Diploma Mills: The $200-Million-a-Year
Competitor You Didn't Know You Had
For the sake of argument, let's say you run the company that makes Rolex watches. For many years, your company has carefully cultivated and protected its reputation for quality. One day you pick up a major business magazine and see the following advertisement: "Genuine Rolex Watches by Mail, $50." You quickly learn that they are being made in a huge factory in another country. You are confident that your sales will be dramatically affected, and as these fakes fail to work well, your reputation will be damaged. But despite your increasingly frantic attempts, you are unable to interest law enforcement agencies in taking any action, and you can't persuade the media to stop running those ads.
It sounds like a nightmare.
It is a nightmare, and it's happening today -- not in the world of wristwatches, but in the world of higher education. Consider the following:
- There are more than 300 unaccredited universities now operating. While a few are genuine start-ups or online ventures, the great majority range from merely dreadful to out-and-out diploma mills-fake schools that will sell people any degree they want at prices from $3,000 to $5,000.
- It is not uncommon for a large fake school to "award" as many as 500 Ph.D.'s every month.
- The aggregate income of the bad guys is easily in excess of $200 million a year. Data show that a single phony school can earn between $10 million and $20 million annually.
- With the closure of the FBI's diploma mill task force, the indifference of most state law enforcement agencies, the minimal interest of the news media, and the growing ease of using the Internet to start and run a fake university, things are rapidly growing worse.
The prognosis is bleak. This is not some jerk with a laser printer on his kitchen table cranking out a few phony diplomas, often to the mild amusement of the media (as when Florida congressman Claude Pepper bought a fake doctorate to show how easy it was and proclaimed himself Dr. Pepper). Fake schools are a serious economic force in America, hitting legitimate schools in their pocketbooks in two important ways:
- A fair chunk of that $200 million is being spent by people who really want and need a legitimate degree but don't know enough to tell the difference. It's tuition that should be going to the legitimate schools.
- Every time a phony school is exposed by the media, the whole public perception of distance learning suffers. So when the public sees your ad or press release, they are more likely to say, sneeringly, "Oh, I've heard about those kinds of programs," and you'll never hear from them.
A huge crime wave is under way, and almost no one has noticed. You can't have a crime wave without two basic ingredients: villains and victims. In this particular crime wave, there are four kinds of villains and four kinds of victims. In the course of looking at each of them, much can be learned about what is going on, and why.
THE FOUR VILLAINS
Who are the villains in this sad drama? There is an obvious one (the perpetrators), a less obvious one (the customers), and two very important ones: the media and law enforcement.
Villain #1: The People Who Run the Dreadful Schools
Of course there would be no such institutions without these people, and we cannot excuse their behavior. They were not sold into the diploma trade. No, they all know precisely what they are doing, and they are doing it for money and, perhaps, the prestige that comes with a business card reading "University President."
These folks typically fall into three categories: Lifelong scam artists, who might have progressed from three-card monte on the street corner to running a university; quirky academics who have decided to cross to the dark side; and businesspeople who simply find another kind of business-that of selling degrees.
An example of one such businessman is James Kirk. In addition to dabbling in film production, 3-D film distribution, and a video dating service, in the late 70s he got involved with a correspondence law school called the University of San Gabriel Valley (it no longer exists; the California Supreme Court suspended one of Kirk's lawyer-partners for three years and placed the other on probation for a year). But Kirk saw the cash potential and opened his own Southland University down the street. When Southland could no longer meet California's minimal operating requirements, he moved it. It ended up in Missouri, where he changed its name to LaSalle University and his own to Thomas McPherson. Leaving Missouri a few steps ahead of the sheriff, he found a haven in Louisiana's unregulated world of higher education. He ran ads in dozens of airline and business magazines. He took a vow of poverty, so his World Christian Church owned the university, his Porsche, and his million-dollar home. And when the federal authorities finally came for him, they discovered bank deposits in excess of $35 million, current cash deposits of $10 million, and numerous other assets. Kirk/McPherson was indicted on 18 counts of mail fraud, wire (telephone) fraud, and tax fraud, among others. Following a plea bargain, he was sentenced to five years in federal prison.
What is he up to now? Well shortly after he arrived at the federal pen in Beaumont, Texas, a new university started advertising nationally. The Edison University campus in Honolulu turned out to be a Mail Boxes Etc. box rental store. The literature was almost identical to that of LaSalle. The registrar was one Natalie Handy, James Kirk's wife. And the mail was postmarked Beaumont, Texas. Instead of "University Without Walls," we may well have a case here of "University Behind Bars."
One of the academics who has gone down this path is Dr. Mary Rodgers, founder and president of the Open University of America. She has an earned doctorate from Ohio State and had a decent career in higher education. When I visited the, um, campus, I found it to be a pleasant suburban home in Maryland. When a young girl answered the door, I said I was looking for Open University. "She's upstairs," was the reply. When I asked Dr. Rodgers about the legitimacy of the university, she showed me photos of their graduation ceremony at the National Shrine of the Immaculate Conception in Washington D.C., featuring mostly, it seemed, foreign military officers receiving their degrees. "What more could you ask for?" she inquired. Oh, perhaps something more than grandma in the basement (I had been given a tour) filling orders.
Then there's lifelong con-man Ronald Pellar (aka Ronald Dante), undisputed king of the fraudulent school world, who probably has tens of millions of dollars in offshore bank accounts to prove it. Following an early career as a Las Vegas lounge hypnotist, a brief stint as Lana Turner's seventh and last husband (she threw him out and accused him of robbery), and a two-year prison stretch for hiring a hit man to kill someone, Pellar discovered the world of education and training. He also hit upon the easiest method yet of becoming a "Doctor." He called himself Doctor Dante. After making a bundle with his fake travel-agent training school and his dangerous cosmetology school (he was convicted under federal fair trade laws in California for running the fake cosmetology school), he hit the big time with his Columbia State University. Starting in the late 1980s from a Mail Boxes Etc. store in New Orleans and featuring a Ph.D. in 27 days -- no questions asked -- Columbia State University grew and grew. By 1997 Pellar had several employees filling orders in an unmarked warehouse in San Clemente, California, not far from the Nixon museum. Between January 1997 and March 1998, according to the New Orleans Times-Picayune, the school deposited approximately $16 million in its bank ac count. By this time, Pellar was living on his million-dollar yacht in Ensenada, Mexico, defying warrants for his arrest. In 2000, Pellar gate a rather smug interview from the deck of his yacht to ABC's 20/20, making fun of the stupidity of his "clients." Shortly afterward, he was arrested on re-entering the United States, and imprisoned for his previous fraud, the Permaderm Institute, which purported to teach people how to apply permanent make-up using tattoos. (They practiced using ball point pens on cantaloupes!). In 2003, he was indicted on eight counts of fraud for his Columbia State activities, and in April 2004 he was sentenced to seven years in prison (but the judge inexplicably deducted 6 years and 4 months from the sentence for time previously served on the unrelated offenses, which included the fake school, witness intimidation, jury tampering, and escape. So Pellar will be serving only eight months in prison for fleecing thousands of people out of millions of dollars. The FBI was not able to find any of his assets other than his $1.5 million yacht, and while the court ordered it confiscated, it is in international waters, and may not be easy to recover.
The obvious question at this point is: How could he make so much money, for so long, with such a blatantly phony (to you and me, at least) scheme? The answer can be found by looking at the other three categories of villains.
Villain #2: The Media
No fraudulent scheme can succeed if people don't know about it. And the traditional way to make yourself known, whether you are selling Coca-Cola or doctorates, is to advertise.
Pellar's basic advertisement for Columbia State University read like this:
Bachelor's, Master's, Doctorate
Legal, legitimate, and fully accredited.
School rings available.
What publication on earth, with the possible exception of the supermarket tabloids, would run such an ad? Well, how about the Economist, Time, Newsweek, Forbes, Money, Business Week, Investors Business Daily, and USA Today?
Surely, the rational mind asks, no responsible publication would continue to run such ads, once they learned the nature of the advertiser. But the media I contacted reacted in one of three ways when they learned they'd been running advertisements for fraudulent schools.
A. We run them. Period. The Economist is one of the worst offenders: Every weekly issue for at least the last five years has had five to 20 ads for "schools" that range from to tally phony to merely unaccredited and bad. Because of the magazine's excellent reputation, many readers assume if a school advertises in the Economist, it must be OK. When I first tugged at the magazine's sleeve, sending them clear evidence of their bogus advertisers, the response from Suzanne Hopkins in their classified ad department was loud and clear: "Although I understand your urgency of making people aware of the dealings of Columbia State University, we are of the belief that our readers are educated enough to make there [sic] own decisions." (As a conservative guess, readers lost over a million dollars to this one phony alone, before the FBI finally closed it down.)
B. We run them. Wait, no we won't. Many years ago, the Wall Street Journal was running some ads for reprehensible schools. My attempts at getting their attention either went unanswered or elicited replies like that from Hopkins. Then one day, when an especially dreadful ad appeared, I went into my "terrier" mode (relentless, get teeth in and don't let go). I finally got through to the key decision maker in New York. Robert Higgins, of their advertising standards committee said, in effect, "Of course we shouldn't be doing this," and they simply stopped. It was simple because they said what any medium could say: "If a school doesn't have recognized accreditation, we don't run their ads. Period."
C. We won't run them. Wait; yes we will. For sheer numbers, USA Today is the champ. Every morning, the flagship of the Gannett fleet runs from five to 15 ads from questionable schools in the Education section of their classified page, although sometimes the ads migrate into the rest of the paper, notably, one full-page ad (at an estimated $70,000) for a phony university. When I did my sleeve-tugging act at USA Today, the response was immediate and gratifying. Cynthia Ross, in the advertising office, seemed genuinely alarmed and promptly drew up a set of standards and guidelines for accepting school ads, which were as reasonable and rigorous as anything I would have done. She thanked me profusely and assured me that changes would be implemented as soon as questionnaires were sent to advertisers. The only problem is that this happened three years ago, no changes were made, and Ross no longer returns my calls.
Another failing of the media is indifference. The two-headed snake at the 4-H show will probably get more coverage than the local high school principal discovered to have a fake degree. Or the campaign literature of former senator Joseph Biden reporting a degree he didn't have. Or the president of Croatia with a worthless California doctorate. Or Arizona's "teacher of the year" with a bogus master's. Is this business as usual? The press hardly noticed. When the FBI discovered that a few scientists at NASA had fake doctorates, the news was largely ignored by the press. When the Fowler family -- some of the most flamboyant degree mill operators ever -- were charged with stealing millions and put on trial in North Carolina, the courthouse was full of reporters, but only because Jim and Tammy Faye Bakker and Fawn Hall were on trial in the next room. Despite the best efforts of the FBI and yours truly, not an inch of copy ever appeared.
Villain #3: The World of Law Enforcement
If I held up a 7-Eleven for 50 bucks, I'd probably be in prison before my Slurpee melted. But if I start a totally fraudulent university, selling degrees by return mail for $3,000 each, and I obscure my path just a little, changing the name from time to time and using various mail-forwarding services, the odds are that I will go unpunished forever. And if caught, I will get little more than a slap on the wrist.
Because of the multistate and international aspect of many fakes, it's often unclear who has jurisdiction. When, as in the case of one huge fraud, a man in California rents a one-room "campus" in Utah and mails his diplomas from Hawaii, who regulates him? In the Columbia State saga, for years the attorney general of Louisiana was saying, in effect, "He may use a mail drop here, but the entire operation is run from California. It's their problem." And the California attorney general was saying, "Hey, he uses a Louisiana address and telephone in all his ads and in his catalog. It's their problem."
In this great republic of ours, each state has its own school licensing laws, and they differ mightily and change regularly. During the 1990s more new universities opened in Hawaii than in the rest of the country combined: over 100 of them, and all but two or three located at mailbox service addresses. In the 1980s it was Louisiana, a state that did not license degree-granting institutions. Recently, the state of choice for this kind of thing has been South Dakota.
It wasn't always this way. In 1980 the FBI made diploma mills a priority and established the DipScam task force, based in Charlotte, North Carolina. With the states generally uninterested in acting, time after time the FBI did the research, secured a search warrant, marched in (often with postal inspectors and the IRS in tow), collected evidence, got indictments, and ended up closing down more than 50 major frauds, including two active fake medical schools.
But in the early 1990s FBI agent Allen Ezell, scourge of the degree mills, took early retirement, and the agency removed diploma mills from its priority list. The sad news is that more fakes and near-fakes have been launched in the last 10 years than in the previous 50. They are fueled by the ease of advertising and the even greater ease of setting up an impressive-looking Internet site -- even one with the hallowed .edu suffix, which many people think signifies quality, but which has been doled out to many questionable schools.
There have been a few good guys in the last few years-but not many. One assistant attorney general in Illinois guards his state like a bulldog. When a fake Loyola State University opened not far from the real Loyola University in Chicago, Assistant Attorney General Hollister Bundy got an injunction and closed them down within a few days. But Attorney General Richard Ieyoub of Louisiana yawned and looked the other way for years, until a close election battle in 1998 spurred him to action, posing for photos while shutting down a few notorious mailboxes. And California's top lawman showed zero interest while some of the biggest frauds ever thumbed their noses in the direction of Sacramento.
Even when some action is taken, it may not be enough. Since 1998 the Federal Trade Commission has had the important power to regulate the use of the word "accredited," but to my knowledge, it has never filed a case, despite blatant misuse of that word. In 1997, the state of California ordered Columbia Pacific University to close but the "university" appealed and remained defiantly open for nearly four more years, continuing to advertise nationally. In 2001, as its appeals ran out, it moved to Missoula, Montana, changed its name to Commonwealth Pacific University, and remains in business.
Villain #4: The People Who Buy and Use Fake Degrees
The question is always asked: Do the customers of these schools know what they're doing? Are they acquiring what they are well aware is a questionable degree for the purpose of fooling others? Or have they genuinely been fooled by the purveyor of the parchment?
The only certain answer is that there are some of each, but whether it is 50-50 or any other proportion is quite unknown and much discussed. Surely, you are thinking, anyone with an IQ higher than room temperature who acquires that "Ph.D. in 27 days" must know exactly what he or she is doing. And yet. And yet, the literature and the sales pitch of the phony Columbia State is really slick. The catalog is more attractive than some real schools, replete with photos of campus scenes, happy alumni (all from stock photo companies) and two Nobel laureates listed with honorary doctorates.
Their argument is that many universities today are giving credit for experiential learning. If you've run a business for 10 years, they suggest, you know more than most M.B.A.'s (heads nod), and so we'll give you that M.B.A. If you've taught Sunday School at church, you know as much as one of those Ivy League doctors of divinity, and we'll award you the degree you've already earned through experience.
When I put a detailed exposé of Columbia State up on my Web site , I received more than 500 replies from alumni. While most were of the boy-was-I-stupid sort, a significant subset were like the woman who wrote, "I can't believe I did this. I have a master's degree from Goddard [College in Vermont]. I really understand this 'life experience' thing. Those people were sooo convincing."
And, depressingly, there was another notable subset of people who said, "Well if they're as bad as you say, how come my employer (they name a Fortune 500 company) is paying for three of us to do that degree?"
My hunch is that at least half the "victims" are truly co-conspirators. They know they live in a world where employers pay higher salary for the same job if the person has a higher degree; where therapists with a Ph.D. after their name are said to get three times as many Yellow Pages responses as those with an M.A.; and where a large Ohio city told the man who had been cutting down dead trees for them for 20 years that, due to a new policy, unless he earned a degree within two years, he would be let go. So they're willing to take the risk.
Surely it would be nice to see some meaningful research about these matters. I believe that I am right when I tell people, as I have for years, that using such a degree is like putting a time bomb in their resumÈ. One never knows when it might go off with dire effects. In my expert-witness work, I see this all the time. A few years ago, for instance, I testified against a prison psychologist for the state of Florida who had gotten away with his fake Ph.D. for eight years. He insisted that he believed the University of England was real, in spite of their P.O. box address, the absence of a telephone, and their offer to backdate his diploma to the year of his choice. As the prosecutor said in summation, "Here is a man who probably spent more time deciding which candy to buy from the vending machine than he did in choosing his doctoral school."
THE FOUR VICTIMS
Victim #1: Those Buyers who Aren't Villains
And many of them aren't. Some stories introduced at diploma mill trials are heartbreaking: Old people mortgaging their homes to provide their children's tuition. People selling their cars to pay their fees. And untold numbers of people losing their jobs, even being fined, jailed, or, if holding a green card, deported, for unwitting use of fake degrees.
Victim #2: The Employers
Employers are victimized in two ways: The obvious one is ending up with untrained employees, and the more subtle but potentially devastating one is financial liability when people with fake credentials make mistakes that damage people or property. Consider the urgent meetings that must have taken place when a prominent staff pediatrician at the University of California-Berkeley student health center was discovered to have forged his medical degree. A matter that sometimes keeps me up at night is two sleazy (but excessively litigious) universities that specialize in quick and easy home-study doctorates in nuclear engineering safety.
How can such things happen? Many employers either don't check or don't care. LaSalle University in Louisiana, shortly before their founder went to prison for mail fraud, listed hundreds of companies that they said had accepted and paid for their degrees. Skeptically, I started calling these companies, fully expecting to find the "university" had lied. But they hadn't. About half the companies had confused them with the real LaSalle University in Philadelphia. And the rest believed their accreditation claim, because they didn't realize there was such a thing as fake accreditation.
Victim #3: The Public
Many well-meaning people suffer because the person they think is a trained teacher, business consultant, or engineer may not have the degree or even the knowledge. Consider the damage potential of the sex therapist in Syracuse with his fake Ph.D., for which he paid $100. The import-export lawyer in San Francisco who turned out to have bought his University of Michigan law degree from one of the insidious, no-questions-asked, "lost" diploma replacement services that advertise nationally. This spring, I'm scheduled to testify in California Superior Court, to help expose the phony doctorate claimed by the expert witness for the plaintiff. This man's Ph.D., his only degree, is from a well-known European "university." But for more than 20 years, this worthless credential has buttressed his scientific testimony in more than 300 court cases. If we are successful, it could lead to reopening all those other cases. And that's just one person from one "school." We are truly talking about the tiniest tip of a very large iceberg.
Victim #4: The Legitimate Schools
Just as the fake Rolex seller harms legitimate watch companies by taking money that should be theirs and by tarnishing their reputations, the fake schools take millions from the good schools' pockets, and, at least as significantly, foul the waters of nontraditional higher education.
Despite the huge surge of interest and investment in online and distance learning, everything is not rosy in the groves of virtual academe. Extremely well funded efforts such as California Virtual University just couldn't attract enough students and faded away. How many potential students were on the verge of sending for a catalog or writing a check to a good school when they saw one of the fake school exposÈs on 20/20, 60 Minutes, or Inside Edition, and decided not to take the risk of dealing with "one of those" schools.
What can legitimate schools do?
If there were an Olympic gold medal for hand-wringing, the foes of diploma mills would have won one years ago. But, with the lone exception of the FBI's decade-long effort, results have been sporadic, generally ineffective, and woefully short-lived. In 1982 the American Council on Education announced an impending, hard-hitting, and uncompromising book (I hoped) on fake schools. But by the time Diploma Mills: Degrees of Fraud finally emerged in 1988, the lawyers had marched in, and the book was, at best, soft-hitting and compromised. The authors apologized for lack of specificity (not a single currently operating fake was named) because of "the present litigious era."
Yes, schools do sue. When Lingua Franca, the sister publication of University Business, ran an article about Mellon University Press and Mellon University (which they judged to be a diploma mill ), they were sued by the owner. They ultimately prevailed in court, but it was a long, expensive process. I've been sued eight times by schools, including once, for $500 million, by the University of North America. Only one ever got to court, and that was thrown out by the judge, as frivolous, in minutes. But there is a cost in both dollars and, my wife will confirm, despondency.
How to fight the bad guys
So shining the light of publicity on these schools can certainly do no harm, but I'm afraid that books and even articles like this may do little more than accelerate the hand-wringing.
Wouldn't it be fine if there were a consortium of legitimate universities and companies in the business of education that worked to eradicate the problem? They could do it through a combination of individual action, group action (especially media notification and advertising boycotts), and working for the passage of meaningful legislation and the enforcement of existing laws. Like the computer industry's software piracy efforts, organizations that might be fiercely competitive most of the time work together in this arena for their common good.
Individual school action. I believe that the bigger and better schools can be a force for change-if only they would. A few years ago, a completely fake Stanford University began operating from Arkansas, even selling medical degrees by mail. I couldn't interest anyone at the real Stanford in this matter, and the fake carried on for more than a year. If the president of the real Stanford had telephoned the governor of Arkansas and the editor of USA Today and said, "Stop this!" might something have happened much sooner?
Advertising boycotts (or threats thereof). Recently, on the same page in the Economist, there were large ads for Harvard University (quite real) and Monticello University (which the state of Kansas has accused of being fake). What if Harvard (or a group of major schools) got together and said they no longer wish to be on the same pages with the fakes?
Build a fire under the FTC. In 1998 the Federal Trade Commission published a rule that would regulate the use of the word "accredited," limiting it to schools with recognized accreditation. The FTC has successfully dealt with the misuse of other words, from "organic" to "low-tar." Enforcing this rule would be a major blow to the fakes, who count on being able to call themselves accredited.
The "graffiti" approach. Cities have begun winning the war on graffiti by taking immediate and decisive action: monitoring trouble spots, working with community organizations, and painting over it before the sun rises the next morning. It would not be impossibly labor-intensive to monitor ads in major publications, Web sites, and well-meaning lists compiled by people who have been fooled. The very moment a bad guy appears, instant action is taken. Action in the form of a phone call followed up with a professional and comprehensive information packet to the editor, publisher, or Internet site provider from a respectable consortium of schools would do it. Perhaps another warning letter or packet to the relevant federal, state, and local authorities as well. As it happens, the advance scouts are already out there beating the bushes searching for the bad guys, and they are doing it without pay, just for the satisfaction of the chase. Point your browser to an Internet newsgroup called alt.education.distance, and you'll find a hundred or more postings a day. There are at least 50 zealots, from Australia to Switzerland, whose antennae vibrate when some questionable institution arises. They (well, actually, we) collect information, visit nearby locations to see what's there, write reports and then, well, wring our hands a lot. Of course, the group does not speak with a common voice, but I know of no other place where there is so much useful information for someone (please) to take and run with.
Educating the public. Legitimate schools could do this through articles, brochures, books, and public relations pieces. They could even devote a percentage of advertising, marketing, and PR budgets to this purpose, possibly through pooled efforts.
Law enforcement. For my doctoral dissertation (in communication, earned at the legitimate Michigan State University) I studied complaining and how politicians and the media deal with complaints. I learned that the personal approach is the one that usually works, especially on an issue where the politician has little personally invested. A million letters won't change a vote on abortion or gun control, but one good letter, especially from a power-possessing individual, can get a traffic light installed, the almond import quota changed, or, quite possibly, the fake schools dealt with.
The media can be significant here, too, especially in the process of getting legislators to act. In 1983 ,Arizona was the haven for many fake schools. Then the Arizona Republic did a splendid four-day, page-one series, the first article running with the headline Diploma Mills: a festering sore on Arizona Education. Within months the state got and enforced some tough laws, and one by one, every phony in the state moved on to Louisiana, Hawaii, South Dakota, and other places.
If the good guys turn the power of their own credibility, credentials, contacts, and connections on the fake degree sellers, and if they do it the very instant the bad guys' ads and their Web sites appear, there is a fighting chance to recapture all of the playing field.
John Bear is an author based in El Cerrito, California. For 12 years he was the FBI's principal consultant and expert witness on diploma mills and fake degrees. His books include Bear's Guide to Earning Degrees by Distance Learning and College Degrees by Mail and Internet.
This report was revised on April 7, 2004.