[Unraveling Axact’s complex system of payments and revenues — much of which former employees have said is routed through offshore companies — is one potential challenge for the seven-member government investigation team announced by Interior Minister Chaudhry Nisar Ali Khan on Wednesday.]
By Declan Walsh
People gather at the entrance of an Axact company building after a raid by the Federal
Investigation Agency. Credit Farooq Naeem/Agence France-Presse — Getty Images
LONDON — Heavy scrutiny by investigators, politicians and the fractious Pakistani media sector has mounted over the past week for Axact, a Karachi-based software company that has made millions selling fake degrees through a sprawling empire of school websites.
The tax authorities, the Interior Ministry and the Securities and Exchange Commission of Pakistan, among others, have announced inquiries into the company’s operations. Its Karachi headquarters and a smaller office in Islamabad were sealed after a raid by the authorities earlier in the week. The company’s founder, Shoaib Ahmed Shaikh, has been summoned to an interview with federal investigators.
Axact has thrived for more than a decade on its ability to hide links between its operation in Karachi and hundreds of fictitious online schools, many of them claiming to be American. But more such links are coming to light in the days since The New York Times published a detailed account of the company’s operations, and Axact’s chief executive has begun shifting his tack in public statements.
At first, Mr. Shaikh insisted that the only link between Axact and the hundreds of fake school sites was that his company sold software to what he called “associates and partners.” In a television interview on Wednesday, however, he conceded that Axact provided office-support and call-center services for those websites. Still, he continued to deny being a part of any scam.
“Axact does not issue any degree or diploma, whether real or fake,” Mr. Shaikh said in the interview.
In the past few days, the company’s array of fake online universities and high schools has gone silent. In calls and text messages to 111 websites identified as being operated by Axact, a New York Times reporter was unable to establish contact with a single sales agent.
The scandal has driven intense coverage by the Pakistani television news media, much of it on stations whose owners were already at odds with Mr. Shaikh, ostensibly over his plans to start his own television network, Bol, in the coming months. Television crews have been camped outside the company’s Karachi headquarters all week.
Away from the media glare, people at differing ends of Axact’s elaborate degree scheme have continued to come forward with their accounts.
Sikander Riaz, who said he worked as a sales agent under the pseudonym Hank Moody for six weeks last summer, was one of a dozen people who contacted The New York Times to identify themselves as former Axact employees, and were able to provide consistent and detailed descriptions of the organization.
Mr. Riaz, a 22-year-old communications student, said he had been tasked to sell degrees for Harvey University and Nixon University out of an Islamabad-based call center for Axact.
“Our punch line was that we could give customers a degree in 10 to 15 days,” he said.
Another former employee, who asked to be identified only as Ahmad, part of his full name, expressed regret. “I feel bad about people I ripped off,” he said. “I could never tell my family that I sold degrees that destroyed people’s lives.”
Ahmad said he averaged sales of $500,000 per quarter, on behalf of fake high schools with names like Belford, Lorenz and Adison, during a three-year stint at Axact. By the time he left in 2012, the company was taking in $80,000 to $100,000 a day, he said, providing copies of his pay stubs to prove he had been employed by Axact.
He said that many of his early customers were young Americans seeking a high school diploma to fulfill a requirement for enlisting in the Army to fight in Iraq and Afghanistan. “We would celebrate like crazy if we hit $125,000 a day,” he said.
Unraveling Axact’s complex system of payments and revenues — much of which former employees have said is routed through offshore companies — is one potential challenge for the seven-member government investigation team announced by Interior Minister Chaudhry Nisar Ali Khan on Wednesday.
Former employees said that Axact uses at least 20 offshore companies to process customer revenues, pay suppliers and purposefully create a shield between Axact and the financial affairs of its websites. Many of those companies the employees identified, such as EduConnect and Education SP, have their own websites and say they sell educational software.
One such firm, Connect Shift, which is registered in Cyprus, lists Mr. Shaikh as its chief executive, according to company registration records.
Axact has left some traces of American connections as well. They include mailboxes in California, Colorado and Texas, and two Bank of America accounts at a branch in Florida that two former customers of Axact-run school sites said had been provided as a place to send payments.
By several accounts, Axact’s main financial and logistical hub outside Pakistan is in Dubai, where its holding company, Axact FZ, is located. Reporters for The Khaleej Times newspaper who visited the registered office of Axact FZ this week described a deserted glass cubicle with a desk and two chairs.
For years, former employees said, Axact’s diploma certificates were shipped to customers across the globe through a courier service in Dubai, to give the impression of being based in that city’s free trade zone. But that facade nearly collapsed in 2009, when a technology journalist from Saudi Arabia started looking more closely.
The journalist, Molouk Ba-Isa, was following up on a report that Rochville University had awarded a masters in business administration to an American pug named Chester. Although Rochville’s physical location was a mystery, Ms. Ba-Isa learned from a courier company official in Dubai that the degree originated from Axact’s office in Karachi.
But when The Arab News published her report, naming Axact, she said her editors received a strongly worded legal threat from company lawyers, and the article was removed from the Internet. This week, Ms. Ba-Isa said in an email that she felt vindicated.
Former customers of the fake online schools spoke of frustration and anger in their dealings with universities they thought were based in the United States.
Mary, a businesswoman in Dubai who wanted to be identified only by part of her name, said she spent $210,000 with Paramount California University in the hope of a genuine third-level business qualification.
“I was paying for an education, not buying a degree,” she said. “I’ve only got a high school education, so I did it for my own self worth, and nothing else.”
Mary said she and her husband enrolled for business degrees they hoped to study for at home over the winter. Instead she found herself being pursued and hectored by sales agents into making ever-greater payments for fees, registration and legalization. As she started to suspect a fraud, her confusion turned to denial and then anger.
“I didn’t know where to turn,” said Mary, who has hired an American lawyer to help seek a refund. “People say, ‘How could you be so stupid?’ I was one of the stupid ones.”
Griff Palmer contributed reporting from New York, and Saba Imtiaz from Karachi, Pakistan.