Trio of Lynchburg Women Indicted on Federal Fraud Charges
Charges Stem from Scheme to Defraud Insurance Companies, Department of Education
LYNCHBURG, VIRGINIA – Three local women are facing federal fraud charges following a grand jury indictment that charges them with mail fraud, wire fraud, student loan fraud, and other charges.
A federal grand jury sitting in Roanoke, Va. has charged Melinda Smith, 42, Catherine Pankey, 61 and Vernetta Johnson, 40, all of Lynchburg, Va., in connection with an alleged scheme to defraud insurance companies and the federal student loan program. Smith has been charged with one count of conspiracy to commit mail and wire fraud, 23 counts of student loan fraud, eight counts of mail fraud, four counts of wire fraud and four counts of aggravated identity theft. Pankey has been charged with one count of conspiracy to commit mail and wire fraud and four counts of student loan fraud. Johnson has been charged with one count of conspiracy to commit mail and wire fraud, nine counts of student loan fraud and eight counts of mail fraud.
According to the indictment, between 2011 and 2014, Smith, Pankey and Johnson allegedly engaged in a scheme to submit Free Applications for Federal Student Aid (FAFSA) in order to get Federal Student Aid (FSA) credit refunds for online classes for the purpose of obtaining money to which they were not entitled. It is alleged that as part of the scheme, Smith completed coursework for certain classes, which she at times shared with others, including Pankey, in order to complete a sufficient amount of courses to maintain enrollment. While enrolled at Liberty University, the indictment alleges that Smith helped Pankey with coursework in exchange for a portion of Pankey’s FSA credit refund.
To further support the scheme, Smith and Johnson allegedly submitted false insurance claims for car accidents that did not occur. In addition, Smith and Pankey submitted a false temporary rental agreement to obtain rental reimbursement in connection with a fire.
The indictment also alleges that Smith committed aggregated identity theft by submitting FAFSA forms and obtaining FSA credit refunds in the names of three other individuals without lawful authority.
As a result of these actions, Pankey was reimbursed for losses from a house fire in excess of the amount to which she was entitled; Smith and Johnson were reimbursed for losses caused by car accident that did not occur; and, all three, Smith, Pankey and Johnson, received Higher One debit cards containing credit refunds to which they were not entitled for online classes in which they never intended to participate.
If convicted, each defendant faces a maximum possible penalty of up to 20 years in prison on the conspiracy to commit mail and wire fraud charges, up to 20 years on each of the wire fraud charges, up to 20 years on each of the mail fraud charges and up to five years on each of the student loan fraud charges. Smith faces an additional consecutive term of two years imprisonment on each count of aggravated identity theft. Each charge in the indictment also carries significant fines and a period of supervised release. Restitution to the victims is mandatory in the event of conviction.
The investigation of the case was conducted by the United States Department of Education- Office of the Inspector General, the United States Secret Service, the Virginia State Police, the Campbell County Sheriff’s Office and the Lynchburg Police Department. Assistant United States Attorney Jennifer R. Bockhorst will prosecute the case for the United States.
A Grand Jury Indictment is only a charge and not evidence of guilt. The defendant is entitled to a fair trial with the burden on the government to prove guilt beyond a reasonable doubt.