Fake Diplomas, Real Cash: Pakistani Company Axact Reaps Millions
Photo
Axact, which has its headquarters in Karachi, Pakistan, ostensibly operates as a software company.Credit
Sara Farid for The New York Times
Seen
from the Internet, it is a vast education empire: hundreds of
universities and high schools, with elegant names and smiling professors
at sun-dappled American campuses.
Their
websites, glossy and assured, offer online degrees in dozens of
disciplines, like nursing and civil engineering. There are glowing
endorsements on the CNN iReport
website, enthusiastic video testimonials, and State Department
authentication certificates bearing the signature of Secretary of State
John Kerry.
“We host one of the most renowned faculty in the world,” boasts a woman introduced in one promotional video as the head of a law school. “Come be a part of Newford University to soar the sky of excellence.”
Yet
on closer examination, this picture shimmers like a mirage. The news
reports are fabricated. The professors are paid actors. The university
campuses exist only as stock photos on computer servers. The degrees
have no true accreditation.
In fact, very little in this virtual academic realm, appearing to span at least 370 websites,
is real — except for the tens of millions of dollars in estimated
revenue it gleans each year from many thousands of people around the
world, all paid to a secretive Pakistani software company.
Photo
Axact makes tens of millions
of dollars annually by offering diplomas and degrees online through
hundreds of fictitious schools. Fake accreditation bodies and
testimonials lend the schools an air of credibility. But when customers
call, they are talking to Axact sales clerks in Karachi.
That company, Axact, operates from the port city of Karachi, where it employs over 2,000 people and calls itself Pakistan’s largest software exporter, with Silicon Valley-style employee perks like a swimming pool and yacht.
Axact
does sell some software applications. But according to former insiders,
company records and a detailed analysis of its websites, Axact’s main
business has been to take the centuries-old scam of selling fake
academic degrees and turn it into an Internet-era scheme on a global
scale.
As
interest in online education is booming, the company is aggressively
positioning its school and portal websites to appear prominently in
online searches, luring in potential international customers.
At
Axact’s headquarters, former employees say, telephone sales agents work
in shifts around the clock. Sometimes they cater to customers who
clearly understand that they are buying a shady instant degree for
money. But often the agents manipulate those seeking a real education,
pushing them to enroll for coursework that never materializes, or
assuring them that their life experiences are enough to earn them a
diploma.
To
boost profits, the sales agents often follow up with elaborate ruses,
including impersonating American government officials, to persuade
customers to buy expensive certifications or authentication documents.
Revenues,
estimated by former employees and fraud experts at several million
dollars per month, are cycled through a network of offshore companies.
All the while, Axact’s role as the owner of this fake education empire
remains obscured by proxy Internet services, combative legal tactics and
a chronic lack of regulation in Pakistan.
“Customers
think it’s a university, but it’s not,” said Yasir Jamshaid, a quality
control official who left Axact in October. “It’s all about the money.”
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Axact’s
response to repeated requests for interviews over the past week, and to
a list of detailed questions submitted to its leadership on Thursday,
was a letter from its lawyers to The New York Times on Saturday. In the
letter, it issued a blanket denial, accusing a Times reporter of “coming
to our client with half-cooked stories and conspiracy theories.”
In
an interview in November 2013 about Pakistan’s media sector, Axact’s
founder and chief executive, Shoaib Ahmed Shaikh, described Axact as an
“I.T. and I.T. network services company” that serves small and
medium-sized businesses. “On a daily basis we make thousands of
projects. There’s a long client list,” he said, but declined to name
those clients.
The
accounts by former employees are supported by internal company records
and court documents reviewed by The New York Times. The Times also
analyzed more than 370 websites — including school sites, but also a
supporting body of search portals, fake accreditation bodies,
recruitment agencies, language schools and even a law firm — that bear
Axact’s digital fingerprints.
In academia, diploma mills have long been seen as a nuisance. But the proliferation of Internet-based degree schemes has raised concerns
about their possible use in immigration fraud, and about dangers they
may pose to public safety and legal systems. In 2007, for example, a
British court jailed Gene Morrison, a fake police criminologist who claimed to have degree certificates from the Axact-owned Rochville University, among other places.
Little
of this is known in Pakistan, where Axact has dodged questions about
its diploma business and has portrayed itself as a roaring success and
model corporate citizen.
“Winning
and caring” is the motto of Mr. Shaikh, who claims to donate 65 percent
of Axact’s revenues to charity, and last year announced plans for a
program to educate 10 million Pakistani children by 2019.
More immediately, he is working to become Pakistan’s most influential media mogul. For almost two years now, Axact has been building a broadcast studio and aggressively recruiting prominent journalists for Bol, a television and newspaper group scheduled to start this year.
Photo
A screengrab taken from the
website Columbiana University. This and other Axact sites have toll-free
American contact numbers and calculatedly familiar-sounding names.
Just
how this ambitious venture is being funded is a subject of considerable
speculation in Pakistan. Axact has filed several pending lawsuits, and
Mr. Shaikh has issued vigorous public denials, to reject accusations by
media competitors that the company is being supported by the Pakistani
military or organized crime. What is clear, given the scope of Axact’s
diploma operation, is that fake degrees are likely providing financial
fuel for the new media business.
“Hands down, this is probably the largest operation we’ve ever seen,” said Allen Ezell, a retired F.B.I. agent and author of a book on diploma mills who has been investigating Axact. “It’s a breathtaking scam.”
Building a Web
At
first glance, Axact’s universities and high schools are linked only by
superficial similarities: slick websites, toll-free American contact
numbers and calculatedly familiar-sounding names, like Barkley, Columbiana and Mount Lincoln.
But other clues signal common ownership. Many sites link to the same fictitious accreditation bodies
and have identical graphics, such as a floating green window with an
image of a headset-wearing woman who invites customers to chat.
There
are technical commonalities, too: identical blocks of customized
coding, and the fact that a vast majority route their traffic through
two computer servers run by companies registered in Cyprus and Latvia.
Five
former employees confirmed many of these sites as in-house creations of
Axact, where executives treat the online schools as lucrative brands to
be meticulously created and forcefully marketed, frequently through
deception.
The professors and bubbly students in promotional videos are actors, according to former employees, and some of the stand-ins feature repeatedly in ads for different schools.
The sources described how employees would plant fictitious reports about Axact universities on iReport,
a section of the CNN website for citizen journalism. Although CNN
stresses that it has not verified the reports, Axact uses the CNN logo
as a publicity tool on many of its sites.
Social
media adds a further patina of legitimacy. LinkedIn contains profiles
for purported faculty members of Axact universities, like Christina Gardener, described as a senior consultant at Hillford University and a former vice president at Southwestern Energy,
a publicly listed company in Houston. In an email, a Southwestern
spokeswoman said the company had no record of an employee with that
name.
The
heart of Axact’s business, however, is the sales team — young and
well-educated Pakistanis, fluent in English or Arabic, who work the
phones with customers who have been drawn in by the websites. They offer
everything from high school diplomas for about $350, to doctoral
degrees for $4,000 and above.
“It’s
a very sales-oriented business,” said a former employee who, like
several others, spoke on the condition of anonymity because he feared
legal action by Axact.
A
new customer is just the start. To meet their monthly targets, Axact
sales agents are schooled in tough tactics known as upselling, according
to former employees. Sometimes they cold-call prospective students,
pretending to be corporate recruitment agents with a lucrative job offer
— but only if the student buys an online course.
A
more lucrative form of upselling involves impersonating American
government officials who wheedle or bully customers into buying State
Department authentication certificates signed by Secretary Kerry.
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Axact employees often follow
up aggressively with previous customers, pushing them to buy more. Some
pose as American officials, badgering clients to spend thousands of
dollars on State Department authentication letters. Payments are
funneled through offshore firms.
Such
certificates, which help a degree to be recognized abroad, can be
lawfully purchased in the United States for less than $100. But in
Middle Eastern countries, Axact officials sell the documents — some of
them forged, others secured under false pretenses — for thousands of
dollars each.
“They
would threaten the customers, telling them that their degrees would be
useless if they didn’t pay up,” said a former sales agent who left Axact
in 2013.
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Axact
tailors its websites to appeal to customers in its principal markets,
including the United States and oil-rich Persian Gulf countries. One
Saudi man spent over $400,000 on fake degrees and associated
certificates, said Mr. Jamshaid, the former employee.
Usually the sums are less startling, but still substantial.
One Egyptian man paid $12,000 last year for a doctorate in engineering technology from Nixon University and
a certificate signed by Mr. Kerry. He acknowledged breaking ethical
boundaries: His professional background was in advertising, he said in a
phone interview, speaking on the condition of anonymity to avoid
potential legal trouble.
But
he was certain the documents were real. “I really thought this was
coming from America,” he said. “It had so many foreigner stamps. It was
so impressive.”
Real-Life Troubles
Many
customers of degree operations, hoping to secure a promotion or pad
their résumé, are clearly aware that they are buying the educational
equivalent of a knockoff Rolex. Some have been caught.
In the United States, one federal prosecution in 2008
revealed that 350 federal employees, including officials at the
departments of State and Justice, held qualifications from a
non-Axact-related diploma mill operation based in Washington State.
Some
Axact-owned school websites have previously made the news as being
fraudulent, though without the company’s ownership role being
discovered. In 2013, for instance, Drew Johansen, a former Olympic swim
coach, was identified in a news report as a graduate of Axact’s bogus Rochville University.
The effects have sometimes been deeply disruptive. In Britain, the police had to re-examine 700 cases
that Mr. Morrison, the falsely credentialed police criminologist and
Rochville graduate, had worked on. “It looked easier than going to a
real university,” Mr. Morrison said during his 2007 trial.
In
the Middle East, Axact has sold aeronautical degrees to airline
employees, and medical degrees to hospital workers. One nurse at a large
hospital in Abu Dhabi, United Arab Emirates, admitted to spending
$60,000 on an Axact-issued medical degree to secure a promotion.
But there is also evidence that many Axact customers are dupes, lured by the promise of a real online education.
Elizabeth
Lauber, a bakery worker from Bay City, Mich., had been home-schooled,
but needed a high school diploma to enroll in college. In 2006, she
called Belford High School, which had her pay $249 and take a
20-question knowledge test online.
Photo
Shoaib Ahmed Shaikh, the founder of Axact, in an image taken from social media.
Weeks
later, while waiting for the promised coursework, Ms. Lauber was
surprised to receive a diploma in the mail. But when she tried to use
the certificate at a local college, an official said it was useless. “I
was so angry,” she said by phone.
Last
May, Mohan, a junior accountant at a construction firm in Abu Dhabi,
paid $3,300 for what he believed was going to be an 18-month online
master’s program in business administration at the Axact-owned Grant Town University.
A
sales agent assured Mohan, a 39-year-old Indian citizen who asked to be
identified only by part of his name, of a quality education. Instead,
he received a cheap tablet computer in the mail — it featured a school
logo but no education applications or coursework — followed by a series
of insistent demands for more money.
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When
a phone caller who identified himself as an American Embassy official
railed at Mohan for his lack of an English-language qualification, he
agreed to pay $7,500 to the Global Institute of English Language Training Certification, an Axact-run website.
In
a second call weeks later, the man pressed Mohan to buy a State
Department authentication certificate signed by Mr. Kerry. Mohan charged
$7,500 more to his credit card.
Then
in September a different man called, this time claiming to represent
the United Arab Emirates government. If Mohan failed to legalize his
degree locally, the man warned, he faced possible deportation.
Panicking, Mohan spoke to his sales agent at Axact and agreed to pay
$18,000 in installments.
By
October, he was $30,000 in debt and sinking into depression. He had
stopped sending money to his parents in India, and hid his worries from
his wife, who had just given birth.
“She
kept asking why I was so tense,” said Mohan during a recent interview
near his home in Abu Dhabi. “But I couldn’t say it to anyone.”
Chasing Bill Gates
In
Pakistan, Mr. Shaikh, Axact’s chief executive, portrays himself as a
self-made tycoon of sweeping ambition with a passion for charity.
Growing
up in a one-room house, he said in a speech posted on the company’s
website, his goal was to become “the richest man on the planet, even
richer than Bill Gates.” At gala company events he describes Axact,
which he founded in 1997, as a global software leader. His corporate
logo — a circular design with a soaring eagle — bears a striking
resemblance to the American presidential seal.
Unusual
for a software entrepreneur, Mr. Shaikh does not habitually use email
or a cellphone, said several people recruited to his new station, Bol.
But
his ambition is undimmed: Last year he announced plans for Gal Axact, a
futuristic headquarters building with its own monorail system and space
for 20,000 employees. His philanthropic vision, meanwhile, has a
populist streak that resonates with many Pakistanis’ frustrations with
their government.
As
well as promising to educate 10 million children, Mr. Shaikh last year
started a project to help resolve small civil disputes — a pointed snub
to the country’s sclerotic justice system — and vowed to pump billions
of dollars into Pakistan’s economy.
Photo
Barkley University claims that its degrees are recognized all over the world.
“There is no power in the universe that can prevent us from realizing this dream,” he declared in the speech.
But
some employees, despite the good salaries and perks they enjoyed,
became disillusioned by the true nature of Axact’s business.
During
three months working in the internal audit department last year,
monitoring customer phone calls, Mr. Jamshaid grew dismayed by what he
heard: customers being cajoled into spending tens of thousands of
dollars, and tearful demands for refunds that were refused.
“I had a gut feeling that it was not right,” he said.
In
October, Mr. Jamshaid quit Axact and moved to the United Arab Emirates,
taking with him internal records of 22 individual customer payments
totaling over $600,000.
Mr.
Jamshaid has since contacted most of those customers, offering to use
his knowledge of Axact’s internal protocols to obtain refunds. Several
spurned his approach, seeing it as a fresh effort to defraud them. But a
few, including Mohan, accepted his offer.
After weeks of fraught negotiations, Axact refunded Mohan $31,300 last fall.
The Indian accountant found some satisfaction, but mostly felt chastened and embarrassed.
“I was a fool,” he said, shaking his head. “It could have ruined me.”
Deception and Threats
Axact’s
role in the diploma mill industry was nearly exposed in 2009 when an
American woman in Michigan, angry that her online high school diploma
had proved useless, sued two Axact-owned websites, Belford High School
and Belford University.
The
case quickly expanded into a class-action lawsuit with an estimated
30,000 American claimants. Their lawyer, Thomas H. Howlett, said in an
interview that he found “hundreds of stories of people who have been
genuinely tricked,” including Ms. Lauber, who joined the suit after it
was established.
But
instead of Axact, the defendant who stepped forward was Salem Kureshi, a
Pakistani who claimed to be running the websites from his apartment.
Over three years of hearings, his only appearance was in a video
deposition from a dimly lit room in Karachi, during which he was barely
identifiable. An associate who also testified by video, under the name
“John Smith,” wore sunglasses.
Mr.
Kureshi’s legal fees of over $400,000 were paid to his American lawyers
through cash transfers from different currency exchange stores in
Dubai, court documents show. Recently a reporter was unable to find his
given address in Karachi.
Photo
A broadcast studio at Bol, a television and newspaper group owned by Axact that is scheduled to start this year.Credit
Sara Farid for The New York Times
“We were dealing with an elusive and illusory defendant,” said Mr. Howlett, the lawyer for the plaintiffs.
In
his testimony, Mr. Kureshi denied any links to Axact, even though
mailboxes operated by the Belford schools listed the company’s
headquarters as their forwarding address.
Today,
Belford is still open for business, using a slightly different website
address. Former Axact employees say that during their inductions into
the company, the two schools were held out as prized brands.
Axact
does have regular software activities, mainly in website design and
smartphone applications, former employees say. Another business unit,
employing about 100 people, writes term papers on demand for college
students.
But
the employees say those units are outstripped by its diploma business,
which as far back as 2006 was already earning Axact around $4,000 a day,
according to a former software engineer who helped build several sites.
Current revenues are at least 30 times higher, by several estimates,
and are funneled through companies registered in places like Dubai,
Belize and the British Virgin Islands.
Axact
has brandished legal threats to dissuade reporters, rivals and critics.
Under pressure from Axact, a major British paper, The Mail on Sunday,
withdrew an article from the Internet in 2006. Later, using an
apparently fictitious law firm, the company faced down a consumer rights
group in Botswana that had criticized Axact-run Headway University.
It
has also petitioned a court in the United States, bringing a lawsuit in
2007 against an American company that is a competitor in the
essay-writing business, Student Network Resources, and that had called
Axact a “foreign scam site.” The American company countersued and was awarded $700,000, but no damages have been paid, the company’s lawyer said.
In
his interview with The New York Times in 2013, Axact’s chief executive,
Mr. Shaikh, acknowledged that the company had faced criticism in the
media and on the Internet in Britain, the United States and Pakistan,
and noted that Axact had frequently issued a robust legal response.
“We have picked up everything, we have gone to the courts,” he said. “Lies cannot flourish like that.”
Mr. Shaikh said that the money for Axact’s new media venture, Bol, would “come from our own funds.”
With
so much money at stake, and such considerable effort to shield its
interests, one mystery is why Axact is ready to risk it all on a
high-profile foray into the media business. Bol has already caused a
stir in Pakistan by poaching star talent from rival organizations, often
by offering unusually high salaries.
Mr.
Shaikh says he is motivated by patriotism: Bol will “show the positive
and accurate image of Pakistan,” he said last year. He may also be
betting that the new operation will buy him influence and political
sway.
In any event, Axact’s business model faces few threats within Pakistan, where it does not promote its degrees.
When
reporters for The Times contacted 12 Axact-run education websites on
Friday, asking about their relationship to Axact and the Karachi office,
sales representatives variously claimed to be based in the United
States, denied any connection to Axact or hung up immediately.
“This is a university, my friend,” said one representative when asked about Axact. “I have no idea what you’re talking about.”
Griffin Palmer and Kimiko de Freytas-Tamura contributed reporting.
