Five South Bay men face grand theft and unauthorized computer use charges for an alleged scheme in which they charged students for student loan assistance programs that were normally accessible for free through the U.S. Department of Education, authorities said.
In addition, the men also lied about their company’s business model to entice investors, causing the investors’ businesses to fail within months, Attorney General Xavier Becerra’s office said Wednesday, March 4.
In all, the men illegally obtained $2.5 million from 2015 to 2017, officials said.
Criminal charges were filed against the men on Wednesday, March 4, officials said.
The defendants are Bradley Kyle Hansen, Christopher Edward Lyell and Paul Michael Rehmar of Redondo Beach, Hoke Masami Nagahori of Manhattan Beach and Kevin Howard Rathburn of Lawndale. Their ages were not disclosed.
Hansen and Lyell were arrested Wednesday, while Nagahori and Rathburn have agreed to turn themselves in, authorities said. Rehmar was still outstanding as of Wednesday.
A criminal complaint filed in Los Angeles Superior Court accused the men of illegally creating and accessing account records in the U.S. Department of Education’s computer systems without authorization, officials said.
The men would then use information to reach out to student borrowers struggling to repay their student loans under the company name Student Loan Relief Department, Becerra said. The company has since folded.
“Our country is in the middle of a student loan debt crisis with more than $1.7 trillion owed in outstanding federal student loans,” Becerra said. “The last thing consumers should have to worry about are criminals looking to make a quick buck off of student borrowers.”
The defendants would gain the trust of student loan borrowers through the company, asking victims to pay a fee of up to $1,300 to participate in the company’s loan payment reduction programs. Victims would make $39 monthly payments for services that were already available through the Department of Education for free, authorities said.
However, they did not tell borrowers that the monthly payments were neither a subscription service nor payments applied toward their federal student loans, but rather payments on a high interest loan. The borrowers were obligated to continue making these payments even if they attempted to cancel the company’s services, authorities said.
The case was investigated by the California Department of Justice’s Consumer Law Section and Division of Law Enforcement, Special Investigations Team.
Hansen and Lyell face a possible maximum sentence of more than 22 years in prison if convicted of the charges. The possible maximum sentences for the other three men was not disclosed by authorities Wednesday.