A WATCHDOG PUBLICATION OF LNP MEDIA GROUP, INC. | TUESDAY, JANUARY 23, 2018 | $4.

25

HANDS UP

PENCILS
DOWN
Inside the secret, armed investigative unit rooting out student
DigiCode Data File loan

fraud for Pennsylvania’s Higher Education Assistance Agency

ACCOUNT : 8275701 LANC
ORDERED BY : RORY MACKIS
PAG E 6 P.O. NUMBER : LNP160931
INVOICE NO. : 1540728
OVERHEARD ON 3RD THE INTERVIEW
(PCCOMMENTARY
EPS via EMAIL)

LANCASTER NEWSPAPERS, 1540728/1-2

Encode: 677490101007 PU 12/6/201

MAG 140 NBAR .0182 BWA -0.0025

President Donald Trump appeared to Meet Eric Epstein, the good-govern- Don’t believe Thaddeus Stevens.
make an effort to help elect Repub- ment activist Ed Rendell once de- Simon Cameron, who served as
lican Rick Saccone, but the White scribed as being “about as mentally President Lincoln’s secretary of war,
House cast doubt on the reason for stable as that guy who ate all those wasn’t such a scoundrel. PAGE 12
GROUP INC his trip last week. PAGE 4 people.” PAGE 10
LNP MEDIA
PA I D
COURTESY COPIES OF THE CAUCUS ARE SENT WEEKLY TO STATE LEGISLATORS
US POSTAGE

77490 10100
PRSRT STD
SUBSCRIBE AT CAUCUSPA.COM 6 7
Postmaster: Please deliver JANUARY 23, 2018
 COVER STORY

THINKSTOCK | GRYNOLD | LKESKINEN | AQUIR

6 T H E C A U C U S Tuesday, January 23, 2018


They’re armed. They’re deputized.
And they’re on patrol for
student-loan fraud.
F
reeze!
Hands up!
Spread ’em!
No, it’s not a scene from a spin-off of the
popular television police pro-
cedural “CSI: Crime Scene
Investigation.”
It’s the PHEAA police.
And you have the right to
remain silent.
Pennsylvania’s student-
loan servicing agency, the
Pennsylvania Higher Edu-
cation Assistance Agency,
operates a little-known unit
of investigators who hold the
“powers of state law enforce-
ment officers,” according to
documents provided to The
Caucus by the agency under
the Right to Know Law.
The team, called the
Investigative Service Unit,
is “dedicated to combating
financial fraud in the student
aid industry,” PHEAA states
in an in-house newsletter.
Its members are sworn
officers of the law who are
“fully certified in safe and
effective use of firearms
and secondary weapons,”
agency documents say. Those
secondary weapons include
pepper spray and batons.
The existence of the
PHEAA unit comes as a shock
to many Harrisburg insiders
knowledgeable with the ins
and outs of state government.
“I really am agog at the
news,” said David Taylor,
president and CEO of the
Pennsylvania Manufacturers’
Association. “That’s excep-
tionally well hidden. Maybe
they have an explanation
and justification. I’m kind of
surprised.”
Tom Gross, executive
director of the Pennsylvania
Chiefs of Police Association,
was incredulous, too.
“Has a what? PHEAA has
a police force?”
Stephen Miskin, a spokes-
man for House Republicans
and a former staffer for the
auditor general and Gov. Tom
Ridge, didn’t know, either.
“They do? PHEAA?” he
COVER STORY
» » PAULA KNUDSEN + BRAD BUMSTED
asked.
Whether PHEAA needs
such an investigative arm is a
matter of debate.
Eric Epstein, co-founder
of the state-government re-
form group Rock the Capital,
argues that the student-loan
servicing agency doesn’t need
police powers.
“Its mission is educating
not incarcerating,” he said.
PHEAA’s Investigative
Service Unit is not one of the
117 Pennsylvania agencies ac-
credited in law enforcement.
Traditional police agencies
are required to develop poli-
cies for use of force, vehicle
pursuits and gathering and
retaining evidence before
they can be accredited as part
of a years-long process, Gross
said.
So if the PHEAA police
aren’t accredited law-en-
forcement officers, what are
they?
ROOTING OUT FRAUD
PHEAA officials defend
the investigative unit by
pointing to its work identify-
ing and prosecuting abuses
in the multibillion-dollar
student-loan industry.
In 2016, for example,
its investigators busted a
student who had fraudulently
obtained more than $21,000
in federal aid to attend Le-
high University. The student
was charged in Dauphin
County for several felonies,
including forgery and theft by
deception.
In 2017, another student
PHEAA investigators alleged
had obtained student loans
fraudulently entered a guilty
plea to theft and is required
to pay more than $100,000 in
full restitution.
“The unit safeguards both
federal and state tax dollars
since fraud cases involve
both student loans and state
grants,” PHEAA spokesman
Keith New said. “As a fed-
eral loan guarantor, PHEAA
is also obligated under the
Higher Education Act to
comply with federal enforce-
ment regulations regard-
ing criminal misconduct by
program participants and
borrowers.”
New said PHEAA’s Inves-
tigative Service Unit works
closely with other law en-
forcement agencies on iden-
tity-theft and fraud investiga-
tions. They include the U.S.
Department of Education
and its Office of Inspector
General; the FBI; the U.S.
Secret Service; the U.S. Postal
Inspection Service; U.S. attor-
neys; and county prosecutors
across Pennsylvania.
But because some cases
involve as little as $1,000,
the student-loan servicing
agency is often on its own
sniffing out fraud. “Exist-
ing workloads and limited
resources of outside entities
can make it difficult for some
cases to receive the necessary
attention,” New said.
IS FORCE NECESSARY?
As of December 2017,
PHEAA was servicing $410
billion in assets, according to
New. It is one of the largest
third-party loan servicers in
the country and one of the
four primary servicers for
the nation’s federally-owned
student loan portfolio.
PHEAA is a huge player
in the student-loan market.
“Anything they’re doing is
worth paying attention to,”
said Persis Yu, an attorney at
the National Consumer Law
Center and director of the
Student Loan Borrower As-
sistance Project.
Most institutions like
PHEAA operate financial-
fraud units dedicated to
rooting out identity theft and
other crimes. But the Inves-
tigative Service Unit run by
PHEAA is the first Yu heard
of that has the authority to
Tuesday, January 23, 2018
make arrests.
“This is absolutely the
first time I’ve heard of some-
thing to this extent,” Yu said.
Yu, who tracks student
loan issues across the coun-
try, said the practice raises
serious questions, namely
whether the power to make
arrests and carry firearms
is appropriate for an agency
primarily responsible for is-
suing loans.
“We don’t know to what
extent they are doing these
investigations of student loan
borrowers; are they bran-
dishing weapons?” she said.
The Investigative Service
Unit does not pursue delin-
quent or defaulted loans,
New said. It works to recoup
restitution in criminal cases,
and has retrieved more than
$1.8 million over the course
of five years, according to
PHEAA’s internal newsletter.
While a substantial sum,
that money is a small por-
tion of PHEAA’s operational
costs, said Robert Strauss, a
public policy and econom-
ics professor at Carnegie
Mellon University. Strauss
raised questions about how
the recouped money is used
by the agency and the level
of training provided to the
investigators.
“Are they trained and
evaluated and is there period-
ic testing? Have people been
convicted of crimes against
PHEAA?” he asked.
Records show recent
hires for the investigative
unit include a former county
juvenile probation officer and
a Pennsylvania Gaming Con-
trol Board investigative ana-
lyst. The records reviewed by
The Caucus did not show any
employees with experience as
a municipal, federal and state
police officer.
Andy Hoover, the com-
munications director for
the American Civil Liberties
Union of Pennsylvania, had
similar questions.
“This is another example
of the 40-year trend of
Cont., page 8
THE CAUCUS 7

Continued from page 7
criminalizing Americans’
everyday lives,” Hoover said.
“What crime is so pervasive in
higher-education financial aid
that it requires armed cops on
PHEAA staff?”
Hoover said PHEAA could
simply refer evidence of crimi-
nal behavior to federal or state
prosecutors, just as other agen-
cies do.
“Clearly there are people in
powerful positions who know
of the existence of this staff and
it didn’t even cross their mind
that this was problematic,”
Hoover said. “That is indicative
of how accepting we’ve become
of overcriminalization.”
PRIVATE SECURITY
FORCE
Several insiders who spoke
to The Caucus and did not
know about the investigative
unit wondered if the team is
used for security at PHEAA’s
headquarters, on North 7th
Street in Harrisburg.
New, the agency’s spokes-
man, said the unit does man-
age the “physical security” of
PHEAA’s five operating facilities
and staff in Dauphin, Cumber-
land, Centre, Allegheny and
Delaware counties. But mem-
bers of the Investigative Service
Unit are not stationed at build-
ing entrances and exits and do
not patrol them, New said.
PHEAA already contracts
for building security, records
show. Harrisburg-based In-
formation Network Associates
Inc. provides “armed security
guard services” to PHEAA.
The Investigative Services unit
oversees security personnel
who are under contract, New
said, “but are hands-on with in-
cident response, active-shooter
planning and training, and any
internal or on-site criminal or
theft investigations.”
Under the three-year
contract, which was signed in
May 2017 and expires in 2019,
Information Network Associ-
ates provides services at two
PHEAA offices in Harrisburg,
as well as offices in Mechanics-
burg, State College, Chester and
Pittsburgh.
While the value of the cur-
rent contract is not available
on the Treasury Department’s
e-contract database, records
show a four-year contract for
similar serves from 2012 to
2016 was valued at close to $1
million.
Information Network As-
sociates also provides services
for other state agencies, records
show.
EARLY FIGHT OVER
POLICE POWERS
The powers ascribed to
the PHEAA police have been
the subject of debate before.
8 T H E C A U C U S Tuesday, January 23, 2018
COVER STORY
In 1977, then-Rep. Ivan Itkin,
D-Allegheny, tried unsuccess-
fully to strip language giving
PHEAA arrest powers as the
What a
House was preparing to make
it easier for PHEAA to collect
PHEAA
unpaid debts by garnishing
wages.
investigator
“Now basically what we
are considering here is really
does
a civil debt. … And to use such
devices like the power of ar-
rest and the power of search
seems to be … excessive. It is
unreasonable,” Itkin said on »»Investigations: Gathers information
the floor. and advises suspects of Miranda
“Consider the situation rights.
where a correspondent has »»Communication and documenta-
been delinquent in his pay- tion: Collects, evaluates, develops
ments. There is a knock on the evidence; establishes, fosters and
door, and the person behind maintains relationships with other
the door answers and says, departments, including the federal
who is it? The answer is, the Department of Education and FBI,
PHEAA police. … It seems to state Office of Attorney General and
me if you look upon it, you local law enforcement agencies.
would say that sounds ludi- »»Office of Foreign Assets Control
crous, and obviously, that administration: Reviews Office of
should not happen.” Foreign Assets Control list on a
Then-Rep. Joseph Doyle, regular basis to support loan servic-
D-Delaware, supported Itkin’s ing contracts.
proposal. “You are using a shot- »»Other duties and responsibilities:
gun to kill a flea,” Doyle said. conducts covert surveillance assign-
“You will have PHEAA officers ments of individuals or locations;
running around carrying guns collects restitution checks; and
and everything else.” other duties as assigned.
Among those who sup-
ported giving PHEAA officer SOURCE: PHEAA
the power to arrest was Rep.
Fred Shupnik, D-Luzerne.
He said he doubted the move
would result in mass arrests
and pointed out the Justice
Department was no longer
handling college loan-fraud
cases and was referring them
back to the state.
Shupnik also said PHEAA
would likely hire former state
police officers, FBI agents and
Justice Department officials.
“In other words, we are just not
going out there, fellas, to get
somebody off the street. I mean,
it is just too delicate of work to
have just the ordinary individu-
al,” Shupnik said on the House
floor in 1977.
Rep. Ron Cowell, D-Al-
legheny County, reminded
House members that those
who thought “PHEAA might
go off the deep end” should
remember that legislators
make up the majority
of the agency’s
board. It would
be easy, he said, to
“step in and take appropri-
ate action.”
While there has been no
evidence that such behavior has
occurred, lawmakers have not
revisited the powers granted to
PHEAA in recent years.
Hoover, of the
ACLU, said the
PHEAA power, or any govern-
ment power for arrest or incar-
ceration, should be regularly
reviewed.
“Things just become en-
trenched,” he said. “Lawmakers
don’t have the will to revisit
them in any serious way.”
THINKSTOCK | GRYNOLD