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Case Number: 19CR4551-JAH; 19CR4550-JAH
Court: United States District Court for the Southern District of California (San Diego County)
Plaintiff's Attorney: United States District Attorney’s Office, San Diego, California
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Description: San Diego, California wire fraud criminal defense lawyer represented defendant who was charged with defrauding the United Sates.
Nimesh Shah, owner of Blue Star Learning, a technical training school in San Diego, was charged with multi-year scheme that defrauded the Department of Veterans Affairs out of almost $30 million in Post-9/11 G.I. Bill benefits.
As laid out in Shah’s plea agreement and court documents, Shah took extraordinary efforts to deceive regulators from the Department of Veterans Affairs (VA) to ensure the school continued to receive VA funds. Shah provided the VA with false documents, invented fake students and created fake student files. He provided spreadsheets with false employment information and fraudulent contact information for purported graduates of the school and their made up employers. He purchased cellular telephones so that he and his employees could field VA regulator calls to purported employers of school graduates, and hired individuals overseas to pretend to be satisfied Blue Star Learning students in response to VA regulator emails. As laid out in court records, Shah’s scheme appears to be one of the largest Post-9/11 G.I. Bill fraud cases that has been prosecuted around the country.
Shah was also ordered to forfeit $3,076,361.77 and to pay the VA $29,350,999 in restitution. Shah’s wife Nidhi Shah, who was the vice president and director of education at the school, was sentenced to two years of probation as a result of lying to investigators in the course of the investigation into the school.
The Post-9/11 G.I. Bill provides veterans and other eligible individuals educational assistance, including tuition, housing costs, and other educational costs and fees. The VA pays tuition and fees directly to the school where the veteran is enrolled, and if the veteran is enrolled on more than a half time basis, the VA additionally provides a monthly housing allowance directly to the veteran, as well as money for books, supplies, equipment and other educational expenses. In October 2011, the VA began paying Post-9/11 G.I. Bill benefits for individuals pursuing non-institute of higher learning, non-degree programs, including non-accredited, non-college degree schools like Blue Star Learning.
In order to receive funds from the VA under the Post-9/11 G.I. Bill, Blue Star Learning was required to have at least 15 percent non-veterans for each course for which the VA was paying educational benefits - a rule called the “85/15 Rule.” As laid out in court records, the “85/15 Rule” is designed to minimize the risk that veterans’ benefits are wasted on educational programs of little value and to ensure that the cost of a course is acceptable and paid on the open market by non-veterans. As part of its yearly accreditation process, Blue Star Learning was also required to provide vocational attainment data for graduates of the school to VA regulators that corroborated employment statistics posted on the Blue Star website. This data was requested to ensure that individuals attending the school were getting jobs in the fields in which they were receiving training, as a measure of quality.
As part of his multi-year fraud scheme, between March 2016 and June 2019, Shah lied to the VA about the percentage of non-veteran students at the school, and made up fake non-veteran students – when in fact nearly all of their business came from veteran students. He also created spreadsheets of fraudulent employment data, including false emails, phone numbers, jobs and employers to support made-up graduate employment data. And he falsely claimed that all of the students at the school were enrolled full-time. Shah’s lies ensured that Blue Star Learning received millions of dollars in VA education benefits that the school was not entitled to.
Blue Star Learning, which charged up to $20,560 per course, had close to 100% veteran students. Shah nonetheless repeatedly misrepresented to the California State Approving Agency for Veterans Education (“CSAAVE”) and the VA that Blue Star Learning was in compliance with the “85/15 Rule.” Shah took extraordinary efforts to deceive VA regulators regarding non-veteran students at the school, including creating fake enrollment agreements and student files for the purported non-veterans in each program. Shah emailed the VA 48 fraudulent enrollment agreements for fictitious people he represented were non-veteran students at Blue Star Learning, complete with fraudulent dates of birth, social security numbers, addresses, phone numbers and emails for each fraudulent non-veteran student.
Shah knew that the vast majority of Blue Star Learning graduates did not obtain jobs in the fields in which they were purportedly receiving training, and that the employment statistics on Blue Star Learning’s website were false. Shah nonetheless submitted fraudulent spreadsheets to CSAAVE claiming that all of the Blue Star Learning students listed were employed in the informational technology field. On these spreadsheets, Shah provided fraudulent phone numbers, email addresses, employers, and employer contact information for each student. Shah then took his fraud a step further: Because he knew CSAAVE could contact the students/employers to verify the data submitted, Shah hired individuals to create the fraudulent email addresses for the Blue Star Learning students, and directed these individuals, who resided overseas, to answer emails received at the fraudulent email addresses pretending to be satisfied Blue Star Learning graduates working in the information technology field. Shah additionally created 30 fictitious companies that he listed as the employers on the fraudulent spreadsheets, and hired individuals to create fraudulent email addresses and domain names for each fictitious company. Shah directed a Blue Star Learning employee to purchase 30 cellular telephones, one for each fictitious employer, and had employees of Blue Star Learning create voicemail greetings on each cellular telephone so that it would appear that the fraudulent businesses were legitimate if CSAAVE called to check.
“This was an extraordinary fraud in terms of the elaborate deception, the years-long duration and the amount of money involved,” said U.S. Attorney Robert Brewer. “This defendant knowingly violated the rules to enrich himself, and for that he will go to prison.” Brewer commended prosecutor Michelle Wasserman and agents from the Department of Veterans Affairs Office of Inspector General and Federal Bureau of Investigation for excellent work on this case.
“The FBI worked with our partners at the VA-OIG to investigate this elaborate fraud scheme resulting in a loss of over $29 million dollars,” said FBI Special Agent in Charge Suzanne Turner. “Fraud affecting educational benefits meant for our military veterans will not be tolerated. Today, justice was served against the Shahs, the owners of Blue Star Learning, who put greed and deceit above the men and women of our U.S. military.”
Rebeccalynn Staples, Special Agent-in-Charge of the U.S. Department of Veterans Affairs, Office of Inspector General, Western Field Office, stated, “This case demonstrates VA OIG’s commitment to aggressively pursuing individuals and schools who seek to exploit the education benefits earned by veterans. VA OIG will continue to protect the integrity of the VA education benefits program by identifying unscrupulous schools who take advantage of veteran students. VA OIG urges anyone with knowledge of possible fraud against VA to contact the VA OIG Hotline Division at 1-800-488-8244.”
As a result of Shah’s fraud, the VA issued over $11 million in tuition payments to Blue Star Learning, and over $18 million in housing allowances and stipends. In total, as a result of Shah’s fraud, the VA lost $29,350,999.
DEFENDANT Case Number 19CR4551-JAH; 19CR4550-JAH
Nimesh Shah Age: 37 San Diego, CA
Nidhi Shah Age: 35 San Diego, CA
SUMMARY OF CHARGES
Nimesh Shah: Wire Fraud – Title 18, U.S.C., Section 1343
Maximum penalty: Twenty years in prison and $250,000 fine
Nidhi Shah: False Statement – Title 18 U.S.C., Section 1001
Maximum penalty: Five years in prison and $250,000 fine
Department of Veterans Affairs Office of Inspector General
Federal Bureau of Investigation
Outcome: Defendant was sentenced to 45 months in prison.