“Ghost Students”: ESA Voucher Fraud Scandal

"Ghost Students”: ESA Voucher Fraud Scandal

Attorney General Kris Mayes continues to investigate waste, fraud, and abuse in the ESA voucher program. She decried the Legislature for creating a law with so few safeguards for state money: “I believe it is high time for the Legislature to put regulations in place to prevent the fraud we’re seeing today.”

Last May, Attorney General Mayes announced that due to a concerning lack of controls over the nearly $1 billion dollar ESA voucher program, the Attorney General’s office would investigate potential waste, fraud, and abuse within the ESA voucher program. 

At the time, Superintendent Horne issued his standard response to any scandal within his administration and projected by accusing the Attorney General of “choosing politics over the law.” Horne’s Arizona Department of Education (ADE) and his Republican allies in the state legislature (who hold the slimmest possible majority in both the House and the Senate) continue to dig in their heels and refuse to hear common-sense proposals to add accountability to the ESA voucher program — despite voter support for reining in the off-the-rails program.

Six months later, it is clear that reform of the ESA voucher program is urgently needed. Since the beginning of the year, Attorney General Mayes has revealed multiple instances of fraud within the ESA voucher program, with over $650,000 defrauded from Arizona taxpayers

To better understand why the ESA voucher program is such a prime target for fraudsters, let’s break down the recent cases announced by Attorney General Mayes.

Ex-Boyfriend Tips Off ESA Voucher Scheme

The first instance of fraud announced by Attorney General Mayes revealed that three women were indicted last July on charges of “funneling more than $100,000 from the Empowerment Scholarship Account (ESA) program and the Arizona Health Care Cost Containment System (AHCCCS) into private school and caretaking companies.” This includes $87,900 defrauded from the ESA voucher program alone. An investigator on the case wrote that “the totals are most likely higher.”

The three women created fake ESA voucher vendor companies — including “Academic Training AZ, All Family Solutions, Love Learning LLC, and Arizona School for Exceptional Kids” — in order to charge the state of Arizona with falsified education receipts for services that were allegedly never provided. It is important to note that Horne’s ADE did not uncover this fraud; instead, a disgruntled ex-boyfriend provided the tip to Attorney General Mayes. 

State law does not require ESA voucher vendors to undergo any kind of vetting. In fact, Supt. Horne and the Ducey-appointed State Board of Education stripped out previous teacher, tutor and vendor qualification requirements from the ESA voucher handbook and is now offering “accreditation” to any vendors, in state or out of state, with only one requirement: a high school diploma. Once vendors achieve this paltry accreditation and join the program, there is zero oversight. When asked what kind of oversight the ADE has over voucher vendors, Horne’s spokesman shared that “as with any purchase of goods or services, buyers are encouraged to educate themselves on a vendor’s reputation before making a decision.” In other words, buyer beware.  

Vouchers for “Ghost Students”

At the end of February, Attorney General Mayes held a press conference to break more shocking news: five people were indicted on charges of defrauding Arizona’s ESA voucher program of at least $600,000. Mayes outlined the scheme, revealing that the fraudsters created ghost students with forged birth certificates – children that didn’t exist –- and gave them fake disability diagnoses that would make them eligible for larger funding amounts.” 

This scam was not uncovered by Superintendent Horne’s ADE, but by a local credit union which saw unusual account activity and alerted the AG’s office. AG Mayes noted that while the fraud began a few years ago, it “ramped up” once vouchers were universally expanded in 2022, and the investigation is still ongoing. According to Mayes, “From what our investigators found there are very few controls and very little accountability in terms of analyzing birth certificates at the Department of Education, at analyzing determinations of disability.” 

This wild case underscores the complete lack of accountability and guardrails for the ESA voucher program that make it ripe for fraud and abuse with Arizona taxpayers on the hook for the bill. Arizona’s Republican lawmakers’ stubborn refusal to introduce any sort of accountability is leaving the program wide open for all-too-easy theft of our taxpayer dollars. Mayes decried the Legislature for creating a law with so few safeguards for state money: “I believe it is high time for the Legislature to put regulations in place to prevent the fraud we’re seeing today.”

Tip of the Voucher Fraud Iceberg

In her press conference, Attorney General Mayes made a point to note that her “overarching concern is this is a program that is easy to target for fraud… It was very easy for these individuals to do this. We have to ask the question, ‘Are others replicating this?'” Unfortunately, this is highly likely. Arizona is still dealing with major fraud in the AHCCSS system — in that instance, it was clear that fraudsters began targeting the system after it became clear it was easy to do so. With little to no controls on the ESA voucher program, it remains an easy target for fraud.

These cases are only the beginning. Attorney General Mayes continues to investigate waste, fraud, and abuse within the ESA voucher program. In her statement last summer, Mayes warned parents of possible scams within the voucher program, and promised that “if vendors or private schools take advantage of this, the Attorney General’s Office will investigate to the fullest extent of our authority.” Arizona voters of all political stripes are demanding voucher reforms to increase accountability and transparency, and to ensure Arizona children are safe.

While Attorney General Mayes’ efforts to weed out waste, fraud, and abuse in the ESA voucher program is admirable, she is right to acknowledge that her office is only able to do so much. Case in point, these fraud cases were not discovered by Superintendent Horne’s Arizona Department of Education and only came to light because of individuals providing tips. In order to prevent future fraud and further scandal, the Arizona State Legislature must implement widespread program level reforms. 

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