Owner of "sham" Virginia barber school sentenced in $4.5M GI Bill fraud

by Scott Daugherty
The Virginian-Pilot

NORFOLK, Va. (Tribune News Service) — The co-owner of a Chesapeake barber college was sentenced Wednesday to more than five years in prison on charges he defrauded the Veterans Affairs Department out of more than $4.5 million.

William Grobes IV, 45, pleaded guilty in November to two felonies: conspiracy to commit wire fraud and engaging in monetary transactions in property derived from specified unlawful activity.

His wife, Katherine, pleaded guilty the following month to one count of conspiracy. She is set to be sentenced Friday.

The charges against the Grobeses relate to their operation of the College of Beauty and Barber Culture in Chesapeake from October 2011 through this past September. According to court documents, the school – where the unofficial motto was "We’re here to earn, not to learn” –collected $4.5 million under the Post-9/11 GI Bill.

Veteran students enrolled there collected $10.5 million more – for housing allowances, books and supplies. To date, no students have been charged with any crimes.

The court documents said veterans “rarely, if ever,” received the required hours of instruction. They didn’t take graded tests or complete projects. Some didn’t even have a textbook.

Of the more than 350 veterans enrolled there in that time period, 11 took the state licensing exam. Seven passed and got a barber or cosmetology license, according to court documents.

The scam was possible because of a change the VA implemented in October 2011 that allowed veterans to use the Post-9/11 GI Bill to pursue noncollege degree programs. The department pays tuition and fees directly to the school on the veterans’ behalf. Other benefits, including housing, are paid to the veterans.

According to court documents, the Grobeses provided false information to the department about the number of hours and quality of instruction veterans were receiving at the school, which also serves as a barber shop and hair and nail salon in the Village Square Shopping Center off South Military Highway.

Attendance at the school, which remains open, wasn't mandatory. The Grobeses had veterans sign in and out each day to “create the appearance” of attending for the required number of hours. Students could do whatever they wanted during school hours, though.

Students “often merely socialized, ate, or read non course-affiliated materials,” according to court documents.

The Grobeses, however, took careful steps to prepare for annual compliance surveys conducted by the VA, the documents said. They directed students to be present when the surveys happened to show the school was as full and as busy as they claimed, and they hand-selected veterans for VA staff to interview. They also made up nonveteren students to comply with VA rules.

"They would fill the student files with phony transcripts and other documents to create the appearance of legitimacy, and would outright lie to the Education Specialist about the school’s conformance," Dougherty said.

Dougherty argued Wednesday that William Grobes deserved a sentence of five years and three months. She noted that "on the VA’s dime," he and his wife bought and quickly paid off a five-bedroom, 3,750-square-foot lakefront home in Chesapeake and new cars every year for five years straight. There also was a "week-long international cruise" in May 2015 and other domestic travel.

When investigators searched the Grobeses' home in September, they found nearly $200,000 in cash inside a safe in the master bedroom’s walk-in closet, documents said. Further investigation revealed more than $1.1 million in various accounts and investments.

Defense attorney Jon Babineau asked the court Wednesday to show his client mercy. He argued Grobes was a hard worker and prominent member of his community, but said he got "addicted" to the money he was able to get from the VA.

Babineau said Grobes was dedicated to paying full restitution. He noted that the government had already received $1.3 million from his client, and that Grobes was in the process of selling his home, furniture and cars. He valued the house, which he said was free from any loans, at about $600,000.

Standing in front of two dozen friends and family members – including one former student who now has a shop of his own – Grobes appologized to the court.

"I'm sorry for all of my actions and all I have done wrong," he said.

Dougherty agreed that Grobes had several good qualities, but argued that they should be taken in context.

"Here is a man who gives regularly to others, but who swindles millions from a government program intended to honor veterans of our armed forces," she wrote in court documents. "When weighed against the extremely serious nature and circumstances of his offense, the defendant’s history and characteristics are not so extraordinary."

©2017 The Virginian-Pilot (Norfolk, Va.)
Visit The Virginian-Pilot at pilotonline.com
Distributed by Tribune Content Agency, LLC.

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