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Gilbert Man Found Guilty of Bank and Student Loan Fraud. Phoenix, AZ, February 17, 2006

Published by the Department of Education, Office of Inspector General on 2006-02-17.

Below is a raw (and likely hideous) rendition of the original report.

OIG Investigative Reports, Gilbert Man Found Guilty of Bank and Student Loan Fraud
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Investigative Report
FOR IMMEDIATE RELEASE:
February 17, 2006
U.S. Department of Justice
Office of the United States Attorney
District of Arizona
for Information Contact Public Affairs
SANDY RAYNOR
Telephone: (602) 514-7625
Cell: (602) 525-2681
GILBERT MAN FOUND GUILTY OF BANK AND STUDENT LOAN FRAUD
PHOENIX - Robert C. Hazlett, 44, of Gilbert, Ariz., was found guilty
of Conspiracy to Commit Bank Fraud and Student Loan Fraud in a decision by U.S.
District Court Judge Stephen M. McNamee. Both parties agreed to submit the case
to Judge McNamee for a decision without a jury. The judge’s decision was based
on the testimony and evidence presented during a jury trial held in May 2005
in which the jury was deadlocked.
From April 1999 to June 2000 Hazlett was the President of Valley Acceptance
Corporation, a debt collection agency which provided services to colleges participating
in the U.S. Department of Education Perkins Loan Program. The company’s collection
efforts were directed at students who had defaulted in the repayment of their
Perkins loans to their schools.
The Court found that Hazlett and four of his employees conspired to submit
fraudulent applications for replacement “consolidated student loans” to SunTrust
Bank of Richmond, Va. which generated in excess of $1 million in commissions
for themselves. The scheme consisted of misrepresenting that the applicants
were in a repayment status on their prior loans rather than listing their default
status. The defendants also falsely indicated that the applicants had made six
payments to their prior loans so that they would qualify for the new bank loans
that were federally insured by the U.S. Department of Education.
A total of 537 fraudulent applications were submitted and approved by the bank
for consolidated loans, totaling in excess of $3.6 million. The borrowers subsequently
defaulted on 212 of the fraudulently obtained loans causing a loss to the bank
in excess of $1.4 million which was ultimately paid through insurance from the
Department of Education.
The four other defendants pleaded guilty and have been sentenced. One defendant
received 14 months in prison and the others received probation.
Judge McNamee reached his guilty verdict on February 9, 2006. Sentencing is
set for May 1, 2006. A conviction for conspiracy carries a maximum penalty of
five years in prison, a $250,000 fine or both. In determining an actual sentence,
Judge McNamee will consult the U.S. Sentencing Guidelines, which provide appropriate
sentencing ranges. The judge, however, is not bound by those guidelines in determining
a sentence.
The investigation leading to the guilty verdict was conducted by the FBI and
the Office of the Inspector General, U.S. Department of Education. The prosecution
is being handled by Richard I. Mesh, Assistant U.S. Attorney, District of Arizona,
Phoenix.
CASE NUMBER: CR-04-0276-PHX
RELEASE NUMBER: 2006-028(Hazlett)
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Last Modified: 03/17/2006
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