Crown College employees suspected of fraud

Federal officials are investigating whether employees at Crown College in Tacoma stole thousands of dollars in federal financial aid when they thought the school was about to shut down.

In a search of the school's building this week, investigators seized Rolodexes, computer images and documents. They suspect four employees and three other people faked enrollment at the school and collected nearly $60,000 in federal student loans and grants.

The college's owner said the allegations are untrue.

According to court filings, the employees heard the school was about to close for financial reasons and thought they wouldn't have to repay their loans if the school closed. When the school continued to operate, a search warrant said, the employees created documents indicating they were taking classes.

The employees, two friends and one employee's husband are under investigation for conspiracy to defraud, bank fraud and financial-aid fraud.

According to the court documents, a college department head reported to a federal Department of Education investigator that seven people, including four in key leadership positions at the school, collected student aid. One allegedly collected $15,000.

Crown, a for-profit, mostly online school, closed this summer after losing its accreditation from a national group. Several former students have sued the school because they said they were told their credits would transfer. Most community colleges and four-year universities will accept credits only from schools accredited by regional accrediting bodies.

Crown owner John Wabel said the allegations in the search warrant were false.

He said the employees listed in the warrant "are good at what they do. They are accurate, as history will prove, and they are not the type of individuals that something like this would happen to, so I believe there's been some significant misunderstanding."

In an interview Friday, Wabel also said he didn't know of the federal investigation, even though agents visited his school Tuesday morning and left a copy of the warrant, according to federal filings.

Wabel bought Crown College 17 years ago when it was a hair-design school in Everett. He turned it into a school for correctional officers, then later moved it to Tacoma and started offering associate's degrees. Wabel said he is closing the school temporarily but intends to reopen it when he finds additional funding.

The U.S. Department of Education Office of the Inspector General is leading the investigation out of its Long Beach, Calif., office.

Emily Heffter: 206-464-8246 or eheffter@seattletimes.com