N.Y. Beauty School Raided After Two-Year Fraud Probe

A "hole in the wall" Chinatown beauty school that somehow managed to collect millions of dollars in federal aid was raided by agents Friday after a two-year fraud probe, the New York Post reported Saturday.

About 10 agents from the Departments of Education and Labor removed dozens of boxes of documents and other evidence from the USA Beauty School at 87 Walker St.

"It's a hole in the wall that receives millions of dollars," said one agent, who said that raised a "red flag."

In court papers, Kristen Frias, a special agent with the Education Department's inspector general office, said the USA Beauty School probe began with an anonymous complaint to the office's hot line.

An undercover FBI agent contacted the school, posing as a would-be student.

The agent claimed not to have a diploma. A school official said it wasn't necessary and asked the "applicant" to falsify a tax return to show less income and thereby qualify for the full amount of financial aid, Frias said in papers seeking a search warrant.

Records show the school received nearly US$4 million in Pell grants since it became eligible for the program in 2006. In the last year, it received more than $70,000 in federal stimulus money.

Pell grants can provide a student with up to $5,350 a year. They are issued to low-income people across the country to help pay for their post-high school education.