In the first criminal case of its kind in the United States, an Essex man was convicted yesterday of bilking more than $520,000 from tens of thousands of prospective students around the country by offering them phony scholarships.

More than 50,000 of the soon-to-be students sent Christopher Nwaigwe $10 apiece to cover "application fees" -- money that was going into Nwaigwe's personal bank accounts. Nearly all of the money is missing, according to prosecutors who handled the case in U.S. District Court in Baltimore.

"One of the most awful things about this is that so many people were defrauded at a moment when they were financially vulnerable," said Lynne A. Battaglia, U.S. attorney for Maryland. "Ten dollars may seem like a nominal amount, but it's not. He preyed on people's hope."

A jury convicted Nwaigwe, 37, of seven counts of mail fraud after a four-day trial. He is the first to be prosecuted as a result of a Federal Trade Commission investigation into scholarship fraud, according to FTC attorney Alice Saker Hrdy.

The commission brought civil complaints against Nwaigwe and seven companies around the country in 1996 as part of a crackdown on bogus scholarships. Each year, crooked companies collect millions of dollars from hopeful students by dangling fake scholarship offers.

"We've tried to get the word out to students that there are people out there that will do this," Hrdy said. "We've distributed literally millions of consumer education materials to educate students and their parents about the problem."

Nwaigwe, who could receive up to five years in prison on each count, ran a simple envelope-stuffing scheme between 1992 and 1996 that targeted students looking for financial aid.

He bought 380,672 student names and addresses from a New York-based list company, then sent each a letter announcing a scholarship offer of $2,500 to $7,500.

"Congratulations! You have been selected by the National Scholarship Program," read one of the letters, sent in December 1994. "So complete the application, enclose a check or money order for $10, and mail it in the enclosed envelope."

It's unclear how many scholarship offers Nwaigwe sent out during the four years he ran the scheme from a modest Essex apartment. But he received more than 50,000 responses, said Assistant U.S. Attorney Joyce K. McDonald.

Among them was a check from Margaret Jones of Wilmington, Del., whose son Christopher was planning to study exercise and sports science. She said she sent the check because her son was desperately in need of financial help, and because $10 didn't seem like much.

But she never got a response. She said yesterday that she was happy with the jury's verdict.

"I'm just glad they found him guilty, and I'm glad that it's all over with," Jones said.

What Nwaigwe did with the money is unknown. Some went toward living expenses and toward keeping the scheme going -- it cost him $35,401 to buy the mailing lists, for instance -- but the bulk of the cash remains missing, prosecutors said.

Nwaigwe withdrew $164,472 in bank transactions between February 1994 and June 1996, according to evidence at the trial. Nwaigwe, a Nigerian national, may have given some money to others from Nigeria living in the United States, a federal source said.

Hrdy said Nwaigwe's scheme was somewhat different than others identified during the federal investigation in that he didn't do telemarketing. Many of the bogus companies also sent postcards to students, advising them to call an 800-number for "free money."

If the students received material from companies, it often consisted of lists of scholarships with deadlines that had expired or for which the student did not qualify.

The typical loss in scholarship fraud is about $100, but it is not uncommon for students to pay several hundred dollars to apply for scholarships they think are guaranteed. Career Assistance Planning, an Atlanta-based company, charged students as much as $300 for scholarship information.

Hrdy said the FTC received a judgment against Career Assistance Planning for $6 million as part of the agency's investigation into scholarship fraud.

Pub Date: 3/16/99