[Congressional Record Volume 146, Number 120 (Monday, October 2, 2000)]
[Senate]
[Pages S9606-S9608]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SESSIONS (for himself, Mr. Jeffords, Mr. Brownback, Ms. 
        Collins, Mr. Hutchinson, and Mr. Stevens):
  S. 3143. A bill to improve the integrity of the Federal student loan 
programs under title IV of the Higher Education Act of 1965 with 
respect to students at foreign institutions; to the Committee on 
Health, Education, Labor, and Pensions.


             federal student loan programs improvements act

  Mr. SESSIONS. Mr. President, I am concerned that we as a Congress 
have not been effective enough in oversight; that is, looking at the 
Federal agencies and Departments of this Government to make sure they 
are operating effectively.
  We ooh and ah and make complaints and express concern, but we do not 
often follow through. I know fundamentally it is the responsibility of 
the administration to run the executive branch, but Congress does fund 
that branch and has every right to insist that branch does its duty 
effectively, expeditiously, and economically with minimum waste, fraud, 
and abuse.
  I had the pleasure about a year ago to have a conversation with a 
wonderful lady, Melanie DeMayo, who used to work with Senator Proxmire 
and was involved in his ``Golden Fleece Award'' presentations. She 
convinced me I could play a role in helping to make sure, when a dollar 
is extracted from a hard-working American citizen and is brought to 
this Senate, this Government, to be spent, that it is spent wisely and 
not wasted or abused or ineffectively utilized to carry out whatever 
worthwhile program was intended. I appreciate her insight and help in 
thinking this through.
  I have developed what I call Integrity Watch. I spent a number of 
years as a Federal prosecutor. I believe we can do a better job of 
maintaining integrity in this Government. When we are spending $1.7 
trillion a year, it is incumbent upon us to make sure there is 
oversight over these programs.
  I have come to realize that we have a very large student loan 
program, and there are some problems with it. Today I am offering 
legislation to create a 12-month fraud control pilot program to reduce 
the incidence of fraud in the Federal Family Education Loan Program and 
other programs under title IV.
  In recent years, there have been a number of cases of so-called 
students falsely claiming they are attending foreign schools, directing 
that their student loan checks be paid directly to them and not to the 
school, and then taking the money and spending it on themselves and not 
attending the foreign school. This fraud has been documented with many 
examples listed in a 1997 Department of Education inspector general's 
report.
  In addition, the report contains recommendations on tightening 
controls for the program. Too often these reports are dry, detailed, 
and complicated. Nobody in this body even reads them, much less acts on 
them. Certainly, I doubt the President, who says he wants to increase 
foreign student loans, has read the report. We certainly have not seen 
any request from the administration to improve this. I believe we can 
and should do it in Congress.
  It is time, I believe, for this Congress to close the loopholes which 
allow these phantom students to defraud the Government.
  On April 19, 2000, President Clinton and Secretary of Education Riley 
declared that international education is a priority with them. They 
want to encourage more students to study abroad. In fact, the President 
issued a memorandum to the heads of executive departments and agencies 
stating that the United States is committed to promoting study abroad 
by U.S. students. He stated:

       The Secretaries of State and Education shall support the 
     efforts of schools and colleges to improve access to high-
     quality international educational experiences by increasing 
     the number and diversity of students who study and intern 
     abroad, encouraging students and institutions to choose 
     nontraditional study-abroad locations, and helping under-
     represented United States institutions offer and promote 
     study-abroad opportunities for their students.

  Study abroad can be a wonderful experience for a student, and I do 
not oppose some form of student loan aid to students who want to take 
advantage of that. It can be an extraordinarily enriching experience. 
We do need to ensure that the program involves study and not a European 
vacation at the expense of hard-working American taxpayers for whom a 
visit to the ball park is often beyond their budget.

  This new initiative by the administration will increase the risk of 
fraud unless we institute sound controls immediately. I am not 
referring to U.S. universities that have foreign programs or 
cooperative programs with foreign universities. I am talking about 
mainly the unsupervised foreign-based

[[Page S9607]]

institutions. Some of these institutions have already been criticized 
by General Accounting Office studies. Often these marginal schools are 
the very schools the so-called students use in their fraud scam. Their 
fraud is committed when they state they are registering in these 
schools and then simply pocket the money with no one the wiser.
  Since 1995, there have been 25 felony convictions of students who 
fraudulently claimed they were attending a foreign school, and then 
they just cashed their Government loan check and simply did not attend 
class. In the United States, the check is made out to the school and 
the student, but with regard to foreign schools, the check is made out 
simply to the students. These are only the students who were caught 
doing their fraudulent activity. I have no doubt there are many more 
who have not been apprehended. That is why we ought to take action. We 
must prevent cases such as this one.
  Mr. Conrad Cortez claimed to be such a student, and he applied for 
student loans. In March of 2000, he admitted to charges of submitting 
19 fraudulent student loan applications over a 3-year period. He pled 
guilty before a U.S. district court judge to numerous accounts of mail 
fraud, bank fraud, and Social Security account number fraud in the 
State of Massachusetts. The prosecutor told the court in that case that 
Cortez was responsible for dozens of other loans filed outside 
Massachusetts--in Florida and Texas.
  The absolute disregard for the American taxpayers was epitomized by 
Conrad Cortez. Mr. Cortez was living high at the expense of American 
taxpayers and in violation of law by filing false documents to receive 
loan money from the Government.
  During the period from 1996 through 1999, he bought gifts for his 
friends, including jewelry and cars, paid for private tennis lessons, 
made a downpayment on a house, sent some money back to his native 
Colombia, ate in the best restaurants, and even paid restitution for a 
previous charge of defrauding the Government, and he did this all with 
the American taxpayers' money.
  Mr. Cortez' fraud only ended when he was turned in by his sister's 
boyfriend, who claimed that Mr. Cortez had used his identity to obtain 
additional loans. In fact, Mr. Cortez was about to help himself to 
$800,000 that you and I pay in income taxes. He had filed 37 false 
claims in all, spending the money as fast as it came in to him.
  The inspector general's office of the Department of Education, with 
the FBI, and the attorney general's office in Boston combined forces to 
apprehend him before he could get all the money that was coming to him 
through those false loans. He did, however, pocket about $300,000 
before he was caught.
  This is not an isolated case. In 1994, the General Accounting Office 
found that the Department of Education had approved student loans to 
hundreds of students attending 91 foreign medical schools. Frankly, I 
am not sure there are 91 medical schools out there in this world, 
outside the United States, for which we ought to be funding education. 
If somebody comes to this country expecting to be a doctor, we need to 
know they have met certain quality education standards. But, at any 
rate, that is what we hear.
  In applying its standards, the Department of Education relies 
exclusively on information submitted by those foreign schools as to 
their viability. Enforcement and oversight problems at the Department 
still abound. Who is to say how many students have fraudulently applied 
for loans? There isn't a report on that. Those are unknown unknowns, as 
they say in management. We cannot measure what we do not know.
  Most likely, the greatest abuse of the system occurs when the 
student, for various reasons, just pockets the money and never goes to 
class. Under the present system, who will know? We do know that the 
system is broken. This legislation is one step toward fixing it.
  Another abuse occurs when a foreign school is actually paid the 
tuition but does not insist that the student attend class and provides 
no real education to the student. I guess a foreign school could simply 
be glad to get the American money, the American check, and at that 
point it is up to the student whether or not he or she actually attends 
class or learns anything. I think we need to have the Department of 
Education look into that and make sure students are actually attending 
class and not taking a European vacation.
  Mr. Cortez demonstrated a perfect example of why this program is high 
risk. There simply is not enough oversight. Currently, the methodology 
for approving and releasing student loan funds is vulnerable. Current 
law states that the student may request a check be issued directly to 
him or her, when claiming they are attending a foreign school, and a 
check will be sent directly to them, without the requirement of a 
cosignature by the school.
  The Office of Inspector General at the Department of Education 
identified weaknesses and deficiencies in the following areas of the 
foreign school attendance programs: Verification of enrollment, the 
disbursement process, the determination of the borrowers' eligibility, 
standards of administrative and financial capability on the part of the 
foreign school, and general oversight of foreign schools.
  The same Office of Inspector General report--that is the Department 
of Education's own inspector general's office within that Department--
stated that the number of students claiming to attend foreign schools 
and applying for loans increased each academic year from 1993 to 1997 
and went from 4,594 students to 10,715 students. Later figures show the 
number continues to increase. Indeed, in 1998-1999 there were 12,000 
foreign loans.
  My legislation will require the Secretary of Education to initiate a 
12-month fraud control pilot program involving guaranty agencies--those 
are the people who put up the loan money guaranteed by the Federal 
Government--lenders, and a representative group of foreign schools to 
reduce the incidence of fraud in the student loan program. I believe 
the Secretary should look into a number of solutions.

  Maybe the guaranty agencies should confirm that the student is 
enrolled in the foreign school before the loan is actually disbursed. 
After the money has been disbursed to the student, maybe the guaranty 
agencies should confirm that the student remains registered.
  The Secretary should also determine whether it would be advantageous 
to require a loan check to be endorsed by both the student and the 
foreign institution. I am inclined to think it is. But we shall see. 
Maybe this evaluation period can help us determine that.
  The question then becomes, Why are we paying for students to go to 
foreign schools? These are American taxpayers' dollars flowing to 
foreign economies where the standards of education may not be as high 
as ours. I have checked with the higher education systems in my State. 
They certainly are not at full capacity and certainly can handle more 
students.
  Perhaps there should be some limit on the number of years of study 
abroad. How many? Five? Six? Seven? Is that limited today? No, it is 
not. Maybe we ought to limit the number of years that the taxpayers 
will fund foreign education. Today there is no limit. Students can 
complete their entire education abroad, supported by the taxpayers, 
sometimes not in good institutions. Perhaps the quality of the 
institution should be verified, among other things. But this will not 
be an issue raised by our legislation today.
  Our legislation will simply go to the question of whether or not we 
can improve the way we guard against actual fraud in these loans. It 
will begin the process of erasing the fraudulent behavior of 
``students'' claiming they are attending foreign schools and then 
pocketing the money for their personal lifestyle.
  So I introduce this legislation today and hope my colleagues will 
quickly support such a measure as this because I believe it will reduce 
the fraud that has been plainly demonstrated in a critical report by 
the Office of Inspector General of the U.S. Department of Education.
  In the course of working on this, I would like to express my 
appreciation to a number of people who have played an important role in 
this. I thank the cosponsors of this legislation, including Senator 
Jeffords, who chairs the Health, Education, Labor, and Pensions 
Committee; Senator Tim Hutchinson of Arkansas, who is here, who has 
been a supporter and has had a great interest in this as a cosponsor; 
along with Senators Brownback and Collins.

[[Page S9608]]

  I also express my appreciation to Scott Giles of Senator Jeffords's 
office; to Melanie DeMayo, who has done such a tremendous job helping 
us identify and research this problem; and Anthony Leigh of my staff, 
who is with me now, who has helped me work on this.
  We believe this is perhaps not a glamorous issue but an important 
issue, an important step we can take to eliminate plain fraud that is 
clearly occurring around this country to a substantial degree, 
defrauding the taxpayers of the money they have sent to Washington.
  Mr. President, I thank the Chair and yield the floor.
  The PRESIDING OFFICER. The Senator from Arkansas.
  Mr. HUTCHINSON. Mr. President, I commend the distinguished Senator 
from Alabama for his work in this area. I am glad I am cosponsoring the 
bill. Senator Sessions has been one of the tireless leaders in 
education and in rooting out fraud and abuse in the Department of 
Education.
  I also mention, with Senator Sessions' help on the Education 
Committee, we recently sent a bill out that I sponsored on the Senate 
side, that passed the House of Representatives, which would require a 
fraud audit of the Department of Education be performed by the General 
Accounting Office within 6 months.
  While the Senator is dealing with one specific area of fraud that is 
very serious, for which this legislation needs to be enacted, there are 
other examples of fraud, mismanagement, and abuse within the Department 
of Education that have come to light in recent days.
  We are hopeful that legislation can move before this session ends. It 
is ironic that there are those who want the Department of Education to 
have even more power, such as in the hiring of 100,000 teachers or in 
school construction projects, when it is clearly a troubled agency that 
has had a real problem in even having a clean audit of their books.
  So I commend the Senator heartily and appreciate the work he is 
doing.
                                 ______