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The Journal Gazette

  • File: Masters of Cosmetology students working with patrons.

Friday, October 21, 2016 9:26 am

Guilty plea entered in loan fraud

Rebecca S. Green | The Journal Gazette

For more than six years, the former students at the Masters of Cosmetology tried to work around the ramifications of what Kaydean Geist did.

They struggled to put down exorbitant security deposits for apartments, or buy decent cars, or even pay for cancer treatments. 

Burdened with fraudulent student loan debt in the tens of thousands of dollars, their credit was shot, and many didn’t even have the credentials to do the work for which they studied.

On Thursday afternoon, Geist sat next to her attorney in the smaller courtroom at the U.S. District Court in Fort Wayne, waiting to plead guilty to the sole felony charge she faced. She listened to Assistant U.S. Attorney Tina Nomay read page after page of the allegations against her.

Nomay described the scheme, first hatched in 2006 by Geist and financial aid officers at the Quimby Village school to rake in more money from the federal government. 

Much of the money came from the now-defunct Federal Family Education Loan program, money students shouldn’t have even had access to if they were already receiving Direct Student Loans.

Nomay described a school that saw its revenue increase, without adding more students or raising tuition. 

Students thought the money was for living expenses, or that it was a loan from the school itself. Many never knew Geist took out student loans in their names. Others were told the loans were part of a new government program that would require little, if any repayment, according to court documents.

Students started getting wise to the scheme and raising their voices in the summer of 2010. 

A federal audit was requested and just prior to the scheduled examination, Geist pulled $300,000 out of the school’s coffers and put it into a private investment fund belonging to her, and naming her family as beneficiaries, Nomay said. 

The investment account was opened by Geist just weeks before.

It is that $300,000 that is the subject of the criminal case against her, resulting in a charge of failing to refund student financial aid funds. She was required under the terms of her plea agreement with the government to pay that $300,000 at the conclusion of Thursday’s hearing.

But on Wednesday, a federal civil lawsuit filed by the government against Geist showed that $300,000 was practically a drop in the bucket of what was taken.

The Department of Education is trying to claw back a total of more than $5.8 million each from Geist and the now-shuttered school, according to a consent decree signed by Geist, effectively ending the civil lawsuit. Had that case gone to trial, the government was seeking triple the actual damages amount from each, which would have been $8.7 million, plus an additional $5,500 to $11,000 penalty per transaction.

While the U.S. Department of Education is technically the victim in this case, having provided the steady stream of ill-gotten cash through the student loan pipeline to Geist and her college, the students remain on the hook, having signed checks and promissory notes over the period of time in question.

For Angie Witherby, 40, that total is now $105,000 in principal and interest. It is an amount she was never entitled to borrow, under federal law. 

A few years ago, while sitting in her hospital room receiving chemotherapy treatment for breast cancer, Witherby received phone calls from creditors, hounding her about the loan.

"We are the victims here. Why does the U.S. government get all these millions, and then want us to pay back all these millions," she asked Thursday before the hearing. "That doesn’t make sense."

For Witherby and others like her, whatever prison time Geist receives, if any, pales in the light of what they’ve had to fight through the past few years.

"I can’t even describe the anxiety this has caused me, the freaking out," Witherby said. "What the hell is the point of surviving cancer if you can’t get on with your life?"

Amanda Mulkey was one of the first to raise a stink about the financial shenanigans. For her trouble, she was tossed out of the school for being disruptive to morale but not before she’d amassed $23,000 in debt in just over a year there.

She had to enlist a high-profile local attorney just to get the school to release her records so she could try to resume her education someplace else.

"It has been a long six years of having my credit destroyed, of not being able to buy a home for my family," Mulkey said. "She was living her life of luxury off our dime.

"She needs to pay for the six years she’s stolen from so many of us," Mulkey said. "We shouldn’t have to pay for other people’s greed."

Whether Geist will spend any time in prison has yet to be determined. A sentencing date has not been set.

Mulkey and Witherby hope to be there on that day, to see a different kind of accounting.

rgreen@jg.net