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June 21, 2010

CHURCH LEADERS SENTENCED TO PRISON FOR STUDENT LOAN AND FEMA FRAUD

(HOUSTON) – Two pastors and a deacon from a former church in southwest Houston called “Fishers of Men Worship Center” (FOM) have been sentenced to prison for committing student loan and FEMA fraud, United States Attorney José Angel Moreno announced today.
           
At the hearing this morning before United States District Judge David Hittner, Pastor Sheila Diana Washington, 49, and deacon/church treasurer Tony Overstreet, 44, were sentenced to 63 and 43 months in federal prison, respectively, to be followed by a five-year terms of supervised release for their bank fraud convictions relating to a student loan scam. Both were further ordered to pay $830,000 in restitution to Bank One and Wells Fargo. At the same hearing, Pastor Eric Washington, 56, was sentenced to 40 months and ordered to pay $218,000 in restitution to FEMA for conspiring to defraud the United States by having FOM submit grossly inflated claims for reimbursement to Harris County for a FEMA-funded program that reimbursed groups sheltering Hurricane Katrina evacuees during fall 2005. Immediately after handing down the sentences, Judge Hittner ordered all three defendants, who had been on bond pending today’s hearing, immediately into federal custody to begin serving their respective sentences.

Indicted in November 2008, Washington and Overstreet were convicted on Oct. 29, 2009 - just days before their scheduled trial- of bank fraud after pleading guilty. According to the factual basis in their respective plea agreements, the student loan fraud scheme perpetrated by Washington and Overstreet began in 2003. Sheila Washington, Overstreet and other church leaders recruited church members who were college students to allow FOM to use their names in applying for student loans with private lenders. The students were told that the $30,000 loan checks would be turned over to Sheila Washington and Overstreet to fund the church and that the church would repay the loans in full within six months. Sheila Washington, Overstreet and church employees used student identifying information on more than 100 student loan applications submitted online with Bank One (now JP Morgan Chase). The loan applications also listed church members with good credit as co-signors on the loans. Fraudulent paystubs were created to falsely show the co-signors had stable employment and substantial salaries.

After internal investigators discovered the fraud with the Bank One loans, Sheila Washington and Overstreet continued the scheme by submitting more than 50 student loan applications through Wells Fargo Bank. When they ran out of church members who were actually enrolled in college, they began listing church members who were not enrolled in college as applicants on the student loans. In total, the scheme resulted in applications seeking more than $4 million in student loans. Very few, if any, payments were made on the loans which were disbursed. Bank records confirmed the student loan proceeds were diverted to accounts controlled by Sheila Washington or Overstreet and not used for educational expenses.

Eric Washington’s conviction arose out of FOM’s participation in a FEMA-funded program that Harris County administered to reimburse groups providing shelter to Hurricane Katrina evacuees at $30/day per evacuee. Eric Washington, charged along with Sheila Washington and Overstreet, was convicted of conspiracy to defraud the United States on Oct. 29, 2009, after pleading guilty. Eric Washington, along with the church corporate secretary, signed a contract with Harris County to have FOM participate in the program. The Harris County Commissioner’s Court approved the FOM contract on Oct. 26, 2005. The next day, FOM submitted an invoice stating that 250 evacuees stayed at FOM every single day in September and then 118 evacuees stayed at FOM every single day in October. After Harris County sent FOM a letter noting the implausibility of no evacuees leaving except for one day when 132 purportedly left, Eric Washington sent a reply vouching for the accuracy of the numbers. This resulted in $320,580 in FEMA funds being paid to FOM. Eric Washington persuaded his brother-in-law, who worked as a church groundskeeper, to open bank accounts into which the FEMA funds were deposited. Washington either directly or through the brother-in-law withdrew more than $100,000 during the month following receipt of the funds.

Investigators located and interviewed a number of evacuees listed on the Fishers of Men reimbursement form. These evacuees consistently stated that they stayed at Fishers for a far shorter period of time than claimed by Fishers of Men; some having only stayed a day or two while the Fishers of Men claimed the evacuee had stayed at the shelter for 60 days. Investigators learned that the number of people listed by Fishers of Men for a family were sometimes inflated (e.g., a family of four stated that three other names listed with their last name and addresses were fictitious) and also learned that the Fishers of Men facility only had about 100 evacuees in September and less than 50 evacuees by October 2005. 

After investigators with First Marblehead Education Resources and Wells Fargo detected the student loan fraud, the investigation leading to the charges against all three defendants was conducted by the United States Secret Service and the Texas Department of Public Safety.

 

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