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STEUBENVILLE -- Ohio Auditor Keith Faber announced Thursday that indictments were issued against three people whose crimes diverted $20 million in federal financial aid and state subsidies from Eastern Gateway Community College, led to closure of the community college in 2024 and affected its students, even if they did not realize it yet.
Indicted on first-degree felony racketeering and other charges were Michael Geoghegan of Cincinnati, former CFO and former president of Eastern Gateway Community College; Michael Perik of Jamestown, Pa., former owner and operator of the private company Student Resource Center; and Nicole Rowe Colclasure, former co-owner of Student Resource Center. No address was available for her.
Faber called the actions of Geoghegan, Perik and Rowe a "concerted scheme to mislead, to detract and deflect on what was really happening." He said the crimes were a "scheme to leverage Pell Grant monies; to illegally draw them down; to have a pretend last-dollar scholarship, which ... is illegal under federal rules; and then to have (the Student Resource Center) effectively managing the college."
Faber said, "These public resources were supposed to help disadvantaged students in an area of the state where educational opportunities were scarce. Instead, it appears these individuals took advantage of their positions, and students were left out in the cold."
Perik and Colclasure each face a dozen felony counts, and Geoghegan faces nine felony counts. They are scheduled for arraignment before Jefferson County Common Pleas Court Judge Michelle Miller at 9 a.m. Wednesday.
Faber said the lesson of the scheme is to be suspicious when a community college grows in the drastic way Eastern Gateway "without charging anyone," as Eastern Gateway did between 2017 and March of 2022. During that time enrollment increased from about 8,500 students to more than 60,000, with more than 90% of students enrolled only in online courses, and about 80% reportedly lived out of state.
Many of the latter participated in a "Free College Benefit Program," through which union members and their family members and friends enrolled in EGCC classes at no direct cost to them, a State Auditor's Office press release states.
Faber said, "I think this experience alone is going to educate all of the other colleges and university boards of being very skeptical of someone coming in and ... making promises that reason and common sense will tell you are too good to be true."
Faber said one of the "most troubling aspects of this alleged scheme is that there are students who may not even know that they had Pell grants taken out in their name. We want to make sure every student who passed through Eastern Gateway or who suspect their information may have been compromised has the tool to check their records and protect themselves."
He said anyone who knows or believes that they were a victim of "this type of fraud or has information related to this case to report it to the state auditor's office. He said to visit the state auditor's office at ohioauditor.gov where there is an Eastern Gateway Community College resource page on the front page.
Or they can call the auditor's office fraud line at 866-372-8364.
Faber said investigating the scheme was "made more complicated by the fact that the participants were in there changing records and doing things internally."
He said he thinks the evidence will show that "This was a scheme that was managed from the top" but involved people from the private sector.
The indictments against Geoghegan, Perik and Rowe state that they engaged in multiple acts of theft, tampering with records, telecommunications fraud, money laundering, receiving stolen property, bribery, and having an unlawful interest in a public contract from January 2017 through March 31, 2022.
Among the charges is an aggravated theft charge against all three that alleges theft of $1.5 million or more. Geoghegan faces two theft in office charges that Perik and Rowe do not because they worked for a private company and Geoghegan was a public official. All three are indicted on engaging in a pattern of corrupt activity.
Faber said despite the investigation being a collaboration between his office and federal officials, the charges in this case are not expected to be filed in the federal courts, only in Jefferson County Common Pleas Court.
The engaging charge each defendant faces -- also called a RICO -- alleges the three participated in an enterprise that included entities such as Student Resource Center LLC, Eastgate Community College and others. The enterprise "accomplished its purpose by "disbursing and retaining financial aid for ineligible students, falsifying data and records and concealing data and records that would reveal" their misconduct.
The enterprise also obtained federal COVID-era Payroll Protection Protection Program loans and loan forgiveness for reimbursed expenses and for ineligible payments, falsified records and falsely stating that union scholarships were funding tuition and paying public officials for the purpose of improperly influencing them," the indictments state.
It adds that the enterprise "generally functioned to operate Eastern Gateway Community College primarily for the financial benefit of the entities owned and operated by (Perik and Rowe) at the expense of tthe college's mission, its students, the community and the taxpayer-funded financial aid and subsidies."
According to federal documents in a civil suit involving the community college, the Student Resource Center collaborated with the community college on an online strategy to assist with the community college's Free College Benefit Program, which was created by the community college to create online courses and programs aimed at members of labor unions.
In 2022 the U.S. Department of Education issued a Cease and Decist letter to the community college stating that the Free College Benefit program violated a federal prohibition against assessing higher charges to the federal scholarship students than the charges paid by non-scholarship students, according to federal documents.
The Student Resource Center was responsible for outreach and marketing of the Free College Benefit Program, including promoting online courses and programs to members of unions and professional organizations and expanding the community college's professional development offerings, the documents state.
In addition to Faber, U.S. Under Secretary of Education Nicholas Kent spoke at a Thursday press conference at the Ohio Statehouse to announce the indictments.
"Since day one, President Trump and Secretary McMahon have tackled fraud, waste, and abuse, which requires a whole-of-government approach," Kent said. "It is a disgrace that individuals may have taken advantage of the federal student aid programs that are intended to help students access postsecondary education. We are proud to stand with Ohio Auditor Faber and his team to hold fraudsters accountable and protect the integrity of critical resources that millions of students and families rely on."
The Ohio Auditor's Office's Special Investigations Unit launched an investigation into EGCC, initially after receiving information about questionable purchasing by college officials. SIU, along with the Jefferson County Sheriff's Office, the Ohio State High Patrol's Computer Crimes Unit, the U.S. Secret Service, the Columbus Division of Police's Digital Forensics Unit and the Ohio Narcotics Intelligence Center executed a search warrant in January 2024 at EGCC as part of its ongoing investigation, according to an Ohio Auditor's press release.
Thursday's indictment alleges that Perik used four separate for-profit entities he owned, including the Student Resource Center, to divert funds from EGCC, illegally receiving incentive payments and other compensation in violation of federal and state laws.
The illegal activities included disbursing aid for ineligible students and failing to confirm whether students actually attended or had withdrawn from classes. As a result, millions of dollars in financial aid were improperly paid to entities owned and controlled by Perik and Rowe.
The indictment alleges Geoghegan knew about the scheme but still approved the disbursements.
Geoghegan became president of the community college in 2020, after serving as interim president and chief financial officer since January of 2020, according to a publication called Community College Daily.
Among other activities, entities controlled by Perik, Rowe and others were contracted to expand academic and degree programs, including online coursework offered through EGCC.