Tucson Man Sentenced to 42 Months for Student Loan Fraud Scheme
|U.S. Attorney’s Office May 11, 2010|
TUCSON, AZ—On May 10, 2010, United States District Judge John M. Roll sentenced Stephen Gallagher, 29, of Tucson, Arizona to 42 months in prison for his role in a scheme to fraudulently obtain student loans. Gallagher had pleaded guilty on June 30, 2008 to Count One of the Indictment charging Conspiracy to Offenses Against the United States, specifically, Bank Fraud, Wire Fraud, Fraud in Connection with Access Devices, and Identity Theft.
From 2002 to 2007, Stephen Gallagher submitted over 200 student loan applications via the Internet to various financial institutions seeking more than $11 million in fraudulent student loans. Gallagher was successful in obtaining approximately 42 fraudulent student loans totaling over $686,000.
The majority of these loan applications originated from one of eight different America On-Line (AOL) email accounts registered in the name of Stephen Gallagher. Gallagher submitted loan applications in his own name as well as in the names of certain family members. Gallagher then added these other individuals to his bank account so he could deposit the student loan checks, which were made payable in the name of the borrower. Fraudulent supporting documentation, such as proof of employment and residence verification, was submitted by Gallagher to the financial intuitions via facsimile.
Applications were submitted for attendance at Stanford University, George Washington University, University of Arizona, and Scottsdale Culinary Institute. None of the individuals listed as the borrower on the student loan applications ever attended these institutions. The financial institutions that funded the student loans included: First Marblehead, Wells Fargo, Key Bank, Education Finance Partners, Suntrust, JP Morgan Chase Bank, Chela Funding, Richland Bank, and Sallie Mae.
As part of his plea agreement, Gallagher agreed to forfeit almost $40,000 seized from his residence, his vehicle and his bank account, and agreed to a money judgment in the amount of $686,539.60, which constitutes the proceeds of his unlawful activity. Gallagher also agreed to make full restitution to the victim banks. Gallagher was ordered to serve three years of supervised release after completing his prison sentence.
The investigation in this case was conducted by the Federal Bureau of Investigation, Tucson, Arizona and the U.S. Department of Education-Office of Inspector General. The prosecution was handled by Eric Markovich, Assistant U.S. Attorney, District of Arizona, Tucson, Arizona.
CASE NUMBER: CR-07-02408M
RELEASE NUMBER: 2010-091(Gallagher)