[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.]
By Declan Walsh
 |
|
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.
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.”
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.
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 millswho 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 andMount
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.
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.
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 milloperation 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.
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.
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.
“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.
“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.
The lawsuit ended in 2012 when a federal judge
ordered Mr. Kureshi and Belford to pay
$22.7 million in damages. None of the damages have been paid,
Mr. Howlett said.
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. Its new media
company, 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.
