and two to make equally sure that the schools who benefit from federal aid are on the up-and-up and provide a quality education.

I thank you for the hearings, and the opportunity to testify. With your permission, I ask that Ms. Maniker's letter be made a part of the hearing record.

HON. CLAIBORNE PELL (D-RI),

United States Senate, Washington, D.C. 20510.

TERRY MANIKER, ANCHORAGE, ALASKA 99516, August 12, 1993.

DEAR SIR: I should have written this letter a long time ago. I am writing because of the abuses to the Pelt grants.

Almost 15 years ago I divorced my abusive husband. I had no money, no high school diploma, did not know how to drive a vehicle. No skills. No education. And a nursing infant.

To say I was desperate is an understatement.

Today I am a very successful attorney, remarried, with homes in California and Alaska. THE PELL GRANT PROGRAM, WHICH YOU INITIATED IN CONGRESS, MADE MY CURRENT LIFESTYLE POSSIBLE. I have never forgotten the role that the Pelt grant I received played in my life. I attended the University of Wisconsin and graduated Phi Beta Kappa with two majors and two minors. Your grant, and the four jobs I worked simultaneously, made it possible for me to stay OFF of welfare and become a productive, contributing member of society.

I donate approximately $10,000.00 worth of free legal services every year working with prison inmates and community groups. I was a state prosecutor and now own my private practice.

Despite the terrible Pelt grant abuses that I now hear about on the radio and television, I am the recipient of a Pelt grant that changed my life and the hundreds of people I am able to help because of that grant.

You are remembered in my prayers.

Sir, the Pelt grants do work.

With deepest personal and professional respect,

ATTORNEY TERRY MANIKER,

(Mrs. David Tucker).

PREPARED STATEMENT OF SENATOR KENNEDY

I commend Senator Nunn and the Permanent Subcommittee on Investigations for their continuing attention to problems of fraud and abuse in federal student aid programs. The Pell Grant Program is an important source of financial aid for the country's neediest students. Many low-income students would not be able to attend college, university, or a trade school without the benefit of Pell awards. It is vital, particularly in this period of rising college costs, to protect the program from abuse so that deserving students continue to have access to higher education.

This week's hearings make clear that some unscrupulous individuals and institutions are abusing the system for their own private gain, and at the expense of students and taxpayers. Similar hearings on abuses in the programs were held by the Education Subcommittee of the Labor Committee in 1987 and the Permanent Subcommittee on Investigations in 1990. These earlier hearings laid the groundwork for a series of "integrity" measures enacted into law in the Higher Education Amendments of 1992, including stricter accreditation standards, tighter criteria for eligibility and certification, and stronger oversight by state agencies.

The Department of Education is in the process of implementing the improvements mandated in the 1992 legislation, and the Clinton Administration has made clear its commitment to enforcing these reforms. Unfortunately, the schools that are the focus of this week's hearings entered the Pell program long before these safeguards were in place.

Without question, Pell Grants, like other federal student aid programs, have suffered from dishonest participants, poor management, and inadequate gatekeeping. We must not permit these problems, however, to obscure the vital role of Pell Grants in making higher education accessible to low-income students. Since 1972, over 55 million grants, have been awarded totalling over $64 billion. Today, more than 4 million students, or almost 25 percent of all students attending postsecondary institutions, are receiving such grants. We must do all we can to see that this highly successful program remains strong for the future.

PREPARED STATEMENT OF SENATOR DORGAN

Thank you, Mr. Chairman. I want to commend Chairman Nunn for his leadership, and the tireless work of our fine Subcommittee staff, in rooting out the serious fraud and abuse in federal student-aid grant programs.

Pell grants, appropriately named in honor of our distinguished colleague from Rhode Island, Senator Claiborne Pell, are meant to provide educational opportunities for the most needy, qualified individuals. Many graduates of this program literally owe their livelihood and their success to a Pell grant. Pell grants made it possible for them to get an education, learn a trade, and become productive, taxpaying citizens.

But there is a seamy side to this story. As we saw in the federally guaranteed student loan program, there are plenty of unscrupulous con artists out there ready to pounce on the fistfuls of money they can make relatively easily, it seems from our Subcommittee's investigation so far-from this $6.1 billion-a-year program. The Subcommittee already has found "paper" institutions whose sole purpose, apparently, is to rake in money from federal student-aid grants. The only "education" they provide is a lesson in how to scam the taxpayers.

As a member of the other body, I chaired a Democratic Task Force on Government Waste. Our report cited fraud and abuse in federal student loan programs as one of the most glaring examples of government waste. We recommended legislation to fix the program and tighten loopholes that practically cried out for abuse. Congress took action on the loan programs thanks in part to the efforts of the distinguished Chairman of this Subcommittee, whose investigations helped expose the fraud, abuse, and mismanagement.

The effort to reform the guaranteed student loan program was good education and training for this effort to clean up the major student-aid grant program. I'm encouraged by the positive steps taken by the new Secretary of Education, Richard Riley. We need to strengthen his ability to cut off schools that abuse the system. We need to look at the qualification criteria for both schools and individuals to ensure that schools provide, and students receive, real education and training for the money that taxpayers are spending. We need better tools to identify fraud, especially the type that permeates an entire institution set up solely to bilk the taxpayers.

Education is one of the best investments that we can make in the future of our country. But for every dollar paid to the scam artists for a fictitious "education," some deserving student will suffer. Pell grants currently are funded at less than 65 percent of the authorized level for each student, because the federal government just can't afford to provide the maximum amount to needy students. We simply cannot stand for the fraud and abuse we see in this program-while deserving students suffer and American taxpayers foot the bill.

I'm not very thrilled that we have discovered glaring and outrageous abuse at institutions that claim also to teach religious values. Like most Americans, I'm frankly uncomfortable at government investigations of religious affiliated institutions. But we have to keep in mind that these institutions take taxpayers money-and they have to play by the rules.

I hope that, when officials of these schools appear before us tomorrow, they will offer explanations for the actions that General Accounting Office and Subcommittee investigators will describe today. I'm pleased, Mr. Chairman, that you have ensured that they will have an opportunity to respond to the allegations documented by GAO and our staff.

I look forward to hearing the testimony today and tomorrow and working with you to expose and eliminate the deplorable waste, fraud, and abuse in this program.

PREPARED STATEMENT OF SENATOR ROTH

Thank you, Mr. Chairman. I want to commend you for your longstanding interest and continued involvement in the important area of student financial aid. I recall the hearings you presided over in 1975 when this Subcommittee first examined the student loan program. Unfortunately, as we discovered in subsequent hearings, the problems we found in the student loan program in 1975 still exist today.

Today's hearing will focus on a different part of our Federal student aid program-the Pell grant program. Although the program is different, the problems look very much the same.

We established the Pell grant program as the cornerstone of our Federal student aid program. Pell grants enable students from low income families to pursue their dream of a college education. Pell grants are the seed money for our Nation's future; money invested in our most important natural resource-our Nation's young people.

At no time in our Nation's history has this issue been more important. We cannot compete successfully in today's global economy unless we provide our young people with the necessary education and training. Pell grants are the first step by which many young people start along a path that would otherwise not be available to them.

Just as we saw in our investigation of the student loan program, we have heard testimony regarding individuals who, under the guise of educators, prey upon these student financial aid programs and profit at the taxpayers' expense. And again, the Department of Education appears unable to stem the tide of Federal money flowing to apparently unqualified institutions and students. I understand that, just this week, the Department has finally taken action to terminate some of these unqualified institutions from the Pell Grant program. I hope this long overdue action represents a first step in a continuing policy of vigilant oversight of these important programs.

It has been said of our educational system that we are a Nation at risk. What we are risking is our future. For our children's future and for our country's future, we cannot allow waste, fraud and abuse in our student aid programs to squander the vital opportunities these programs present. This is especially important at a time when shortfalls in the Pell grant program are limiting awards.

We cannot wait any longer to address these problems. The future is now-as it is, we have ignored these problems for too long and, as history tells us, we have been forced to repeat them. The time has come for Congress to work with the Department of Education to ensure that program benefits are provided with effective oversight, efficient management and integrated systems.

Again, Mr. Chairman, I believe I speak for my colleagues and for the American people in commending you for your leadership in having the Subcommittee revisit this obviously still troubled area. I applaud you and your staff for the outstanding work you have done in this important area. I look forward to working with you in the future, as we have in the past, to develop solutions to these problems. I look forward to today's testimony.

PREPARED STATEMENT OF SENATOR SASSER

Over the years, this Subcommittee has been among the Senate's most competent and tenacious crusaders against the wasteful use of taxpayer resources. I applaud the efforts of Chairman Nunn to continue in this tradition.

We are here to examine what appear to be improper exploitations of the Pell Grant Program.

Pell Grants, named for our distinguished colleague from Rhode Island, Senator Claiborne Pell, allow students who can demonstrate financial need to obtain an education which might be unavailable otherwise.

It is precisely because this program is so important, that we must zealously guard against misuse of Pell Grant dollars.

Now, more than ever, we live in a world of limited Federal resources. This is especially true with Federal educational loans and grants.

Every Pell Grant the Federal Government gives out unnecessarily or improperly represents a lost opportunity. Every improper payment represents a deserving student who might have lost a chance to go to college or obtain vocational or technical training.

This investigation, by attempting to conserve Pell Grant dollars, aspires to allow greater numbers of deserving students seek higher education-or to continue the Pell Grant program at the same level of service, but at a far lower cost.

It is obvious that this is an unusual investigation in many ways.

The issues addressed here today represent a complex mix-not only of educational issues, or even of basic good government issues-but also of religion, ethnicity, immigration and social welfare.

Those accused of improperly obtaining Pell Grant funding include organizations which seek to assist Jewish immigrants from Russia and perhaps elsewhere.

Many of the Pell Grant recipients who are the subject of this investigation are poor and elderly, and they may truly need assistance as they seek to assimilate to the United States-and in some cases to obtain the basic necessities of life. Perhaps this Subcommittee will be able to steer the truly needy toward a more appropriate avenue of assistance.

I believe the Subcommittee has made a genuine, good faith effort to remain sensitive to these unusual circumstances. I urge us to continue to do so.

Now, having said that, we have before us a number of allegations of activity that would be improper under any circumstances-allegations such as:

• Pell Grant "brokers" who refer eligible students to various institutions simply to increase Pell Grant funding to that school.

• Fabrication of employment information and other information to allow a student to claim eligibility falsely.

• Pell Grant students who have no recollection of attending classes for which the Federal Government paid hundreds, or even thousands, of dollars.

• Students who receive Pell Grants, not primarily for the facilitation of an education, but for personal or other use.

• Schools of questionable eligibility for the Pell Grant program, which stay afloat thanks to thousands, and even millions, of Pell Grant dollars. These activities, clearly, are an abuse of the Pell Grant program.

Annual funding for the Pell Grant program has skyrocketed-from $48 million in 1973 to over $6 billion currently.

Frankly, I wonder how much of this $6 billion is attributable to abuses of the program under the inattentive watch of previous Administrations, for whom education was not a top priority.

I believe this investigation can help restore credibility to the Pell Grant program, and again I commend the Chairman for his leadership.

Chairman NUNN. Thank you very much, Senator Pell. We appreciate you being with us this morning.

Chairman NUNN. Our second witness this morning is Mr. Richard C. Stiener, the Director of the Office of Special Investigations of the U.S. General Accounting Office. In August of last year, the OSI brought these allegations of abuse to the Subcommittee's attention and have since been investigating these allegations at the Subcommittee's request.

Mr. Stiener is joined by Mr. Clarence Crawford, GAO's Associate Director for Education and Employment Issues; Mr. Donald Wheeler, OSI's Deputy Director; and Mr. Robert Hast, OSI's Assistant Director in New York. Mr. Stiener, I understand you have to testify before another committee in the House this morning. If timing gets too tight, we will allow you to leave. You will have to let us know when that comes. And I know you are going to have your people that would stay behind, so that if we are still asking questions, we will be able to complete them.

I want to thank the GAO for your work on this investigation which has been extremely helpful. I know that you are not completed yet, but a lot of work has been done and I appreciate and I think all of our Subcommittee appreciates your support. We look forward to having the results of your inquiry that you will be able to share with us this morning.

I will ask all who are going to testify or answer questions to please stand and take the oath.

Do you swear the testimony you will give for the Subcommittee will be the truth, the whole truth and nothing but the truth, so help you God?

Mr. STIENER. I do.

Mr. CRAWFORD. I do.

Mr. WHEELER. I do.

Mr. HAST. I do.

TESTIMONY OF RICHARD C. STIENER,1 DIRECTOR, OFFICE OF SPECIAL INVESTIGATIONS, U.S. GENERAL ACCOUNTING OFFICE; ACCOMPANIED BY CLARENCE CRAWFORD, DIRECTOR, EDUCATION AND EMPLOYMENT ISSUES; DONALD WHEELER, DEPUTY DIRECTOR, OFFICE OF SPECIAL INVESTIGATIONS; AND ROBERT HAST, ASSISTANT DIRECTOR, OFFICE OF SPECIAL INVESTIGATIONS, NEW YORK

Mr. STIENER. Thank you, Mr. Chairman. You mentioned Mr. Crawford who is with me today, of course, and who is responsible for our education program area. Also accompanying me is Don Wheeler who is my Deputy for Investigations within our Washington office and who was responsible for the investigation from our perspective in Washington. And also Bob Hast who is our Assistant Director in New York and who is responsible for the New York investigation. I would like to enter my statement for the record, sir, and my comments today will be a summary of that statement.

Chairman NUNN. Without objection, your entire statement will be part of the record.

Mr. STIENER. Mr. Chairman and members of the Subcommittee, we are pleased to be here today to participate in this hearing concerning the Subcommittee's continuing oversight of the Department of Education's Student Financial Assistance program. At your request, we investigated to determine if fraudulent activity and serious abuses have occurred within the Federal Pell Grant program, which assists low-income undergraduate students in financing their postsecondary education.

In brief, as recently as June 1993, we testified on participants' abuses of other student aid programs-the guaranteed student loan program. Those abuses included false student-loan applications, schools misrepresenting their academic capabilities, lenders making loans to fictitious students, and ineligible students receiving loans. We found these same basic abuses in our ongoing investigation of the Pell Grant program involving certain yeshivas in the New York City metropolitan area.

The Department of Education identified to us 37 of over 85 yeshivas or yeshiva-operated institutions in the New York City area. The Department was concerned that the 37 were engaging in potentially abusive misconduct involving the Pell Grant program. In all 23 institutions investigated thus far,2 we have found some evidence of the use of false documents to support both the students' Pell Grant applications and the schools' eligibility to participate in the Pell Grant program. The yeshivas submitted documentation to the Department of Education for ghost students; that is, students who never applied for Pell Grants or individuals who never enrolled or attended the yeshivas that used their names. Also, for ineligible high school students; individuals whose biographical information was sold to yeshivas by brokers for use in obtaining Pell Grants; and for misrepresentation of their academic programs and other eligibility criteria.

The false documents included false Pell Grant applications; supporting documentation for the applications, such as high school di

The prepared statement of Mr. Stiener appears on page 199.

2 See Exhibit No. 69 on page 301.