[Congressional Record Volume 145, Number 108 (Wednesday, July 28, 1999)]
[Senate]
[Pages S9545-S9547]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    PUBLIC SCHOOL MODERNIZATION AND OVERCROWDING RELIEF ACT OF 1999

  Mr. ROBB. Mr. President, I have come before this chamber on numerous 
occasions to urge our colleagues to find a way to give states and 
localities the additional resources they so urgently need to build and 
renovate our nation's schools. In January, Senator Lautenberg and I, 
with several other colleagues, introduced the Public School 
Modernization Act of 1999. In March, Senators Lautenberg, Harkin, and I 
were successful in offering an amendment to this year's budget 
resolution which called for $24.8 billion in zero-interest bonds as 
well as direct grants for school construction and repair. That 
amendment passed the Senate unanimously. Regrettably the Senate Finance 
Committee tax bill includes only minimal school infrastructure 
assistance, despite the opportunity we had in Committee to include much 
more substantial infrastructure relief.
  Proposals regarding school construction have been offered from both 
sides of the aisle. Unfortunately, however, the debate about education 
infrastructure needs and the federal role to address those needs has 
too often been partisan and has been characterized by an inability or 
an unwillingness to recognize that there is no one-size-fits-all 
solution to the school construction dilemma facing many of our nation's 
school districts.
  So today, I am pleased to be joined by Senators Lautenberg, Conrad, 
Harkin, Kennedy, Daschle, Reid, Murray, Levin, Cleland, Dodd, 
Torricelli, Schumer, Lincoln, Johnson, Wellstone, Kerry, Kerrey, and 
Akaka in introducing legislation designed to combine various bipartisan 
school construction proposals to create a menu of school construction 
financing options. The Public School Modernization and Overcrowding 
Relief Act of 1999 will help school districts build new schools to 
accommodate the record enrollments of elementary and secondary students 
we know are coming. It will also help modernize schools to ensure that 
our children have the benefit of modern technology. And it will help 
repair old schools which have become outdated and unsafe.
  Mr. President, 14 million children attend schools in need of 
extensive repair or replacement. Twelve million attend schools with 
leaky roofs, and 7 million attend schools with safety code violations. 
The President of the Maine Education Association testified before the 
Health, Education, Labor and Pensions Committee recently and stated 
that there are schools in Maine that actually turn the lights out when 
it rains because the electrical wiring is exposed under their leaky 
roofs.
  Compounding the safety problem is the significant overcrowding in the 
nation's schools. Across the country, there are thousands and thousands 
of trailers used for instruction--over 3,000 are in use in Virginia 
alone. So instead of attending science class equipped with the latest 
technology to conduct biology experiments, our children are going to 
class in poorly-ventilated portable trailers that can actually be 
harmful to their health.
  Mr. President, Loudon County, Virginia will need to build 22 new 
schools over the next six years to accommodate its enormous population 
growth. Despite the help that our own Virginia General Assembly has 
approved, the state will only provide two to three percent of 
Virginia's total school infrastructure needs. This isn't just a 
Virginia phenomenon; it's a national crisis. The National Center for 
Education Statistics estimates that by 2003, the nation will need to 
build 2,400 new schools to accommodate record enrollments in our 
elementary and secondary schools.
  In short, school boards should not be forced to choose between hiring 
an additional teacher or fixing a leaky roof. School superintendents 
should be installing computer labs, not basic air conditioning. And 
students should attend schools of the future, not relics of the past.
  The legislation we offer today will allow school districts to issue 
tax-exempt bonds for school construction. Localities will be able to 
save significant amounts of money on capital improvement projects, as 
the federal government would give bondholders a tax credit in the 
amount of the interest that the locality would otherwise be required to 
pay. The legislation also knocks down a statutory hurdle which 
currently hinders more private sector involvement in public education 
by allowing private entities to pool resources with states and 
localities to build and renovate school buildings. Furthermore, if a 
state or locality has previously issued bonds at a time when interest 
rates were high, this legislation would allow them to essentially 
refinance that debt to take advantage of today's lower interest rates. 
The legislation will also make it easier for small communities to issue 
a greater number of bonds without being subject to onerous arbitrage 
requirements. All of these provisions provide states and localities 
with choices. Under this legislation, our states and localities will be 
able to avail themselves of those provisions that best suit their 
financial needs. The bill creates a menu of options through which 
states and localities can assemble their own financing packages.
  Mr. President, as a former governor, I acknowledge that education is 
primarily a state and local responsibility. The federal government, 
however, can be a helpful partner in education by helping to defray the 
cost of capital improvements without interfering with the substantive 
decisions that states and localities are struggling to make regarding 
their academic reform efforts. Providing a variety of financing options 
to fund capital improvements, therefore, is an imminently constructive 
role for the federal government to play. For our public education 
system to be the best in the world, all three levels of government--
local, state, and federal--will have to work together.
  I thank my colleagues who have co-sponsored this legislation, and I 
look forward to working with them to pass it. It's flexible. It's 
sensible. And it provides the most financing options of any school 
construction proposal to date. I hope this legislation brings us one 
step closer to the compromise I know we can reach.
  Mr. President, in the 1930's and again in the 1950's, our 
grandparents and parents summoned the political will to build the vast 
majority of our nation's existing school buildings. It is my hope that 
we can summon that will again. Our nation's students and families 
deserve no less.
                                 ______
                                 
      By Mr. ABRAHAM (for himself and Mr. Feingold):
  S. 1455. A bill to enhance protections against fraud in the offering 
of financial assistance for college education, and for other purposes; 
to the Committee on the Judiciary.


          the college scholarship fraud prevention act of 1999

  Mr. ABRAHAM. Mr. President, I rise today with my colleague from 
Wisconsin, Senator Feingold, to introduce the College Scholarship Fraud 
Prevention Act of 1999. This legislation will prevent unscrupulous 
businesses from defrauding students seeking to finance a college 
education.
  Students in Michigan and across the nation are targeted by corrupt 
companies preying on their hopes and dreams of a college education. A 
college diploma is the key that opens the door to many of today's 
career opportunities, but the reality is that this diploma is becoming 
more and more expensive to obtain. A number of organizations have 
sprung up to address this problem, and many of them perform an 
invaluable

[[Page S9546]]

service in providing student financing, or in providing information to 
students concerning institutions to which those students may apply for 
financial assistance. Unfortunately, however, a growing number of 
individuals are turning student need into a scam opportunity, taking 
financial advantage of students in need of assistance.
  Each year, individuals and businesses send thousands of letters out 
to hopeful students, offering bogus scholarships. The tactics used by 
these con-artists vary, but they nearly always involve 
misrepresentation and fraud. Some exclusively use the mails to conduct 
their illegal activities, while others, like the National Scholarship 
Foundation have sent hundreds of thousands of postcards to potential 
college students, encouraging them to call an ``800'' number for ``free 
money''. Students calling the NSF number were told that they were 
guaranteed $1000 or more in scholarships if they would pay a $189 
processing fee, to be refunded if they did not receive the scholarship. 
Students sending $189 to the NSF received only general information 
about the college application process and the costs of a college 
education--information readily available for free from other sources. 
NSF never provided refunds.
  The Federal Trade Commission has been aware of this growing problem; 
and we have sought their input while drafting this legislation. In 
1996, the FTC initiated ``Project $cholarship- $cam,'' a nationwide 
crackdown on fraudulent scholarship search services. But although the 
FTC is dedicated to stopping these con artists, it can only pursue 
civil remedies; the Justice Department is responsible for prosecuting 
these scam-artists criminally upon FTC referral, and unfortunately, 
such prosecutions are a rare occurrence.
  Even when the Justice Department does prosecute scholarship scam-
artists, the penalties are so light as to provide little deterrent 
effect. For example, this past May a federal jury in Maryland convicted 
Christopher Nwaigwe of defrauding more than 50,000 college students of 
more than $500,000. Mr. Nwaigwe had mailed letters to students 
announcing scholarship offers of $2,500 to $7,500, in exchange for 
which students were requested to send Mr. Nwaigwe a $10 processing fee. 
In reality, after the students sent the check, they waited in vain for 
a response.
  Nwaigwe was ordered by the U.S. Postal Service to stop sending 
misleading letters in 1993, yet, he chose to ignore this warning and 
continue to defraud students. In 1996, Nwaigwe was the subject of a 
civil action in U.S. District Court, in which he was permanently 
enjoined from using materials to solicit money from students. Yet it 
was only in May--six years after the first official action taken 
against him--that he finally faced a jury. And the maximum penalty he 
faces for his long course of fraudulent conduct is five years' 
imprisonment and a fine of $250,000--half the dollar amount we know to 
be the minimum he gained through his fraud.

  Mr. President, the rapid spread of scholarship scams such as 
Christopher Nwaigwe's makes it imperative that we step up prosecutions 
and impose tougher sentences. My legislation would encourage the 
Justice Department of pursue and prosecute more scholarship scam-
artists, by providing an additional ten years' imprisonment and 
additional fines in fraud cases which involve the offering of 
educational services.
  In addition, this legislation would improve the FTC's ability to 
enforce orders for disgorgement and redress to consumers. Senator 
Feingold and I have been briefed by the FTC on its current problems 
enforcing judgments, and one particularly offensive example involves an 
abuse of consumer bankruptcy protections. Often, scholarship scam-
artists use their fraudulent gains to buy expensive homes. When hit 
with disgorgement and redress orders, they file for bankruptcy. And 
because most states exempt at least a portion of the value of 
residential property from bankruptcy estates, these con-artists are 
able to retain their ill-gotten gains in the form of their trophy 
homes. After the bankruptcy proceeding clears their debts, the scam-
artists may then sell their estates, keeping the money they have 
defrauded from students.
  Our legislation would prevent con-artists from using their technique 
to avoid paying court judgments in this fashion. Residential property 
exemptions from bankruptcy estimates are intended to aid law-abiding 
people who find themselves in financial difficulty; they were not meant 
to help scam-artists launder and protect ill-gotten gains. This 
legislation takes a cue from Congress' response to the savings and loan 
crisis, and amends the bankruptcy code so that debts derived from 
college financial assistance fraud would be excluded from homestead 
bankruptcy exemptions. Legitimate homeowners will still be protected by 
the bankruptcy laws. But con-artists will no longer be able to use 
these laws for their own, fraudulent ends.
  In addition to these punitive and deterrent measurers. Mr. President, 
this legislation also includes measures to help student and their 
families obtain financing help from legitimate organizations. We need 
to make it easier for students and their families to differentiate 
legitimate companies from con-artists. The FTC currently warns students 
about fraudulent scholarship services; while this is commendable, 
however, in my view, the larger number of students who visit the 
Department of Education web site to find out about financing option 
makes it the logical choice for an anti-scam public relations 
initiative. To that end, this legislation would call on the Secretary 
of Education to maintain a web page on the Department's web site 
listing legitimate sources of scholarship information. To ensure that 
this web page is not misused by unscrupulous companies and individuals, 
and other provision would require the Education Department to consult 
with the FTC before including any name on its list.
  No organization would be listed on the web page if it or its operator 
has been prosecuted by the FTC and convicted of using unfair or 
deceptive practices. In addition, a business or organization would not 
be listed if the Department of Education receives a significant number 
of complaints from students alleging that the business has not in good 
faith delivered on its promises, or if it is under investigation by the 
FTC.
  Taken together, Mr. President, these provision discouraging fraud 
disseminating information concerning legitimate sources of scholarship 
information will help students find the assistance they need to finance 
a college education. Through this legislation we can fight scholarship 
scams, put those who would defraud students out of business and 
increase our Nation's pool of educated workers.
  I ask my colleagues for their support, and ask unanimous consent that 
the bill and a section-by-section analysis of the bill be printed in 
the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1455

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``College Scholarship Fraud 
     Prevention Act of 1999''.

     SEC. 2. FINDINGS.

       Congress makes the following findings:
       (1) A substantial amount of fraud occurs in the offering of 
     college education financial assistance services to consumers.
       (2) Such fraud includes the following:
       (A) Misrepresentations regarding the provision of sources 
     from which consumers may obtain financial assistance 
     (including scholarships, grants, loans, tuition, awards, and 
     other assistance) for purposes of financing a college 
     education.
       (B) Misrepresentations regarding the provision of 
     portfolios of such assistance tailored to the needs of 
     specific consumers.
       (C) Misrepresentations regarding the pre-selection of 
     students as eligible to receive such assistance.
       (D) Misrepresentations that such assistance will be 
     provided to consumers who purchase specified services from 
     specified entities.
       (E) Misrepresentations regarding the business relationships 
     between particular entities and entities that award or may 
     award such assistance.
       (F) Misrepresentations regarding refunds of processing fees 
     if consumers are not provided specified amounts of such 
     assistance, and other misrepresentations regarding refunds.

     SEC. 3. ENHANCED CRIMINAL PENALTIES FOR COLLEGE EDUCATION 
                   FINANCIAL SERVICE ASSISTANCE FRAUD.

       (a) Enhanced Penalties.--Chapter 63 of title 18, United 
     States Code, is amended by adding at the end the following:

[[Page S9547]]

     ``Sec. 1348. Enhanced penalties for college education 
       financial service assistance fraud

       ``(a) In General.--A person who is convicted of an offense 
     under section 1341, 1342, or 1343 of this title in connection 
     with the obtaining or providing of any scholarship, grant, 
     loan, tuition, discount, award, or other financial assistance 
     for purposes of financing an education at an institution of 
     higher education shall be fined under this title, imprisoned 
     not more than 10 years, or both.
       ``(b) Other Penalties.--Any penalties imposed under this 
     section shall be in addition to any penalties under any of 
     the sections referred to in subsection (a).
       ``(c) Institution of Higher Education Defined.--In this 
     section, the term `institution of higher education' has the 
     meaning given that term in section 101 of the Higher 
     Education Act of 1965 (20 U.S.C. 1001).''.
       (b) Clerical Amendment.--The table of sections at the 
     beginning of that chapter is amended by adding at the end the 
     following:

``1348. Enhanced penalties for college education financial service 
              assistance fraud.''.

     SEC. 4. EXCLUSION OF DEBTS RELATING TO COLLEGE FINANCIAL 
                   ASSISTANCE SERVICES FRAUD FROM PERMISSIBLE 
                   EXEMPTIONS OF PROPERTY FROM ESTATES IN 
                   BANKRUPTCY.

       Section 522(c) of title 11, United States Code, is 
     amended--
       (1) by striking ``or'' at the end of paragraph (2);
       (2) by striking the period at the end of paragraph (3) and 
     inserting ``; or''; and
       (3) by adding at the end the following:
       ``(4) a debt in connection with fraud in the obtaining or 
     providing of any scholarship, grant, loan, tuition, discount, 
     award, or other financial assistance for purposes of 
     financing an education at an institution of higher education 
     (as that term is defined in section 101 of the Higher 
     Education Act of 1954 (20 U.S.C. 1001)).''.

     SEC. 5. LIST OF BUSINESSES AND ORGANIZATIONS OFFERING COLLEGE 
                   EDUCATION FINANCIAL ASSISTANCE SERVICES.

       (a) List.--The Secretary of Education shall maintain on the 
     Internet web site of the Department of Education a web page 
     that--
       (1) lists businesses and organizations that offer financial 
     assistance (including scholarships, grants, loans, tuition, 
     awards, and other assistance) for purposes of financing an 
     education at institutions of higher education; and
       (2) provides the Internet web site address of such 
     businesses and organizations.
       (b) Application for Placement on the List.--A business or 
     organization may apply to the Secretary of Education for 
     placement on the list.
       (c) Consultation.--The Secretary of Education shall consult 
     with the Chairman of the Federal Trade Commission in an 
     effort to ensure that a business or organization applying for 
     placement on the list is a legitimate business or 
     organization.
       (d) Ineligibility.--A business or organization shall not be 
     listed on the page if--
       (1) the business or organization was prosecuted by the 
     Federal Trade Commission and convicted of using an unfair or 
     deceptive act or practice under the Federal Trade Commission 
     Act (15 U.S.C. 41 et seq.) during the 5-year period preceding 
     the submission of an application under subsection (b);
       (2) the business or organization is operated by an 
     individual who operated a business or organization that was 
     prosecuted by the Federal Trade Commission and convicted of 
     using an unfair or deceptive act or practice under such Act 
     during the 5-year period preceding the submission of an 
     application under subsection (b);
       (3) the Department of Education receives a significant 
     number of complaints, as determined by the Secretary of 
     Education, from students alleging the business or 
     organization has not in good faith delivered on promises made 
     by the business or organization; or
       (4) the business or organization is under investigation by 
     the Federal Trade Commission.
                                  ____


   The College Scholarship Fraud Prevention Act of 1999--Section-by-
                            Section Analysis

       A bill to enhance protections against fraud in the offering 
     of financial assistance for college education, and for other 
     purposes.


                          section 1: findings

       This section sets out Congressional findings concerning the 
     high level of fraud that occurs in the offering of college 
     education financial assistance services to consumers.


section 2: enhanced criminal penalties for college education financial 
                          service definitions

       This section amends Chapter 63 of Title 18, United States 
     Code by adding a section that provides for a fine, 
     imprisonment for not more than 10 years, or both, for college 
     education financial service assistance fraud.


section 3: exclusion of Debts relating to college financial assistance 
services fraud from permissible exemptions of property from estates in 
                               bankruptcy

       This provision amends Section 522(c) of Title 11 of the 
     United States Code to allow property otherwise exempted in 
     bankruptcy to be subject to disgorgement and redress orders 
     resulting from college financial assistance services fraud.


   section 4: List of businesses and organizations offering college 
                education financial assistance services

       This section requires the Secretary of Education to 
     maintain a web page listing businesses and organizations 
     offering financial assistance for purposes of financing an 
     education. The section also requires consultation between the 
     Secretary of Education and the Federal Trade Commission to 
     ensure that a listed business is a legitimate offeror of 
     services, and specifies the circumstances under which a 
     business or organization would be ineligible to be listed.

                          ____________________