INDIANAPOLIS– The U.S. Attorney for the Southern District of Indiana alleges that three operators of a pair of virtual charter schools defrauded the state of Indiana for tens of millions of dollars by inflating the number of students learning from home sitting before keyboards.
The federal indictment claims that from 2016 to 2019, Thomas Stoughton, Phillip Holden, and Dr. Percy Clark engaged in a pattern of lying about the enrollments of Indiana Virtual School and Indiana Virtual Pathways Academy to score huge reimbursement payouts.
The trio faces charges of wire fraud and money laundering.
The indictment lists $18 million in wire transfers, matched by a nearly equal amount of personal expenditures on a car, a boat, gold coins, jewelry, and private school tuition.
Estimates of the alleged fraudulent reimbursements total $85 million. In comparison, Indiana Attorney General Todd Rokita has sued the operators for $154 million. The defendants are accused of steering excessive cash payments to themselves, family members, and private for-profit companies they owned for claimed administrative costs.
”This indictment clearly spells out intentional fraud and fraud at a level that is honestly hard to imagine,” said Brandon Brown, CEO of The Mind Trust, which does not engage in virtual charter schools. ”There was a group of leaders in charge of this school that were obviously not in it for kids. They were in it for themselves. And at the end of the day, there were thousands of actual students that were enrolled in those schools who didn’t get a great education primarily because of the greed of many of the adults who were in charge.”
Clark is the former superintendent of Lawrence Township Schools.
He appeared before a federal magistrate to hear the charges on Monday.
The indictment alleges that the operators intentionally misled state authorities on their schools’ enrollments by not disenrolling students who dropped out, counting students who did not complete enrollment applications, reenroll students who did not intend to return to virtual classes, and firing an employee who tried to blow the whistle on the scheme.
The virtual schools were authorized by Daleville Community Schools.
“In this instance, it was clear that the operator was a bad actor and the authorizer was really asleep at the wheel,” said Brown. ”There were obviously questions and concerns that should have been raised here. Just looking at these enrollment figures, looking at I think at a lot of the challenges at that school, it should have raised concerns years in advance and it didn’t seem like the school district that was actually acting as the authorizer, who, by the way, was raking in millions every year in authorizing fees, was really doing anything at all to monitor that school.”
Dr. Greg Roach, Superintendent of Daleville Community Schools, issued the following statement:
“Daleville Community Schools and its employees are committed to transparency and have cooperated fully with all investigating entities involved in the ongoing legal process. We understand the public’s interest in this matter. However, at this time, it would not be appropriate for us to provide further comments or details until the legal process is complete. We remain dedicated to the highest standards of integrity and will continue to cooperate with authorities throughout this process.
Any specific questions about the indictment should be directed to the U.S. Attorney’s Office.”
