Fugitive defendant who fled during trial convicted by federal jury for laundering millions of dollars stolen from fraud victims throughout the U.S.
ATLANTA – Former Georgia Vocational Rehabilitation Agency counselor Karen C. Lyke (formerly known as Karen C. Gregory) has been sentenced to five years in prison for forging educational records and creating fake students with non-existent disabilities and illnesses in an elaborate, multi-year scheme to steal more than $1.3 million.
“The State of Georgia trusted Lyke to serve some of its most vulnerable citizens – Georgians with significant disabilities and illnesses,” said U.S. Attorney Ryan K. Buchanan. “Driven by greed more than integrity, Lyke betrayed that trust and masterminded a complex scheme to invent fake students with non-existent disabilities through forging medical, educational, and financial records. Based on her sophisticated conspiracy, Lyke cheated taxpayers out of more than $1.3 million.”
“Lyke abused her trusted counselor position to line her own pockets, and for that she will spend time in prison,” said Keri Farley, Special Agent in Charge of FBI Atlanta. “This sentencing should serve as a message that the FBI and our partners will not tolerate anyone driven by personal greed to steal American tax payer money that should be going to those who need it.”
“This sentence provides accountability for an absolutely brazen crime that resulted in the largest criminal fraud OIG has ever investigated,” said State Inspector General Scott McAfee. “OIG will continue to uphold the integrity of state programs and ensure taxpayer dollars are used for their intended purpose.”
“This should serve as a reminder that fraud related to the services and resources the Georgia Vocational Rehabilitation Agency provides to our clients will not be tolerated. We are committed to protecting the interests of Georgia taxpayers and our constituents,” says GVRA Executive Director Chris Wells. “As soon as we suspected fraud in this matter, we notified the Georgia Office of the Inspector General. Additionally, we took immediate action to prevent such incidents of fraud even earlier to ensure both our clients and public funds are secure.”
According to U.S. Attorney Buchanan, the charges, and other information presented in court: The State Vocational Rehabilitation Services Program is a federally funded program administered by the U.S. Department of Education that offers grant money to assist states to provide services to individuals with disabilities. To be eligible for the State Vocational Rehabilitation Services Program, individuals must have a physical or mental impairment that results in a substantial impediment to employment and require services to achieve employment and to maximize career goals. Across the country, state vocational rehabilitation agencies offer various services to individuals with disabilities, including tuition assistance for vocational training and college education.
The Georgia Vocational Rehabilitation Agency (“GVRA”) operates Georgia’s vocational rehabilitation program. Between 2017 and 2020, the GVRA annually received at least $100,000,000 in federal funds. The GVRA’s Vocational Rehabilitation Program helped people with disabilities (known as “clients”) to find and maintain employment, including by providing funding and tuition assistance for college education.
During this time, the GVRA assigned counselors to assist its clients, including helping clients to obtain tuition assistance. To obtain tuition assistance, a client was required to provide the GVRA with documentation to support obtaining GVRA funds, including: (a) medical records demonstrating a disability related to employment, (b) a driver’s license, (c) proof of registration for classes, and (d) financial aid information.
After receiving the information, the client’s GVRA counselor reviewed the documentation and, if the counselor approved the request for tuition assistance, a check was mailed to the client for the requested educational expenses. From June 2015 to March 2019, Lyke served as a GVRA counselor in its Norcross, Georgia office.
From approximately May 2016 to November 2020, Lyke and her husband, Kevin M. Gregory (who has been separately charged) conspired to steal money from the GVRA by claiming educational expenses for approximately 13 fake students. Lyke and Gregory used the names of actual friends and relatives as the names of the fake disabled students seeking tuition assistance from the GVRA.
Lyke and Gregory used the names of friends and relatives to create fake medical records to make it appear that the approximately 13 fake students qualified for tuition assistance from the GVRA. They claimed that these fake students suffered from disabilities or illnesses like AIDS, cancer, psychosocial impairments, or muscular dystrophy.
As proof of identification, Lyke and Gregory provided the GVRA with manufactured images of fake driver’s licenses that listed the names of their friends and relatives. In one instance, Gregory created a fake driver’s license in his cousin’s name, by using a mug shot image of an unknown individual from the Internet as the driver’s license photograph.
Lyke and Gregory then used photo-editing software to alter authentic college transcripts, financial aid reports, and proofs of registration from actual GVRA clients to support claims that the fake students attended schools like the Georgia Institute of Technology, Georgia State University, or the University of Georgia. Lyke then uploaded the sham driver’s licenses, transcripts, financial aid reports, and other documentation into the GVRA’s electronic database.
Based on false documentation, Lyke and Gregory caused more than 230 checks to be mailed to approximately 13 friends and relatives for bogus educational expenses. In fact, none of the 13 fake students attended any of the claimed colleges or universities.
The GVRA mailed the checks to post office boxes that Lyke and Gregory opened in their own names. After receiving the GVRA checks, Lyke and Gregory either: (a) deposited the GVRA checks into their own bank accounts, or (b) gave the GVRA checks to their friends and relatives to be deposited. The friends and relatives funneled most of the GVRA funds back to Lyke and Gregory after depositing the GVRA checks.
After Lyke left the GVRA in March 2019, Lyke and Gregory continued to submit forged paperwork to the GVRA for non-existent educational expenses. Based on the false submissions, the GVRA continued to issue checks to the fake students for bogus educational expenses. Lyke and Gregory used the stolen GVRA funds to pay for various personal expenses, including cars, jewelry, high-end guitars, and the down payment on a new home. In total, based on the false documentation they created, the GVRA mailed more than 230 checks to Lyke and Gregory resulting in the theft of approximately $1.3 million.
From approximately August 2016 to February 2019, Gregory and Lyke also conspired to steal several high-value computers from the GVRA. Using her position as a GVRA counselor, Lyke and Gregory stole multiple computers by submitting phony paperwork to the GVRA claiming that:
Lyke arranged for at least six computers to be shipped to her attention at the GVRA office in Norcross. Upon delivery, Lyke stole the computers and computer accessories from the GVRA. Lyke and Gregory then sold at least five of the computers on eBay using Gregory’s account. Lyke and Gregory kept one computer for personal use. In total, Lyke and Gregory stole at least seven computers with various accessories worth approximately $32,000.
Based on the conduct above, on September 1, 2022, Karen C. Lyke, 37, of Toledo, Ohio, pleaded guilty to a criminal information charging her with conspiring to commit federal program theft. Lyke was sentenced to five years in prison followed by three years of supervised released and was ordered to pay $1,347,531.76 in restitution to the U.S. Department of Education and the GVRA.
On October 4, 2022, Kevin M. Gregory, 40, of Toledo, Ohio, pleaded guilty to a criminal information charging him with conspiring to commit federal program theft. Gregory is scheduled to be sentenced on January 11, 2023.
The Federal Bureau of Investigation and Georgia Office of Inspector General are investigating the case. The Georgia Vocational Rehabilitation Agency also provided valuable investigative assistance.
Assistant U.S. Attorneys Jeffrey W. Davis and Jesika W. French are prosecuting the case.
For further information please contact the U.S. Attorney’s Public Affairs Office at USAGAN.PressEmails@usdoj.gov or (404) 581-6016. The Internet address for the U.S. Attorney’s Office for the Northern District of Georgia is http://www.justice.gov/usao-ndga.