Congressional investigators create school

WASHINGTON -- The Y'Hica Institute for the Visual Arts in London appeared to have all the credentials for certification in a student loan program administered by the U.S. Department of Education -- a Web site, a school president, a consulting firm and students who needed financial help.

Unknown to federal officials who certified Y'Hica, the school didn't exist.

But this wasn't just another fraud on the government. This school was an undercover sting operation by congressional investigators, who wanted to learn how closely education officials monitored aid applications from foreign schools.

The investigators from Congress' General Accounting Office had little trouble gaining U.S. certification of the school and obtaining loan approvals for three students from two of three lending institutions contacted.

The undercover agents even tried to leave a clue to unravel the scheme, identifying one of the "students" as Susan M. Collins.

Sen. Susan M. Collins, R-Maine, was the lawmaker who asked for the investigation. She is now chairman of the Senate Governmental Affairs Committee, and was its ranking minority member when the inquiry began.

Terri Shaw, chief operating officer for the Education Department's Federal Student Aid Office, acknowledged that officials should have verified the school's existence. In this case, the officials "did not completely follow every step of the procedure which resulted in Y'Hica obtaining preliminary approval for one year."

Shaw maintained that officials would have caught the scheme before money actually was loaned out, because one lender noticed irregularities in the student applications and notified the department.

The department now is conducting on-site visits of all foreign schools applying for eligibility in loan programs, and also is working with the State Department to verify a school's existence.