This report provides an analysis of state and federal laws regarding diploma mills, which offer students academic degrees for little or no meaningful academic work. Specifically, this report addresses the criminal, civil, and common law ramifications for both the manufacturers and distributors of phony degrees, as well as for the buyers and users of such degrees. This analysis does not address counterfeit degrees that purport to be from existing accredited universities, but rather focuses primarily on the legal issues surrounding phony degrees from entities that provide diplomas without requiring an appropriate level of academic achievement. Although no formal legal definition exists, a diploma mill is generally regarded as an entity that lacks accreditation from a state or professional accreditation organization, but that nonetheless sells college and graduate degrees that are fraudulent or worthless because of the lack of standards imposed on the purchasers of such degrees. While experts estimate that diploma mills have existed for hundreds of years, such entities have proliferated in recent decades due to lax law enforcement and technological advances such as the rise of the Internet. By some estimates, there are several hundred diploma mills operating at any given time, with revenue in excess of $500 million per year. Because many diploma mills use the Internet to operate their phony institutions of higher education, it is sometimes difficult to distinguish between purveyors of phony degrees and legitimate online institutions that operate traditional distance learning degree programs. This difficulty is one reason that federal and state policy makers have trouble drafting laws that can be used to shut down phony institutions. Nevertheless, most diploma mills display some or all of the following hallmarks of a fraudulent operation: (1) they are unaccredited or they claim to be accredited but the organization that they cite is not one of the legitimate accrediting agencies recognized by the Council on Higher Education Accreditation or the United States Department of Education (ED); (2) they do not require previous academic records, such as grade point average or test scores, for admission; (3) they charge tuition based on the number of degrees purchased rather than the number of credit hours or courses taken; (4) they offer many or all degree credits based on a student's life experience; (5) they guarantee that students will receive diplomas in far less time than it would take at a traditional university; (6) their professors often have degrees from unaccredited universities and have little or no contact with students; (7) they are located in a foreign country or have addresses that are post office box numbers; and (8) they have names that are strikingly similar to legitimate, accredited universities. Diploma mills pose dangers to consumers and employers, as well as the general public and to legitimate institutions of higher education. Although some individuals who obtain degrees from diploma mills are active conspirators in fraud, others are innocent victims of financial scams in which they pay hundreds or thousands of dollars for worthless degrees. If the fraudulent credentials are discovered, such individuals may lose their jobs or face civil or criminal charges. Regardless of whether such individuals have fraudulent intent, employers who hire individuals with fake degrees may, at best, have inadequately trained employees and, at worst, expose themselves to liability for the mistakes of such employees. Finally, diploma mills may harm members of the general public who receive professional services from individuals with fake academic credentials, and they may damage the reputation of legitimate degree-granting institutions. Despite the potential harm caused by diploma mills, state and federal efforts to shut down these entities have been somewhat erratic over the years, depending in part on the jurisdiction and enforcement priorities involved. For example, enforcement has been weak at times for reasons that range from the difficulty in distinguishing between fraudulent and legitimate institutions to the ability of diploma mills to move jurisdictions quickly if authorities in one state begin an aggressive enforcement campaign. Further complicating matters is the fact that every state has its own diploma mill laws, which vary in strength and effectiveness. Meanwhile, the federal government pursues enforcement actions against diploma mills under a separate set of laws. These federal and state laws regarding diploma mills are discussed in detail below. In general, the regulation of education in the United States is a state responsibility. Nevertheless, the federal government plays a role in education oversight, and diploma mills are no exception. Although federal law does not explicitly prohibit diploma mills, the sale of fraudulent academic credentials is punishable under several federal statutes relating to mail fraud, wire fraud, and conspiracy, and at least five different governmental agencies have some direct involvement in or authority over the legal issues raised by diploma mills, namely the Federal Bureau of Investigation (FBI), which is housed within the Department of Justice (DOJ); the U.S. Postal Inspection Service; the Federal Trade Commission (FTC); the Department of Education; and the Department of Homeland Security (DHS). In addition, where tax fraud is involved, the Internal Revenue Service (IRS) has been known to participate in prosecutions of diploma mill operators, and attorneys with a separate division of DOJ prosecute cases involving fraud against the federal government. Finally, the Office of Personnel Management (OPM) has personnel rules that prohibit applicants and employees from making misrepresentations to federal agencies. Each of these agencies, and the relevant laws and regulations, are discussed in detail in this section. The two agencies with the greatest degree of legal authority to regulate and prosecute diploma mills are the FBI and the U.S. Postal Inspection Service. Both agencies have the authority to investigate crimes involving mail fraud, wire fraud, and other types of fraud, and diploma mills are often prosecuted under these statutes if they use the mail or telephone wire to commit fraud. Under the federal mail fraud statute, use of the mail with intent to commit fraud is punishable both civilly and/or criminally, respectively, by a fine and/or by up to twenty years in prison. Use of a fictitious name or address in connection with mail fraud or any other unlawful purpose is punishable by monetary fines and/or up to five years in prison. Likewise, violations of the wire fraud statute are punishable with fines and/or up to twenty years in prison. In addition, any attempt or conspiracy to commit the types of fraud described above is subject to the same penalties that would have applied if the underlying crime had successfully been committed. If an individual is violating or about to violate these anti-fraud provisions, DOJ can seek an injunction in federal court to prevent such violations. Finally, the Post Office is authorized to take certain preventative actions if an individual conducts "a scheme or device for obtaining money or property through the mail by means of false representations." Over the years, federal enforcement of laws against diploma mills has waxed and waned. For example, the FBI and the Postal Inspection Service have periodically engaged in collaborative criminal investigations of diploma mills. Indeed, these investigations were particularly active from the late 1970s to the early 1990s, when the FBI spearheaded the DipScam operation. Short for diploma scam, DipScam consisted of an FBI task force whose successful investigations of diploma mills led to multiple arrests and convictions under federal anti-fraud statutes and to a decline in phony institutions. Ultimately, the DipScam task force disbanded shortly after the retirement of its top diploma mill expert, and phony institutions have made a comeback in the years since. Investigations and prosecutions of diploma mills also appear to have declined in recent years as federal agencies have focused enforcement efforts on other priorities. For example, since the events of September 11, 2001, combating terrorism has been the FBI's top priority, while the Postal Inspection Service has aggressively targeted the issue of identity theft in recent years. The FTC is another federal agency with some regulatory authority over diploma mills. Under the Federal Trade Commission Act, the FTC is authorized to enforce consumer protection laws that prohibit fraud, deception, and unfair business practices. As defined by the statute, unlawful deceptive trade practices include false and misleading advertising. With respect to vocational and distance learning schools, the FTC has interpreted the ban on false and misleading advertising to prohibit such schools from using deceptive trade or business names, misrepresenting the extent or nature of accreditation or approval, or issuing deceptive diplomas, degrees, or certificates. Specifically, FTC guidance notes that (a) It is deceptive for an industry member to issue a degree, diploma, certificate of completion, or any similar document, that misrepresents, directly or indirectly, the subject matter, substance, or content of the course of study or any other material fact concerning the course for which it was awarded or the accomplishments of the student to whom it was awarded. (b) It is deceptive for an industry member to offer or confer an academic, professional, or occupational degree, if the award of such degree has not been authorized by the appropriate State educational agency or approved by a nationally recognized accrediting agency, unless it clearly and conspicuously discloses, in all advertising and promotional materials that contain a reference to such degree, that its award has not been authorized or approved by such an agency. For false or misleading advertisements made with intent to defraud or mislead, penalties for a first offense consist of a fine of up to $5,000 or imprisonment for up to six months, or both. Penalties for a second offense consist of a fine of up to $100,000 or imprisonment for up to one year, or both. Unlike the FBI or Postal Inspection Service, the FTC is also authorized to sue individuals or companies that violate the trade statute in order to seek legal redress for injuries to consumers. Thus, the FTC may sue diploma mills in order to secure refunds or damages for consumers who have been deceived by phony degree-granting institutions. In addition, the FTC is authorized to seek injunctions in federal court to prevent false and misleading advertising.