Federal agents uncovered the college admissions scandal by accident while working on unrelated case

The FBI uncovered the $25 million nationwide college admissions cheating scandal by accident while agents were working an unrelated securities fraud case, two law enforcement sources told ABC News.

The Boston-based agents received a tip from someone connected to the securities fraud investigation about the alleged $400,000 bribe paid to the then-head women's soccer coach at Yale to fabricate athletic credentials, the sources said.

The coach then cooperated with the investigation, according to the sources, which spiraled into what prosecutors called the largest college admissions cheating scam ever prosecuted in the United States, as 50 people were indicted, including actresses Felicity Huffman and Lori Loughlin.

FBI-Boston declined to comment about the origin of the case, which was first reported by the Wall Street Journal.

Universities could remove students

Two elite universities embroiled in the college admissions scam took steps Wednesday that could prompt the removal of any of the students connected to the scandal from the schools.

The University of Southern California and UCLA are both reviewing the admissions applications of students whose parents allegedly paid tens of thousands of dollars in bribes to guarantee their children got into the colleges and scored high on college entrance exams.

Loughlin's two daughters are currently enrolled at USC and the eldest daughter of Huffman and her husband, actor William H. Macy, attends an undisclosed elite college ensnared in the scandal.

"We are going to conduct a case-by-case review for current students and graduates that may be connected to the scheme alleged by the government," USC said in a statement. "We will make informed, appropriate decisions once those reviews have been completed. Some of these individuals may have been minors at the time of their application process."

The school's statement added, "Applicants in the current admissions cycle who are connected to the scheme alleged by the government will be denied admission to USC."

UCLA officials are conducting a similar review.

"If UCLA discovers that any prospective, admitted or enrolled student has misrepresented any aspect of his/her application, or that information about the applicant has been withheld, UCLA may take a number of disciplinary actions, up to and including cancellation of admission," a statement from the school reads.

At a news conference Tuesday, Andrew Lelling, U.S. attorney for the District of Massachusetts, said "the vast majority" of students who benefited from the scams are still enrolled in colleges and in many instances were unaware of the bribery. But prosecutors say some students eventually may be charged.

Several elite Los Angeles-area prep schools have been subpoenaed in connection with the college admissions cheating scam, a source familiar with the investigation told ABC News.

The Los Angeles Times first reported subpoenas were issued to unnamed schools said to be among the most prominent private schools in the area.

The prep schools are not accused of wrongdoing. Rather, the source confirmed, the subpoenas seek records related to some of the families allegedly involved in the scheme.

'Full House' actress arrested

Loughlin was taken into custody by the FBI Wednesday in Los Angeles after she, Huffman and 48 others were charged in the alleged wrongdoing that has prompted repercussions from Hollywood to the boardrooms of major companies.

Loughlin, 54, flew to Los Angeles overnight from Canada, where she was filming a Hallmark movie, sources told ABC News.

She appeared in federal court in Los Angeles Wednesday afternoon where a judge read the fraud charges against her and she acknowledged she understood them. She was released on a $1 million bond.

A judge granted Loughlin permission to travel within the United States and to Vancouver to complete shooting her movie, which isn't scheduled to wrap up until November. Once she completes filming, she must surrender her passport in December unless she submits proof of another project in British Colombia or elsewhere, the judge told her.

Loughlin was ordered to appear in Boston Federal Court on March 29 with the other defendants.

A former cast member on the ABC sitcom "Full House," Loughlin and Oscar-nominated actress Huffman, 56, are among 33 parents charged with conspiracy to commit mail and wire fraud in the coast-to-cost scam to get their children into elite colleges, including Yale, Stanford, Georgetown, Wake Forest and the University of Texas.

The feds dubbed the investigation "Operation Varsity Blues" and said it was triggered by an unrelated investigation by FBI agents in Boston.

Loughlin's husband, fashion designer Mossimo Giannulli, 55, was arrested Tuesday on charges of conspiracy to commit mail fraud and appeared in Los Angeles federal court.

Widespread bribery

Loughlin and Giannulli "agreed to pay bribes totaling $500,000 in exchange for having their two daughters designated as recruits to the USC crew team -- despite the fact that they did not participate in crew -- thereby facilitating their admission to USC," according to the indictment.

U.S. Education Secretary Betsy DeVos made her first comments about the scandal Wednesday in a interview with Fox News.

"Every student deserves to be considered on their individual merits when applying to college, and it’s disgraceful to see anyone breaking the law to give their children an advantage over others," DeVos said. "The department is looking closely at this issue and working to determine if any of our regulations have been violated."

Lelling announced the stunning indictment Tuesday and said the parents charged in the scam represent "a catalog of wealth and privilege."

Coaches fired, CEO steps down

As shockwaves from the arrests spread across the country, the fallout for some of the defendants was swift.

Hercules Capital, Inc., one of the largest venture capital companies in the country, announced Wednesday that its chairman and chief executive officer, Manuel Henriquez, had stepped down.

Henriquez, 55, of Atherton, California, and his wife, Elizabeth, 56, were among those charged in the case.

Gordon Caplan, 52, a partner in the international law firm Willkie Farr & Gallagher, based in New York, was placed on a leave of absence and stripped of all management responsibilities, the firm said in a statement.

Caplan allegedly paid a purported charitable contribution of $75,000 to a sham charity established by William "Rick" Singer, who prosecutors said masterminded the scam, according to the indictment. The money was used to pay a proctor of an ACT test to correct answers Caplan's daughter gave on the exam, the document alleges.

USC officials fired its famed water polo coach, Jovan Vanvic, who allegedly accepted bribes in exchange for scholarships for children of the rich. USC also terminated Donna Heinel, the school's senior associate athletic director, who was also charged.

Vanvic, 57, who led the USC Trojans to 16 NCAA national championships, was arrested Tuesday in Hawaii at a Waikiki hotel. He made his first appearance in federal court Tuesday afternoon wearing a gold and cardinal red USC athletic jacket.

Stanford University fired its longtime sailing coach, John Vandemoer, 41, who has already pleaded guilty to federal charges of racketeering conspiracy.

Vandemoer's attorney, Rob Fisher, told ABC News his client "made a mistake that happened to be part of a giant conspiracy" and is "very remorseful."

"He's taking full responsibility for his actions. He admits that what he did was wrong and if he had a do over he certainly would not do it again. He was a well-respected coach, he's never been in trouble with the law before, and he made a mistake that happened to be part of a giant conspiracy. John is very remorseful for the damage caused to Stanford, the students, staff, and the alumni which will be evidenced at his sentencing hearing," the statement read. "One important distinction to make is that John did not pocket any of the money. The US attorney stated that one coach did not profit and John did not profit personally. They acknowledged that the money went to Stanford sailing and was used to buy new equipment and pay for the salary of an assistant coach."

Wake Forest officials placed its head volleyball coach, William Ferguson, 48, on administrative leave after he was indicted. Ferguson, according to the indictment, allegedly accepted a $100,000 bribe from Singer to designate the daughter of one of Singer's clients as a recruit for the women's volleyball team, facilitating her admission to the university.

In an email to students and faculty Wednesday, Wake Forest President Nathan Hatch said the student that Ferguson allegedly help get admitted to the school is currently enrolled.

"We have no reason to believe the student was aware of the alleged financial transaction," Nathan wrote.

The University of Texas also fired Michael Center, 54, the head coach of the school's men's tennis team, who is also charged in the cheating scheme.

"After working with campus leaders to review the recent situation with Michael Center, we have decided to relieve him of his duties as our Men's Tennis coach," Chis Del Conte, the university's vice president and athletic director, said in a statement. "It's a very difficult decision, and we are grateful for the years of service that he has provided, but winning with integrity will always be paramount at The University of Texas, and it was a decision that had to be made."

NCAA launches probe

The NCAA announced it will launch an investigation into the widespread cheating scandal that implicated nine coaches at elite schools.

"The charges brought forth ... are troubling and should be a concern for all of higher education," the NCAA wrote in a statement on Twitter. "We are looking into these allegations to determine the extent to which NCAA rules may have been violated."

Singer, owner of a college counseling service called Key Worldwide Foundation and a company called Edge College & Career Network, pleaded guilty in Boston federal court on Tuesday to charges of racketeering conspiracy, money laundering conspiracy, conspiracy to defraud the United States and obstruction of justice.

Singer allegedly accepted bribes totaling $25 million from parents between 2011 and 2018 "to guarantee their children's admission to elite schools," Lelling said.

Federal officials said Singer was a corroborating witness in the investigation and wore a wire to capture some of the conversations with parents and cohorts implicated in the scam.

Singer's inner circle included Steven Masera, 69, the accountant and financial officer for the Edge College & Career Network and the Key Worldwide Foundation and Mark Riddell, a private school counselor in Bradenton, Florida, who were both indicted in the scam, according to the indictment.

Mikaela Sanford, 32, of Folsom, California, another employee of the Edge College & Career Network and the Key Worldwide Foundation, was also charged.

How the scam worked

Singer would instruct parents to seek extended time for the children to take SAT and ACT entrance exams by obtaining medical documentation that their child had a learning disability, according to the indictment. The parents were then told to get the location of the test changed to one of two testing centers, one in Houston and another in West Hollywood, California, where test administrators Niki Williams, 44, of Houston and Igor Dvorskiy, 52, of Sherman Oaks, California, and an exam proctor helped carry out the scam, the indictment alleges.

Riddell would allegedly either take the tests for students or would correct their answers after they took the tests, according to the indictment.

To bolster students' college entrance applications, Singer worked with parents to allegedly concoct glowing profiles of their children, including staged or Photoshopped pictures of them participating in sports, the indictment alleges.

In one case highlighted by federal prosecutors, the former head women’s soccer coach at Yale University, Rudolph "Rudy" Meredith, 51, was paid $400,000 to accept a student even though the applicant did not play soccer. The parents of that student had paid Singer $1.2 million.

According to the charging papers, Huffman "made a purported charitable contribution of $15,000" to a sham charity set up by Singer to participate in the college entrance exam cheating scheme on behalf of her eldest daughter.

The actress allegedly made arrangements to pursue the scheme a second time for her younger daughter, before deciding not to do so, the documents allege.

Huffman's husband, actor William H. Macy, was not charged, but according to the court document he and Huffman were caught on a recorded conversation with a corroborating witness in the case allegedly discussing a $15,000 payment to ensure their younger daughter scored high on a college entrance exam.

Roster of CEOs

Federal officials mentioned the roster of CEOs charged in the scam. One of them is David Sidoo, 59, a prominent businessman and philanthropist from Vancouver, Canada, who was indicted on charges of conspiracy to commit mail fraud and wire fraud. He was arrested on Friday in San Jose, California, federal officials said.

"David Sidoo has been repeatedly recognized for his philanthropic endeavors, which is the true testament to his character. The charge that has been lodged against David is an allegation that carries with it the presumption that he is innocent," Sidoo's attorney, Richard Schonfeld, said in a statement Wednesday.

"We look forward to presenting our case in court and ask that people don't rush to judgment in the meantime," he said.

Other prominent business leaders indicted included Robert Zangrillo, 52, of Miami, founder and CEO of the private investment firm Dragon Global; Bill McGlashan, 55, of Mill Valley, California, a businessman and international private equity investor; and Gregory Abbott, 68, founder and chairman of International Dispensing Corp., a New York food and beverage packaging company.

"For every student admitted through fraud an honest, genuinely talented student was rejected," Lelling said.

ABC News' Jennifer Harrison contributed to this report.