A Seattle diving-school owner has pleaded guilty to financial-aid fraud amounting to more than $805,000.
As part of settling the case, the school's operator and owner also has agreed to sell the facility.
The Divers Institute of Technology, located in Ballard, pleaded guilty in federal court to submitting false financial-aid applications on behalf of its students. The applications were submitted to the U.S. Department of Education for an eight-year period beginning in 1987. In those applications, the school reported less income for the students than they actually earned. As a result, the school was wrongly given $805,566, all of which went to the school to pay tuition.
As part of the guilty plea, the school, which provides vocational and professional training for commercial divers, agreed to pay a $250,000 fine and a special penalty of $400. It also agreed to pay more than $2.4 million, three times the original amount of damages, to settle a whistle-blower lawsuit that initiated the investigation.
The suit was filed by Thomas Nicol, former director of student aid, when school officials contested his claim for worker's compensation after he resigned under duress, said his lawyer, Jeffrey Needle.
Under federal law, Nicol stands to receive 15 to 25 percent of the proceeds.
Nicol quit because of the reaction by school officials when he learned that false and fraudulent financial-aid applications for Pell grants were being filed by the school's financial-aid director at the time, Needle said.
"He saw that they were ripping off the Department of Education on a very regular basis," Needle said. "Because he objected to it, they made life miserable for him and denied him bonuses."
To pay the damages, the school's owner, John Ritter, has agreed to sell the school as quickly as possible.
The Department of Education will let the school participate in financial-aid programs for 90 days while the sale is pending.
The school, opened in 1968, charges $10,500 tuition for a 30-week certification program. In January 1997, 84 students were enrolled.
Today was a normal day for students, despite news spreading through the school about the lawsuit.
"The only thing that concerns us is how it will affect the students," said James Broderick, 25, a student from Federal Way. "We have a lot of time and money invested."
Students are required to purchase about $850 worth of diving gear before enrolling. Some, like Jeff Buhmiller, 19, moved across the country to attend the school, which is considered one of the best in the nation.
Ritter has always maintained that a former employee committed the fraud, and that the school knew nothing of it until 1996 and then voluntarily went to the government.
This report includes information from The Associated Press.
Hugo Kugiya's phone message number is 206-464-2281. His e-mail address is: firstname.lastname@example.org