Training school owner pleads guilty to defrauding Veterans Affairs of $29 million

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Indian-American Nimesh Shah, owner of Blue Star Learning, a technical training school in San Diego, pleaded guilty Nov. 13, 2019, to defrauding the Department of Veterans Affairs out of more than $29 million in Post-9/11 G.I. Bill education benefits.

“These funds were meant to provide educational benefits to veterans who served our country, not line the pockets of unscrupulous opportunists,” U.S. Attorney for the Southern District of California Robert Brewer, is quoted saying in a press release. “This defendant crafted an elaborate scheme to fleece the government and taxpayers, but this case put a stop to this significant fraud.”

The Post-9/11 G.I. Bill provides veterans and other eligible individuals with assistance for education-related expenses such as tuition and housing.  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 expenses.

In order to receive and maintain approval to receive funds from the VA under the Post 9/11 G.I. Bill, Blue Star Learning was required to have at least 15% non-veterans for each course for which the VA was paying educational benefits under the Post-9/11 G.I. Bill, a rule called the “85/15 Rule.”  Blue Star Learning was forbidden to engage in any erroneous or misleading advertising.

The defendants in this case include Nimesh Shah, 36, of San Diego, California, and Shah’s wife Nidhi Shah, 34, also of San Diego. Nimesh Shah was charged with wire fraud which carries a maximum penalty of 20 years and a $250,000 fine. Nidhi Shah was charged with making a false statement for which the maximum penalty is 5 years in prison and a $250,000 fine., Nidhi Shah, pleaded guilty at the same time to one count of False Statement, as a result of lies she told to agents at the time of her interview.

According to Shah’s plea agreement, from March 2016 to June 2019, he devised a scheme to defraud the VA with regards to Post 9/11 G.I. Bill benefits, a press release from the U.S. Attorney for the Southern District of California, said.

Although Shah knew that close to 100 percent of students at Blue Star Learning were veterans receiving VA educational assistance, Shah 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.  In order to deceive CSAAVE and the VA, prosecutors say Shah created, and directed at least three other employees at Blue Star Learning to create, fake student files for the purported non-veterans in each program.

Shah additionally emailed the VA 48 fraudulent enrollment agreements for fictitious people he said 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.

Blue Star Learning additionally had to provide vocational attainment data to CSAAVE on a yearly basis, as part of a required yearly approval process. According to Shah’s plea agreement, 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 fraudulent.

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 hired individuals to create the fraudulent email addresses for the Blue Star Learning students, and directed these individuals 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 voicemails on each cellular telephone so that it would appear that the fraudulent businesses were legitimate if CSAAVE called to check.

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, the VA lost $29,350,999.