The Indiana Statehouse appears on May 5, 2017, in Indianapolis. Indiana’s Republican leaders are calling for a short 2024 session focused on “fine-tuning” policy. The session beginning Jan. 8, 2024, must adjourn by March 14. (AP Photo/Michael Conroy, File)
INDIANAPOLIS- A federal grand jury has returned an indictment charging three individuals for their alleged roles in a conspiracy to defraud the Indiana Department of Education through their operation of two online charter schools, Indiana Virtual School (IVS) and Indiana Virtual Pathways Academy (IVPA).
Indicted were: Tom Stoughton Sr., 74, of Carmel, on one count of conspiracy to commit wire fraud, 16 counts of wire fraud and 57 counts of money laundering; Phillip Holden, 62, of Middletown, one count of conspiracy to commit wire fraud and 16 counts of wire fraud and Percy Clark, 81, of Carmel, one count of conspiracy to commit wire fraud, 16 counts of wire fraud and 11 counts of money laundering.
In addition, Christopher King, 61, of Green Fork, Indiana, has entered a plea of guilty to conspiracy to commit wire fraud.
According to the indictment, between the summer of 2016 and 2018, the defendants allegedly submitted false numbers to IDOE representing the enrollment of more than 4,500 students that they knew were not attending IVS or IVPA.
Like other public and charter schools, IVS and IVPA received funding from the state of Indiana based upon the number of students a school claimed to be enrolled and attending the school. In general, the more students enrolled, the more funding IVS and IVPA received from the state of Indiana. The indictment alleges the defendants manipulated this process to inflate enrollment numbers and ultimately receive more funding.
As a result of these false submissions, IDOE paid in excess of $44,000,000 to IVS/IVPA, investigators said.
The defendants allegedly caused students to be enrolled or remain enrolled in IVS/IVPA who should not have been, by directing employees to stop verifying student interest before they were enrolled or reenrolled, and by making incomplete student applications available so that the student information could be used to enroll students for the 2017 and September 2018 Count Days. Most of these “students” never actually attended either school.
Shortly before the September 2018 Count Day, the defendants allegedly directed their information technology contractor to compile a list of students who were not listed in the Indiana Department of Education database as attending another school and who had previously been unenrolled from IVS or IVPA due to inactivity. Upon receiving a list of approximately 600 such students, the defendants directed employees to reenroll many of these students and be counted on the September 2018 Count Day.
After IVPA was created in 2017, the defendants allegedly transferred hundreds of students who had not been attending any classes from IVS to IVPA to continue to “count” and receive money for these students but also “protect” IVS from being held accountable by the IDOE for the students’ non-performance.
In the spring of 2017, Holden and Clark allegedly fired an employee who sent an email to IDOE attempting to inform the department of fraud that was occurring at IVS.
IVS and IVPA allegedly paid money received from the state of Indiana to fraudulent for-profit companies, many of which were controlled or operated by Stoughton, according to the indictment. After the money was funneled through these for-profit companies, millions of dollars were paid out to Stoughton and members of his family, Clark, King, and others.
The Indiana State Board of Accounts performed an audit on IVS and IVPA in 2019. The SBOA referred the audit findings to the FBI, U.S. Department of Education Office of Inspector General, Indiana State Police, and Indiana Office of Inspector General, who investigated this case. If convicted, each defendant faces between 10 and 20 years in federal prison per count.
U.S. Attorney Zachary A. Myers thanked Assistant U.S. Attorneys Bradley P. Shepard and Samantha Spiro, who are prosecuting this case.
An indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt.
