Jon, I think the guy who ran this scam set up a charity so the parents could 'donate' to that instead of making a direct payment to him. Apparently students took the ACTs/SATs but the parents were told to try to find a medical/other reason that their child couldn't take it as scheduled for their location. Then the guy running this scam would have them schedule it at one of two locations where he had someone take the test and another person there would send in that test instead of the student's actual test. (Apparently students took the test assuming that the score they got back was theirs, but it wasn't.)
Smoke, this guy had someone photoshopping heads onto photos to make it look like a student had played a sport, and other photos were supposedly staged so for those a student would've obviously known the photo was not of a sport they'd actually played (at least not at high school or varsity level, I suppose they could've played it in earlier grades). I read it was considered that the sport had not been played 'competitively'. This was apparently presented as getting an athletic scholarship then the sport could be dropped once they were in school.
Kids may have wondered or had doubts but most likely if their parents said it was OK to do this, kids would typically want to believe their parents so may have shoved aside any misgivings - if the parent said it was OK, then they probably accepted it as being OK.