many students they would 
have at any given time at Kennedy-Western University?
    Mr. Coulombe. I do not. It was a significant number. I know 
that just from watching the success of the company while I was 
there. But I do not have a number on that.
    Senator Pryor. How would the time frame work from the time 
you would contact someone and you would walk them through the 
process. I guess they would send in whatever material--did they 
send a check at that point, or----
    Mr. Coulombe. They do for the application. My job as an 
admissions counselor was to get them to apply to the 
university. I needed to get them, and I believe it was a $50 
check and send them the actual brochures, which had the 
application in it. Once they sent back the application, my job 
was to get back in touch with them and explain to them that 
they did actually get into the university, and then I handed 
them off to what was referred to as a senior admissions 
specialist, which was in charge of setting up, I believe, the 
tuition and getting them in line, ready for the student 
services people.
    Senator Pryor. So as soon as you received their payment, 
then you fairly immediately----
    Mr. Coulombe. Yes. I called them and said, thank you, we 
got you in, and explained to them, not that I was giving them 
to a closer--but that I was giving them to someone who is going 
to be able to walk them through financial aid.
    Senator Pryor. OK. Do you recall anyone ever being turned 
down?
    Mr. Coulombe. I don't personally recall anybody being 
turned down. It may have happened. I am not really in a 
position, just due to tenureship there and my entry-level 
position, to know if that ever happened. But in my experience, 
no, everybody got in.
    Senator Pryor. That is all I have, Madam Chairman. Thank 
you.
    Chairman Collins. Thank you, Senator Pryor.
    As Senator Lieberman said, the only basis that he could 
think of where someone would be turned down is if the check 
bounced----
    Senator Pryor. That is exactly what I thought, too. 
[Laughter.]
    Chairman Collins [continuing]. And I think that is probably 
accurate.
    Senator Pryor. Exactly.
    Chairman Collins. And you would note I gave credit where 
credit is due for that.
    Senator Lieberman. It is very unusual.
    Chairman Collins. It is very unusual. [Laughter.]
    I want to just quickly follow up on two very important 
points that Senator Pryor made. Kennedy-Western provided the 
Committee with a listing of its current employees and the list 
indicated that they have 119 employees. Sixty-nine of them, 
almost 60 percent, work in admissions. I can't imagine a 
legitimate college having 60 percent of its employees working 
in admissions.
    Mr. Coulombe, do you think that those numbers and that 
ratio are indicative of the fact that Kennedy-Western's 
emphasis was on sales rather than on teaching?
    Mr. Coulombe. Without question.
    Chairman Collins. And one other point. You talked about 
your training and the training sounds much more like the 
training for someone working in a boiler room, someone who is 
trying to sell fraudulent stocks or investment scams, than a 
college degree. Could you talk a little bit more about the 
training, and in particular, do you consider it to have been 
high-pressure techniques? Were you ever instructed to call 
people repeatedly, even if they expressed no interest when you 
first solicited them?
    Mr. Coulombe. I would say the answer to your question is 
yes, and specifically the reason is that the reverse take-away 
sale on a superficial level does not look like a high-pressure 
sale. It looks as if it is a very touchy-feely emotional type 
of sales practice. However, if you are on the receiving end of 
it, especially if you are in a point of transition or in a 
desperate situation, I would say it is extremely high pressure.
    Things being said as far as, ``Oh, I guess you are not 
serious about bettering yourself,'' or ``You are obviously not 
ready to continue your education and get that advancement,'' 
were things that were said that are just statements. They are 
not knocking on your door or anything like that. But if you are 
on the receiving end, I believe that I would consider it high 
pressure. There was a lot of things that we were asked to say 
and a lot of things that were on the script that I felt that if 
someone was calling my home and talking to me like that, that I 
would have a personal issue with it, not necessarily just a 
telemarketing issue with it.
    As far as repetitive calling goes, they called them touches 
on the students. We were told to have at least three touches on 
them before we let them go, regardless pretty much of what 
their interest in the school was.
    Chairman Collins. So if the first time you called, the 
student said, or the potential student says, ``I am just not 
interested,'' that wasn't the end of it. You might call two 
more times?
    Mr. Coulombe. Oh, we would call two more times.
    Chairman Collins. You would?
    Mr. Coulombe. Personally, for me, if they were violently 
mad at the fact that we were calling, we were still supposed to 
call them a couple more times. I never did. But yes, if they 
didn't show any interest, we would call them a few more times, 
and we also would try to reach them at different times of the 
day, the morning, afternoon, and evening, just in case their 
response was driven by a situation they were in either with 
kids or work or something of that nature.
    Chairman Collins. I am fascinated by the calling lists that 
you worked from. I certainly would understand if a college were 
buying lists of people about to graduate from high school, for 
example, and send them materials or perhaps even call them. But 
you have suggested something much more ominous, that these were 
lists of people in difficulty. They may have been laid off from 
their jobs or getting a divorce. It almost sounds like a list 
of people who were primed for exploitation. Is that fair?
    Mr. Coulombe. I never looked at it like that while I was 
there, but with hindsight, I would say yes. I am not sure how a 
list like that would be generated due to the fact that there 
were so many life situations and personal situations. 
Obviously, there is a complex equation to get a list like that. 
But what I do know is that they were not people who had 
requested information from Kennedy-Western.
    Chairman Collins. Thank you. Senator Lieberman, do you have 
anything further?
    Senator Lieberman. I don't have any further questions. 
Thank you.
    Chairman Collins. Senator Pryor.
    Senator Pryor. No, thank you.
    Chairman Collins. Thank you very much. I want to thank you 
both for your excellent testimony and for giving us an inside 
look at one diploma mill. Thank you.
    Our final panel today includes Stephen Benowitz, who is the 
Associate Director of Human Resources Products and Services at 
the Office of Personnel Management, and Sally Stroup, who is 
the Assistant Secretary for Postsecondary Education at the U.S. 
Department of Education.
    Welcome to you both. We appreciate very much your being 
here and how closely you have worked with our Committee over 
the past months as we have conducted this investigation. 
Actually, this investigation goes back 3 years and it has 
involved a lot of work by the staff.
    Ms. Stroup, we will start with your testimony. Thank you.

   TESTIMONY OF SALLY L. STROUP,\1\ ASSISTANT SECRETARY FOR 
     POSTSECONDARY EDUCATION, U.S. DEPARTMENT OF EDUCATION

    Ms. Stroup. Thank you. Good morning. I am pleased to be 
here this morning to talk about this issue of diploma mills and 
the role of the Department of Education. It is not necessarily 
something we think of at the Department because we deal with 
accredited institutions, so you have taken us to think about 
some other things that need to be on our list.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ms. Stroup appears in the Appendix on 
page 135.
---------------------------------------------------------------------------
    My testimony has been submitted for the record and I am 
going to try to briefly summarize it. I will try not to repeat 
things you have already heard.
    Just by way of background, though, for institutions that 
participate in our programs, we rely on several different 
methods to ensure quality in the normal higher education system 
that we all think of. That is the institutions themselves, 
States that do the licensing, and the credentialing features of 
higher education. Our role is sort of the overseers of the 
accreditation process that is set forth in the Higher Education 
Act, and then, of course, our accrediting agencies themselves. 
We recognize about 70 of them right now that are regional, 
national, specialized, and cross all sectors of education.
    Between all of these parties, we feel like we do a fairly 
good job of ensuring quality because we have this group who is 
working on those issues and are making sure that gets done. 
Obviously, that is missing in what we are talking about today 
when we talk about diploma mills.
    Although we have always tended to focus our efforts at the 
Department of Education on worrying about students who are 
victims, having the meeting we recently had sort of brought a 
new light to us that, gee, there are people who are buying 
these and who do know they are buying them and are 
intentionally doing it. I mean, we all just have to accept that 
is the way it goes.
    We got our own ad the other day from a diploma mill that we 
found intriguing that was sent to the Department of Education 
since it said, ``Get your diploma within 30 days, no classes to 
attend, no books to read, simply pay and receive your 
diploma.'' My assistant got it on her computer and we said, 
clearly, someone who got that E-mail should know that is a 
diploma mill. It is hard to convince us that you don't know 
that is not.
    For the most part, diploma mills don't jeopardize the 
things we do at the Department related to student aid, which is 
our primary responsibility, ensuring the integrity of the 
student aid programs and the institutions that participate. 
Between accreditation and our student aid process, we can cover 
those things.
    When it comes to diploma mills, though, that is just 
outside of our stream of consciousness when you get right down 
to it. It is not the people we are looking at, talking to, or 
even thinking about.
    You raised these issues to us in your letter to Secretary 
Paige, which got us thinking about this and sort of moved us 
down a series of events that occurred after that, which started 
with a meeting that included my colleague from OPM, Mr. 
Contreras from Oregon, we had North Dakota, New Jersey, 
Illinois, the FBI, the FTC, the GAO, your staff, House staff, 
all come together and sit down and talk about this issue. The 
premise of the meeting really was to say, what are we all 
individually doing? What should we be doing collectively? What 
can we do? How can we be helpful to each other? How can we 
share information?
    I think the result of that meeting and sort of hearing 
about the different things that were going on certainly led us 
to the idea of talking about lists, and that got to be an 
interesting conversation for us because everybody said, we 
should have a list of diploma mills. And then we all went, 
well, gee, how are we going to make a list of diploma mills? 
Who knows who is a diploma mill and how do we define a diploma 
mill and who has that information and how do we put this all 
together? Of course, we all know they change daily. It is 
Internet-based. They can morph into different names every other 
day.
    We kept sitting there going, how are we going to compile 
such a list, and I really think at the end of the day we all 
said, OK, maybe we should talk about a positive list and change 
our approach to this whole thing, at least for purposes of what 
we can be helpful about at the Department of Education.
    That caused the Secretary and I to have some conversations 
saying, what can we do to be helpful, particularly when we 
heard our colleagues from the States say to us at this meeting, 
we really need you guys to put a positive list together because 
that will take care of 99 percent of our problems. We need a 
quick place we can go, look up the information, OK, we know 
that they are fine, and then we will figure out ways to deal 
with that other one percent that cause us problems.
    We have concerns about putting together a diploma mill list 
at the Department of Education mainly because we don't evaluate 
institutional quality. I mean, the Department of Education 
doesn't really do that. The accrediting process does that. We 
oversee it, no question about it, but we are not the ones who 
decide that somebody is or is not a quality institution. The 
Federal Government historically has never made those kinds of 
decisions. We have always relied on this accrediting process.
    So when we talk about a positive list, that is something we 
think we can do in a very sort of simple, reliable, easily 
usable fashion. We can get that information by going out to the 
accrediting bodies we already recognize and ask them to submit 
all the names. We will put it in a database that people can 
search and we can help address that first part of the step. It 
won't be perfect from the beginning.
    We need historical data. I mean, we all know that we have 
people on our own staffs that have gone to institutions that 
have merged with other institutions and have changed names. 
They have gone to institutions that have closed. But they were 
accredited at the time they got their credential, so the 
credential itself was awarded during a perfectly valid period 
of time. It is perfectly legal and recognizable, but they won't 
show up on our list because they are not currently recognized 
by an accrediting agency recognized by the Secretary.
    So we are going to have to do some work to make this list 
be really good, as far as I am concerned, for people to use, 
mainly because of the historical data that we are going to have 
to go back out and collect. It is just something we have never 
done in the past, so that will be a little adventure for us.
    The basic list, though, that people could use today to do a 
search, to say, did somebody get their degree from a valid, 
recognized institution, we should be able to do that pretty 
fast, and we already have the wheels in motion. The Secretary 
has signed off on our doing it. We are talking to contractors 
about the database. We will get that up and running as fast as 
we possibly can.
    One thing I do want to raise, though, is that, again, the 
list isn't going to be perfect. I know one of the problems we 
have all talked about, and certainly you have heard it in the 
last 2 days, is how do we define a diploma mill for purposes of 
what we are talking about, which is determining jobs and 
credentials for employment and promotions.
    We don't have a definition. We don't have a way to put on 
our list those institutions that we know are actually doing a 
good job but have chosen not to be accredited, because 
accreditation is tied to student aid for our purposes in higher 
education. If you are not interested in getting money from the 
government for your students, you don't have to be accredited. 
I mean, you have that option. And certainly, we know of 
institutions, and particularly small religious institutions are 
going to be the ones that have chosen not to be accredited and 
they have their own reasons for doing it. They are offering 
very valid degrees. I am sure they are doing a good job.
    But they are not going to be part of our system. They will 
not be on our database, and they are going to be sort of the 
missing piece that I think we all at least need to worry about 
and think about when we talk about making lists. That would be 
the one caution I raise to people.
    And we will do our part in putting a list out there. We 
want to be very clear to people that it is not the perfect list 
so that people do maybe take that second step. If you get an 
application from someone and it has an institution listed that 
is not on our list, it doesn't necessarily mean it is a diploma 
mill and I don't think we should make those kinds of 
assumptions. People are going to have to take the next step and 
do a little investigation to see what is the status of that 
institution that that application came from.
    So with that, one thing I think we learned from having this 
meeting is that there is a lot we don't know. Between all of us 
talking together and you raising this sort of to our level of 
consciousness, we all now are working together to try to figure 
out how we can better help each other, the public generally, 
students certainly who might be victimized, and employers who 
are looking for access to information that will help them make 
hiring decisions, in some sort of easily usable, recognizable 
fashion that we all agree, anyway, is the right way to do it.
    We will help do whatever we can. The Secretary has 
basically said, do what you have got to do to try to make this 
work. So we will start with the positive list first as our 
first effort into it, and then as more, I think, of these 
discussions and meetings go on, we will see what other things 
we can do to be helpful in the process.
    We have always told people, if you don't know, call us 
because we don't have a list out there yet. We will look it up 
for you. I mean, we will tell you where to go. We will tell you 
who the accrediting body is. We will give you that kind of 
information. We already link to websites. Alan's website, we 
love it, too. We think it is great. More States having laws 
like Alan does and having someone like him managing it would be 
great for all of us. But we already link to all of those on our 
websites in several places to make that information available, 
to make sure.
    Again, we always think of it from the student perspective 
and we want students to have that information so they don't end 
up enrolling somewhere and find out they have paid a lot of 
money for a degree that is not worth anything to them.
    So to the extent we can be helpful and provide more 
information and do more to make people aware of the issue, we 
are ready, willing, and able to help do that anytime we can. 
Thank you.
    Chairman Collins. Thank you. Mr. Benowitz.

TESTIMONY OF STEPHEN C. BENOWITZ,\1\ ASSOCIATE DIRECTOR, HUMAN 
   RESOURCES PRODUCTS AND SERVICES, U.S. OFFICE OF PERSONNEL 
                           MANAGEMENT

    Mr. Benowitz. Madam Chairman and Members of the Committee, 
I am pleased to testify today on behalf of the Office of 
Personnel Management. OPM has been engaged in addressing the 
issue of bogus degrees and diploma mills since the mid-1980's, 
when we teamed with the Federal Bureau of Investigation to 
combat the fraudulent use of these so-called degrees by 
individuals under consideration for Federal employment.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Benowitz appears in the Appendix 
on page 141.
---------------------------------------------------------------------------
    OPM Director Kay Coles James has said that these degrees 
deceive the public, pose a potential threat to national 
security, constitute a fraud if Federal funds are used to pay 
for them, and can give the public the impression that Federal 
employees have expertise and credentials when they do not. 
Degrees or other credentials from these schools are never 
acceptable for any purpose related to Federal employment. It is 
vital that members of the Federal workforce be well-trained and 
qualified and that Federal employees in no way misrepresent the 
experience and education they bring to their positions.
    Every Federal employee must earn the utmost confidence of 
the American people no matter what job the employee fills. The 
way to maintain this confidence is by ensuring that the 
training and education of the Federal workforce are done by 
legitimate institutions that have a proven track record.
    We have significantly increased our vigilance surrounding 
this issue in the past year. Director James has written to the 
heads of executive branch departments and agencies on three 
occasions, and I might point out that, in August 2003, her 
statement clearly told these agencies that diploma mills cannot 
be used for any purpose in Federal employment. She has also 
increased resources in our Center for Federal Investigative 
Services, where we do background investigations, including 
those that sometimes turn up information about diploma mills.
    The use of fraudulent degrees in the Federal Government 
could substantially affect national security and the health and 
safety of Americans. In conducting background investigations on 
applicants, employees, and contractors, we have found examples 
where these degrees were cited by individuals in their 
applications and other official documents.
    When we conduct a background investigation, we do that on 
behalf of our client agencies who use the information to 
determine if employees are suitable for Federal employment or 
should be granted security clearances. If we identify 
information related to diploma mills during the course of these 
investigations, we send it immediately to the agency that has 
requested the background investigation.
    Use of a bogus degree may disqualify an individual from 
Federal employment. First, that individual may not meet the 
qualification requirements for the position. That is, to 
qualify for some positions, applicants need specific degrees or 
required credit hours, but these must be from institutions 
accredited or well in the process of being accredited by an 
organization recognized by the U.S. Department of Education.
    In addition, and strongly in the view of Director James, 
the individual's deception in claiming a degree he or she knew 
to be invalid may constitute fraud in examination or 
appointment. In this case, the agency or OPM may determine that 
the individual is unsuitable for Federal employment because of 
the use of the bogus degree. The agency or OPM may find the 
person ineligible and disqualify him or her from consideration. 
If the person is already a Federal employee, they can be 
removed from their position. If an agency or OPM takes a 
suitability action, there is due process involved and the 
individual can appeal to the Merit System Protection Board. If 
OPM takes that action, we also have the authority to debar an 
individual from employment in the Federal Government for up to 
3 years.
    We have recently completed a review of all of the laws, 
regulations, policy statements, public information, and forms 
to determine what changes might be necessary to clarify what 
education will satisfy requirements for qualifications and 
training. Our review included consultations with our teammates 
at the Department of Education.
    For purposes of Federal employment, we actually decided 
that there are four categories of schools that we have to deal 
with. The first we are calling conventional or accredited, or 
those that are accredited by organizations recognized by the 
Department of Education. Education from these institutions is 
acceptable for meeting the requirements set forth in law, 
regulation, and policy for all Federal personnel purposes--
qualifying for positions, academic degree training, student 
loan repayment, employee training, and tuition reimbursement.
    Schools in the second group, which OPM is calling non-
accredited/pending accreditation, offer a curriculum for 
advanced learning similar to a conventional accredited school 
and are well in the process of seeking accreditation from an 
appropriate organization and have received what is called pre-
accreditation or candidate for accreditation status. We believe 
that education from these schools is acceptable for all 
categories mentioned above, except academic degree training and 
student loan repayment, where statutes limit applicability to 
fully accredited schools.
    Schools in the third category, which we are calling non-
accredited/other and which Ms. Stroup referenced, generally 
have a traditional curriculum but have chosen not to seek 
accreditation and thus do not qualify under the first two 
categories. Because OPM and Federal agency human resource 
offices cannot evaluate the programs of these schools, we 
cannot determine whether training or education from these 
schools meets the requirements set forth in law, regulation, 
and policy. We are working with interested parties to address 
this problem and will be able to share information with you 
soon on this, I think.
    We refer to the fourth category of schools as non-
qualifying schools. These are the diploma mills, as well as 
firms that simply sell counterfeit degrees. Coursework or a 
degree from these institutions is never acceptable for any 
purpose in the Federal Government. Any individual claiming a 
degree from this type of institution is misrepresenting his or 
her background and may be found unsuitable for Federal 
employment.
    To ensure that executive departments and agencies, members 
of the public interested in Federal employment, and current 
Federal employees have a better understanding of what types of 
education are qualifying for purposes of employment, training, 
and tuition reimbursement, OPM has completed the review I 
discussed earlier.
    While no current statutes or regulations will require 
revision, Director James has told us to revise many other 
documents, including those found on OPM's website and on our 
USAJOBS site, the online job information system for Federal 
positions.
    These changes will clarify for users what education is 
acceptable for qualifying for Federal positions and for 
purposes of other personnel policies, like academic degree 
training, student loan repayment, and training and tuition 
reimbursement. As I noted previously, we will be consulting 
with interested parties as we develop these clarifications.
    We believe this effort, taken in conjunction with the 
Department of Education's efforts, will clarify for the public 
in general and for all Federal employees, including the human 
resources and personnel security staffs of Federal agencies, 
the distinctions that must be made in evaluating educational 
achievements of applicants and employees.
    I would also like to correct for the record a statement in 
the written testimony of the General Accounting Office 
delivered to this Committee yesterday. On page six of that 
testimony, GAO addresses senior-level Federal employees who 
have degrees from unaccredited schools. GAO defined senior-
level position as Grades 15 and above. There is an implication 
that one of the 28 senior-level Federal employees identified as 
having obtained a degree from a diploma mill was an OPM 
employee. That is not correct.
    While OPM was one of the agencies reviewed by GAO, no OPM 
senior-level employee was found by GAO to have received a bogus 
degree from a diploma mill. There was one employee, Grade 11, 
who claimed a degree from a diploma mill, but OPM did not pay 
for this training. The individual is no longer employed at OPM.
    I want to thank the Committee for their time and I would be 
happy to answer any questions that you may have.
    Chairman Collins. Thank you.
    Secretary Stroup, in your written testimony, you 
distinguish between consumers who are unsuspecting victims of 
diploma mills and those who are well aware that they are 
obtaining false academic credentials. We found from our 
investigation that many of those individuals who are the true 
victims of diploma mills feel that they don't have an easy way 
to check on whether an institution like Columbia State 
University or Kennedy-Western is a legitimate academic 
institution. You have told our staff that the Department of 
Education receives many questions from the public, including 
potential employers who are trying to figure out whether 
various institutions are legitimate.
    I am very pleased, that the Department is going to compile 
what you refer to as a positive list of accredited 
institutions, but shouldn't the Department be doing more to 
alert people to the signs of a diploma mill? I am happy to hear 
that you have a link on your website to the Oregon list, but do 
you have a section that is entitled, ``Diploma Mills'' where 
you could put warning signs that would help consumers?
    Ms. Stroup. Actually, I looked this up myself and said, I 
am not that happy with the way the website looks. We actually 
have it out there, the warning signs of diploma mills, on our 
student aid website. I just don't think it is very prominent. 
So we need to go back and fix that internally and try to do 
something about it. I am not sure--I used to think it was much 
more prominent, but when I am looking at it today, I went, 
well, this isn't all that prominent after all.
    But we do have on our own website a whole listing of things 
about diploma mills. Again, it is on the student aid portal for 
students to look at when they are thinking about colleges, and 
it links to the FTC. It references contacting the Better 
Business Bureau, all the places we could think of that people 
should go to if an institution is not accredited and it doesn't 
show up on this positive list that we will eventually create.
    Chairman Collins. That is helpful, but the problem is that 
a lot of individuals who are furthering their education at 
their employer's expense aren't going to look at a student aid 
site because they are not dependent on student aid. They are 
getting either reimbursed or their employer is paying directly.
    Ms. Stroup. And that is true and I am not sure how we are 
going to be able to help solve that if people don't use our 
website. I mean, we can put it on, obviously, on all of the 
government websites and get everybody doing the same thing so 
that we all have a prominent section that deals with the issue 
of diploma mills government-wide. It might be the best way to 
reach the people you are talking about, because you are right. 
They will not necessarily be looking at our website to figure 
out--you are right. Ours is mainly for kids who are thinking 
about going to college, not for the people who are out there.
    I mean, there are other things we can do, though. I don't 
want to just say that there is nothing can do because we are in 
touch with lots of people. I mean, we use the statistic all the 
time that one in six people, one in six working Americans have 
student loans insured or guaranteed or paid for by the 
government. So we communicate with people every day who are 
part of the system, and certainly making sure that information 
is included in mailings we do and information we put out would 
actually get into the hands of even the people you are talking 
about, who are out working and are thinking about getting 
another degree, and yet they are probably paying a student loan 
back to us already.
    So it is more about how we make the public more aware and 
how we get more information out, and that is something we can 
do.
    Chairman Collins. I think that would be very helpful. That 
is another reason I wanted to hold these hearings. I think it 
will help educate the public and to make those distinctions and 
also put on notice not only Federal employees but other people 
that we are looking at these phony degrees for those who are 
unethical and deliberately paying for a degree of no value.
    We focused heavily on the problem of taxpayer dollars 
reimbursing Federal education tuition at diploma mills, but in 
the course of our investigation, we uncovered another issue. 
The Committee discovered three checks from Federal Head Start 
program grantees in three different States made out to one 
diploma mill.\1\ What more can the Department of Education do 
to inform program grant managers and other agencies which 
institutions are legitimate and which are diploma mills?
---------------------------------------------------------------------------
    \1\ The chart appears as Exhibit No. 5 in the Appendix on page 165.
---------------------------------------------------------------------------
    We didn't expect to find this. We were looking for Federal 
checks going directly from Federal agencies to diploma mills. 
In the course of our looking at checks of one particular 
diploma mill, we came across these three Head Start grant 
checks. So I think--and that is why I am convinced this is just 
the tip of the iceberg.
    Ms. Stroup. Yes. We clearly have more work to do. Again, to 
me, I look at this and think this is a government-wide issue 
for everybody to look at. I mean, we can give information to 
every government agency and make sure they know what 
information we already have available. We wouldn't necessarily 
know who the Head Start grantees are. Obviously, we are the 
Department of Education. They are HHS. But certainly our 
colleagues in other agencies need to be telling their grantees, 
just like we would tell ours, that they can't be using any 
money they get from the government to pay for these kinds of 
things.
    And again, for the most part, Senator Collins, I think your 
having these hearings and all the news coverage that you have 
gotten for this is probably the best thing that anybody has 
done on the issue in years because nobody has really been 
talking a whole lot about diploma mills or thinking about the 
fact that we are spending taxpayer money on these kinds of 
programs and nobody is doing anything about it.
    Again, I will go back to the Department and we certainly 
will do everything we can to get information out to our 
colleagues at all the other agencies and encourage them to do 
the same thing that we are going to do.
    Chairman Collins. Thank you. Mr. Benowitz, I have lots of 
questions for you, but I am going to yield to my colleague, 
Senator Akaka, at this point.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Madam Chairman. 
Yesterday, we learned from GAO's investigation that several 
Federal managers with degrees from diploma mills had high-level 
security clearances, including Q clearances. This is one of the 
highest security clearances possible and allows access to 
nuclear weapons technology. It is my understanding that a Q 
clearance requires a full background investigation.
    I also understand that you are the point person at OPM, Mr. 
Benowitz, for the probable merger of the OPM and Department of 
Defense units that conduct security clearance reviews. Your 
testimony details OPM's current role in the background 
investigation process and its responsibility in referring 
information to the requesting agency.
    Although I was pleased to learn from your testimony that 
OPM is increasing its oversight of personnel background 
investigations, given the exceptional demand for security 
clearances, it seems to me that greater diligence is needed. My 
question to you is, is OPM considering other changes to the 
current process?
    Mr. Benowitz. Senator, I would agree with you that with 
respect to the use of diploma mills, and I don't know the 
specifics of the Department of Energy cases other than from the 
GAO testimony yesterday, that agencies across government have 
to be much more alert to this issue and have to ensure that 
they understand the laws and regulations and government-wide 
policies and apply them properly.
    OPM conducts background investigations and, if we identify 
a situation where an individual has claimed a bogus degree, we 
tell the agency. It is the agency itself, in this case the 
Department of Energy, that grants a security clearance, and, 
more fundamentally, decides if an individual is suitable for 
Federal employment.
    As I said, I don't know the specifics of those cases at 
Department of Energy. Until recently, the Department of Energy 
did not have authority to ask OPM to conduct those background 
investigations for it. They were done by the FBI. But 
basically, there is an issue you have to resolve, in my view, 
of whether somebody is trustworthy if they are citing that kind 
of degree, whatever their position is in government, whether it 
is the lowest or the highest level of clearance.
    Senator Akaka. Mr. Benowitz, you testified that there are 
four categories of colleges and universities. One of these 
categories, called non-accredited, covers institutions that 
have traditional curriculum but have chosen not to seek 
accreditation. This category also includes foreign institutions 
that may be accredited in their own country, but not in the 
United States. You further testified that OPM and Federal human 
resources offices cannot evaluate the programs of schools in 
this category and are working with interested parties to 
address the problem.
    My concern is that, according to Director James of OPM, 
much of the training purchased by Federal agencies is from 
private non-accredited vendors which, I believe, falls in this 
category. My question is, why do Federal agencies rely so 
heavily on these vendors to train employees given that these 
providers cannot be evaluated?
    Mr. Benowitz. Let me perhaps clarify my statement for you, 
Senator. We don't have the expertise to evaluate these schools. 
Secretary Stroup's statement addressed briefly what the 
accreditation process is.
    When I say we can't evaluate them for purposes of whether 
the academic training is sufficient to be used for job 
qualifications and determine whether you have, for example, 24 
credit hours to be an accountant or whether you are eligible 
for an entry-level professional position if you have a 
Bachelor's degree at Grade 5 and a Master's at Grade 7.
    But I do want to say that there are many of these 
organizations, including private companies, that provide 
absolutely superb training to the government, to individuals 
that meet the government's needs, and it is perfectly 
appropriate in our mind to send employees to these schools for 
training in particular courses, for example if an employee 
needs a course in learning a new computer language or a course 
in statistics or something like this. It is an inherent part of 
the Federal manager's responsibility to ensure that the 
training provided is what it says it is, that the government 
and the taxpayers are getting their money's worth and that the 
individuals are getting the training that they require. This is 
applicable to the kind of training that we send people to 
courses for on a case-by-case basis.
    Senator Akaka. As you allude, OPM seems to lack the 
expertise to evaluate whether training is sufficient. My 
follow-up question to that is, who should be charged with doing 
that?
    Mr. Benowitz. Excellent question, sir. We are not sure that 
we know the answer yet and we are consulting with other 
agencies on that issue. We have considered for purposes of 
Federal employment purposes, which the Office of Personnel 
Management is responsible for, whether it would be useful to 
have an advisory group to the Director of OPM that might advise 
her on particular schools' capabilities. The advisory committee 
might include members who are familiar with the accreditation 
process, that have a full understanding and appreciation both 
of the Federal Government and the needs of their employees and 
the taxpayers, and also representatives of the views of these 
schools, whether they are colleges and universities who choose 
not to seek accreditation or private companies that provide 
training.
    Senator Akaka. Thank you. Madam Chairman, my time has 
expired, but I have one more question.
    Chairman Collins. Please proceed. Take as much time as you 
need.
    Senator Akaka. Ms. Stroup, I am interested in learning more 
about the differences between diploma mills and non-accredited 
institutions, especially since a significant portion of Federal 
workforce training is provided by non-accredited institutions. 
Why would an institution choose to be non-accredited?
    Ms. Stroup. You get different answers depending who you 
ask. The ones that we are most familiar with and certainly that 
I think a lot of people would say, we, hands down, offer a 
quality education, have made the decision based on religious 
grounds, where they really don't want to have a relationship 
with the Federal Government. We certainly know several of 
those.
    There are others that are very small institutions in a 
local community that might enroll 75 students, for example, 
something that is very small, that don't want to go through the 
expense of the accreditation process because it is not cheap. 
It does consider quite a financial investment on the part of 
institutions who think they are already doing a good job and 
they don't want money from the Department of Education or the 
other Federal programs that require accreditation, so they 
don't need to invest that kind of resource into the 
accreditation process.
    Those are the two clear-cut ones we know about. Some of the 
kinds of institutions we have talked about today would never 
get through the accreditation process and they know it, so they 
won't ever bother to apply. They would never meet the faculty 
requirements and the curriculum requirements that are part of 
the normal accreditation process.
    But for most institutions, it is really the question of are 
they interested in getting Federal aid from the Department of 
Education or not, and if the answer is no, they don't need to 
invest in the accreditation process, they don't bother to do 
it.
    And again, don't forget, we have 6,500, give or take, 
institutions that are accredited that are part of our system 
nationwide, ranging from 4-year doctoral institutions like UC-
Berkeley down to short-term training programs. They are all 
eligible to get in if they choose to participate in the 
program.
    Senator Akaka. Thank you for your responses.
    I also want to note, Madam Chairman, that the development 
of a database of accredited institutions by the Department of 
Education is very important to States like Hawaii, which had 
the reputation as being a haven for diploma mills. I stress 
this because my State is home to many fine accredited schools.
    In order to make that point, the May/June issue of 
Consumer's Digest unveiled its top 75 best values in public and 
private colleges and universities. I am especially proud that 
Brigham Young University-Hawaii was rated as the top rated 
private university in the Nation and that my alma mater, the 
University of Hawaii at Manoa, was ranked fifth highest among 
public institutions. We must do everything we can to ensure 
that Federal agencies and their employees are never confused as 
to which schools are legitimate.
    Again, Madam Chairman, I want to thank you for holding 
these hearings which will certainly help our Nation know more 
about diploma mills. I want to ask that my full statement be 
placed in the record.
    Chairman Collins. Thank you, Senator, for your insights, 
and your full statement will be placed in the hearing record.
    [The prepared statement of Senator Akaka follows:]
                  PREPARED STATEMENT OF SENATOR AKAKA
    Madam Chairman, although it is customary for us to thank you for 
holding a hearing, I want you to know how much I appreciate the work 
you and your staff have done to expose the use of diploma mills by 
Federal job applicants, current employees, and agencies.
    As a teacher, I was disturbed that individuals who turn to diploma 
mills are cheated out of a real education. As a leading supporter of 
employee training, I was dismayed that the Federal Government is 
wasting taxpayer dollars on worthless programs. The use of taxpayer 
money to fund diploma mill programs is the very essence of government 
waste.
    At yesterday's hearing, special investigators at the General 
Accounting Office detailed the extent to which Federal agencies and 
senior employees had used diploma mills. A number of questions were 
raised by the disturbing results of their investigation which I hope we 
can pursue today.
    I was deeply troubled by GAO's revelation that three Federal 
managers with high level security clearances, holding sensitive 
positions, received degrees from diploma mills. At a time when our 
Nation depends on a strong and credible Federal workforce, we must do 
all we can to ensure that Federal employees have the right skills and 
educational background to carry out their responsibilities.
    As such, I am particularly interested in learning from the Office 
of Personnel Management what steps OPM is taking to establish policies 
and procedures to address fraudulent academic credentials. I am also 
interested to know how OPM plans to ensure that Federal funds are not 
spent on training at diploma mills. We cannot allow these limited funds 
to be diverted from Federal employees pursuing legitimate degrees to 
those receiving questionable ones. Neglecting to establish personnel 
policies that counter the impact of diploma mills threatens the 
effectiveness of the Federal Government and affects the safety of 
Americans.
    In addition, the absence of a reliable accreditation verification 
process threatens the credibility of the government. I am pleased that 
the Department of Education has agreed to develop a database for 
agencies and managers to use when approving training programs and 
verifying academic credentials.
    Without this information and firm policies and procedures in place, 
the government is ill-equipped to verify whether an applicant or 
employee has a degree from an accredited institution. We cannot let 
such policy and information gaps undermine our Nation's security or the 
integrity of Federal programs.
    Once again, I wish to commend our Chairman for highlighting the 
problems posed by diploma mills. I also want to thank the GAO, OPM, and 
DOE for collaborating on how to best attack the proliferation of 
diploma mills. With this partnership, I believe we are moving in the 
right direction to alleviate the use of diploma mills by Federal 
employees and their agencies.

    Chairman Collins. Secretary Stroup, just to follow up on a 
question that Senator Akaka just asked you, it is certainly 
true that some schools choose not to become accredited because 
of religious or other legitimate reasons. But I suspect that 
the vast majority of diploma mills don't seek accreditation 
because they wouldn't get accreditation. They couldn't possibly 
qualify. Do you agree with that?
    Ms. Stroup. Absolutely. There is no way. They would never 
meet the standards. I mean, the tests of accreditation these 
days are very stringent, and we have gotten more stringent, I 
believe, as years have gone on about outcomes and measurements, 
making sure we have good measurements related to jobs and 
degrees and passing tests and licensing and stuff, and a lot of 
them would never, ever make it through the system to even get 
there--there is just no way they could do it.
    Chairman Collins. I just wanted to make that clear for the 
record.
    I would note, also, I was interested to hear of your 
assistant getting the computer notice from a diploma mill, 
because that is exactly how we got involved. Three years ago, 
one of my staffers received E-mails promising degrees virtually 
overnight and that is what opened our eyes to the world of 
diploma mills. Of course, with the Internet, the reach of 
diploma mills has been expanded exponentially. They can reach 
so many more students than they ever would have prior to the 
Internet, so that is a challenge, as well.
    Mr. Benowitz, it seems to me that one of the factors 
contributing to the use of diploma mills in the executive 
branch is that some employees simply may not understand that 
these degrees are not acceptable, that they do not meet the 
qualifications for educational experience that is listed for 
specific jobs. Shouldn't OPM consider revising its application 
and background investigation forms so it would be crystal clear 
to employees and prospective employees that diploma mill 
degrees are simply unacceptable?
    Mr. Benowitz. Absolutely. We have reviewed all of those 
forms as part of our internal review on this topic. We have 
identified every form where that is an issue, starting with 
Federal job application forms through background investigation 
forms. Each of these forms also has accompanying it information 
on how to fill out the form. So our proposal will be to include 
information both in the instructions to these forms and on the 
forms themselves, and we will propose that these forms 
distinguish education from accredited schools from those that 
are not accredited and instruct individuals never to list 
education received at diploma mills or through counterfeit 
diploma companies.
    We will be working with our colleagues at the Department of 
Education and throughout the government. There is a 
notification process when one changes a government-wide form 
and we will be going through that, as well. But I think this is 
a very important point. It is the point where individuals in 
the public first perhaps see this issue presented to them.
    In addition, as I said in the testimony, we have 
information on our website, OPM.gov, or USAJOBS, for example, 
where we will include this so that individuals who are looking 
at the website, will also understand this, as well.
    Chairman Collins. I think that would be very helpful.
    As you know, since January 2003, Federal agencies have been 
restricted to paying for education for their employees only if 
it is from accredited colleges or universities. However, there 
is still a loophole in the law that can allow an agency to pay 
on a course-by-course basis for education from unaccredited 
institutions, including diploma mills, and the result of that, 
as we have seen from our investigation, is that Federal tax 
dollars are going to diploma mills. I clearly don't think that 
was what was intended by Congress in passing the restriction 
limiting payment to those colleges and universities that are 
accredited only.
    Last July, I sent a letter to OPM calling the loophole to 
the agency's attention and urging you to issue new regulations. 
In August, OPM acknowledged the loophole and noted that much of 
the training that the Federal Government purchases is from non-
accredited vendors, and that makes it more difficult.
    The fact is, though, we know that loophole has been 
exploited. Our investigation showed that we were able to 
identify payments that had occurred after January 2003 to 
diploma mills. We found them from the Department of Labor, for 
example.
    In your testimony, you expressed confidence that no law 
changes or regulation changes are needed to address the 
problems that diploma mills pose. How are you going to close 
this loophole if you are not going to revise the underlying, or 
call for a revision of the underlying law or rules?
    Mr. Benowitz. The law you reference, Madam Chairman, refers 
to sending Federal employees for degrees rather than just a 
course, and the law itself is very clear. The school must be 
accredited by an organization recognized by the Department of 
Education. Our interim regulations implementing this parrot the 
law.
    The issue, as you point out and as you found in the 
investigation, is that at certain points in time, Federal 
employees, perhaps in collusion with diploma mills, perhaps 
not, submitted bills for a course at a time, and I think there 
was, in the Lieutenant Commander's testimony today, a copy of 
an invoice that she could have submitted for reimbursement that 
really spoke to this issue.
    In August 2003, Director James sent a memo to heads of 
executive departments and agencies informing them that they had 
to be particularly aware of this issue and that they could not, 
if you will, do business with diploma mills. As a result of our 
internal review, we are also positioned to send a memo, another 
memo to agency heads parroting what I said today, that there is 
absolutely no circumstance under which Federal agencies should 
accept credentials from or do business with diploma mills. We 
believe that is sufficient to ensure that agencies are put on 
notice. We also have authority in our oversight process at OPM 
to examine these issues when we conduct our reviews of 
agencies' human resources programs.
    Chairman Collins. Will that guidance leave in place the old 
rules that govern training and thus allow agencies to pay for 
courses at diploma mills?
    Mr. Benowitz. No. We do intend to change that as part of 
our review and changes of our policies that we have identified. 
I am sorry if I didn't include that.
    Chairman Collins. That is helpful to know.
    Finally, I note that you have testified that you don't 
think a law change is needed. We think that a law change may 
well be needed to clarify this and I am hoping that you will 
pledge today to work with the Committee, and I would ask 
Secretary Stroup also to see if legislation would be desirable 
to eliminate any confusion. It is just unacceptable at a time 
when we have high deficits that a single dollar is going to 
diploma mills, much less the hundreds of thousands of dollars 
that we believe are going from the Federal Treasury to these 
phony schools.
    Mr. Benowitz. You have our absolute commitment to work with 
you on that.
    Chairman Collins. Secretary Stroup.
    Ms. Stroup. We make the same commitment from the Department 
of Education.
    Chairman Collins. Thank you. Senator Akaka, do you have 
anything else?
    Senator Akaka. Madam Chairman, if you would permit me two 
questions, and these are questions of curiosity. Ms. Stroup, 
yesterday, we heard testimony detailing that many diploma mills 
offer academic credit for so-called life experience. In your 
opinion, is life experience a sound basis for academic credit, 
and if so, how should life experience be evaluated?
    Ms. Stroup. Probably the way the diploma mills are doing 
it, that is not the way to do it. I think we know that. The 
accrediting agencies that the Secretary recognizes as part of 
our process have standards within their own rules that they use 
to evaluate life experience for institutions that want to give 
people credit for that as part of their institutional process. 
It is normally, though, very limited. You don't see a lot of 
it. It is likely less than ten credits that anybody would ever 
get that I have ever seen, in a legitimate setting that would 
go through one of the accrediting agencies that we recognize.
    It is not banned or anything, and certainly there are times 
when they do it in certain instances. But it is under a very 
rigorous review process that is in part of the accreditation 
structure that is already in place that our agencies use.
    Chairman Collins. Senator, I would hope that we could get 
credit for a course in Congress, for example. [Laughter.]
    That might be legitimate.
    Senator Akaka. We should work on that.
    Mr. Benowitz, you were Director of Human Resources at the 
National Institutes of Health, which I consider to be the 
world's premier biomedical research organization. Given the 
stature of NIH, what policies and procedures are used to verify 
the credentials of its workforce and what are the best 
practices used by NIH that could be implemented government-
wide?
    Mr. Benowitz. I was there for 14 years or so and was 
Director of Human Resources for probably almost 13 of those 
years, sir. For scientific positions, which were the core of 
that organization, whether these were bench scientists 
conducting research in NIH laboratories or scientists who were 
reviewing grant applications from the universities around the 
country, we required that they provided us a copy of their 
degree, a certified copy from the university. We relied, for 
example, for physicians' degrees on publications that listed 
accredited medical schools.
    And in order to hold a position as a physician in the 
Federal Government, you have to be licensed by a State if you 
are going to be practicing with patients and interacting with 
patients, and NIH has the world's largest research-based 
hospital on the campus in Bethesda.
    It is a practice, I think, that is emulated in some 
agencies, but in perhaps not all agencies. I don't know that I 
can answer that for you. It is a distinction I would make 
between positions which require academic degrees to qualify for 
them and those that don't. The position I held, quite frankly, 
didn't require an academic degree. I qualified for that job 
based on having a Bachelor's degree and a Master's, and I have 
some additional education, but I am a historian by training. I 
don't have a degree in human resources. So you can evaluate 
people's qualifications for jobs based on experience, as well.
    During the background investigation process, depending on 
the level of the person's clearance and the level of the 
background investigation, for the higher-level ones, OPM 
actually sends field investigators to colleges and 
universities, their registrars' office and obtains copies of 
documents and separately confirms the education. For lower-
level clearances, which are often done in a very automated way, 
we send letters to the college or university where the highest 
degree was obtained to get confirmation of that. And these are 
procedures which typically apply to all Federal employees.
    Senator Akaka. Thank you very much, Madam Chairman.
    Chairman Collins. Thank you, Senator, and thank you for 
your participation in these hearings.
    I would like to thank each of our witnesses today, as well 
as the witnesses that we heard from yesterday. I hope that 
these hearings will not only cause the payment of tax dollars 
to diploma mills to be ceased immediately, but it will also 
help to educate both potential students and employers to the 
dangers of dealing with diploma mills.
    We also will be pursuing, by working with the GAO, the 
referral of information to the Inspectors General of the 
various agencies who appear to be employing high-level 
individuals with diploma mill degrees. In some cases, as 
Senator Akaka mentioned, these individuals have very high-level 
security clearances, which raises questions about their 
trustworthiness as well as their qualifications for the post 
that they hold.
    We very much appreciate the insights of all of our 
witnesses. The record for these hearings will be kept open for 
an additional 15 days.
    I want to thank all of the Committee staff, which worked 
very hard on these hearings. This is a hearing investigation 
that has stretched over 3 years, and I believe these hearings 
have been very valuable.
    This hearing is now adjourned.
    [Whereupon, at 12:13 p.m., the Committee was adjourned.]






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