Fake Diplomas, Real Cash: Pakistani Company Axact Reaps Millions
Axact, which has its headquarters in Karachi, Pakistan, ostensibly operates as a software company. CreditSara Farid for The New York Times
By Declain Walsh
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 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.”
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.”
After the initial publication of this article, Axact posted a public responseon its website, saying it would seek legal action. The statement begins, “Axact condemns this story as baseless, substandard, maligning, defamatory, and based on false accusations and merely a figment of imagination published without taking the company’s point of view.”
Also after publication, some of the testimonial videos and specific website contents cited in this article were taken down without explanation.
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.
A screengrab taken from the website Columbiana University. This and other Axact sites have toll-free American contact numbers and calculatedly familiar-sounding names.
“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 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.
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.
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.”
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.
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.
Barkley University claims that its degrees are recognized all over the world.
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.
A broadcast studio at Bol, a television and newspaper group owned by Axact that is scheduled to start this year. CreditSara Farid for The New York Times
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. 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.
(Courtesy to New York Times)