Jan. 25—A federal grand jury has indicted three people in an alleged conspiracy to defraud the Indiana Department of Education of millions of dollars via two online charter schools.
A fourth defendant has pleaded guilty.
The schools involved are the Indiana Virtual School and Indiana Virtual Pathways Academy. The virtual schools closed in 2019.
Indicted are:
Tom Stoughton Sr., 74, of Carmel: one count of conspiracy to commit wire fraud; 16 counts of wire fraud and 57 counts of money laundering;
Phillip Holden, 62, Middletown: one count of conspiracy to commit wire fraud and 16 counts of wire fraud;
Percy Clark, 81, of Carmel: one count of conspiracy to commit wire fraud, 16 16 counts of wire fraud and 11 counts of money laundering.
If convicted, each defendant faces between 10 and 20 years in federal prison per count.
Christopher King, 61, of Green Fork, has entered a plea of guilty to conspiracy to commit wire fraud.
According to the indictment, which federal prosecutors announced Thursday, the defendants submitted false numbers to IDOE representing the enrollment of over 4,500 students that they knew were not attending. These submissions were made between at least the summer of 2016 and 2018.
Like other schools, IVS and IVPA received funding from the state based upon the number of students a school said were enrolled and attending. Federal prosecutors allege the defendants knowingly manipulated the process to inflate enrollment in order to receive more funding.
As a result of these false submissions, the government said, IDOE paid more than $44 million to IVS/IVPA. Most of the claimed students never actually attended either school, the government says.
Also, the government says that in the spring of 2017, Holden and Clark also fired an employee who sent an email to IDOE attempting to inform the department of fraud.
The two schools allegedly paid money received from the state to fraudulent for-profit companies, many of which were controlled or operated by Stoughton, the government said. After the money was funneled through these companies, millions 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. It referred the audit findings to the FBI, U.S. Department of Education and other agencies, which began an investigation.