Indiana can proceed with its effort to recover $154 million from two defunct virtual charter schools and their leaders and business partners, a judge has ruled.
Judge Michael A. Casati rejected requests from school officials that he dismiss state lawsuits aimed at recovering the funds. His decisions were filed Monday in Hamilton Superior Court.
Attorney General Todd Rokita, representing the state, filed suit in July 2021 against Indiana Virtual School, Indiana Virtual Pathways Academy and several of their officers and business partners, alleging they misappropriated state funds. The lawsuit followed a State Board of Accounts investigation that found officials inflated enrollment figures and made improper payments to companies run by themselves and by associates.
A Hamilton County court hearing this week may determine whether Indiana taxpayers have a chance to recover $154 million from two virtual charter schools and their leaders and business partners.
The hearing, set for 1:30 p.m. Wednesday before Hamilton Superior Court Judge Michael Casati, concerns motions to dismiss a lawsuit to recover charter school funds that were allegedly obtained by fraud or improperly spent.
Attorney General Todd Rokita filed the suit in July 2021 on behalf of the state. Defendants include the schools — Indiana Virtual School and Indiana Virtual Pathways Academy — and several of their officers and employees. Also named are businesses that were affiliated with the schools.
It’s been a year since the State Board of Accounts released a detailed report alleging that tens of millions of dollars in “public funds were misappropriated” by two virtual charter schools. We’re still waiting to see if anyone will do anything.
Copies of the report were sent to the offices of local and federal prosecutors and the Indiana attorney general; but none are disclosing how they will respond. An official with the Marion County prosecutor’s office suggested the matter fell under federal jurisdiction. At the office of the U.S. attorney for the South District of Indiana, spokesperson Steven Whitaker provided a no-comment comment:
“It is difficult to get a man to understand something, when his salary depends upon his not understanding it!” — Upton Sinclair
We’ve known something fishy was going on with virtual charter schools since 2017, when a Chalkbeat Indiana investigation exposed shady business practices and lousy test scores and graduation rates at Indiana Virtual School and its sister school, Indiana Virtual Pathways Academy.
A blockbuster report this week from the State Board of Accounts shows just how bad it was – and it was worse than we’d imagined. The report charged that the schools overbilled the state by $68 million by vastly inflating the number of students who were enrolled in and attending classes online.
It also found schools made $85.7 million in questionable payments to vendors in which school officials or family members had an interest. Much of the taxpayer money that the schools received, the report shows, went to a network of for-profit businesses tied to school founder Thomas Stoughton and his associates.
Is Indiana finally getting serious about cracking down on abuses by virtual charter schools? It sure looks like it, but we’ll have a better idea after Wednesday’s meeting of the State Board of Education.
The board will decide whether to try to recover tens of millions of dollars that two of the schools – Indiana Virtual School and Indiana Virtual Pathways Academy – received for students who were enrolled but apparently didn’t take classes or earn credits.
State officials estimate the schools inflated their enrollment figures and were awarded more than twice the appropriate funding in the past three years. The estimate comes from the head of the State Board of Accounts, which is auditing the schools’ books after they fell years behind in filing financial reports.
A 2015-16 audit report for Indiana Virtual School was released last week, and it shows the school continued to pay millions of dollars to for-profit companies run by the school’s founder and his son.
Chalkbeat Indiana laid out the details of this arrangements in an investigation published in October 2017. The online charter school, while organized as a nonprofit entity, paid management, administrative and technology fees to AlphaCom Inc., a business run by school founder Thomas Stoughton.
It also paid A Simple Reminder, a business run by Stoughton’s son, for IT and marketing services. Thomas Stoughton, the AlphaCom head, also served as chairman of the Indiana Virtual School board.
In 2015-16, according to the audit report, the school was charged:
- $6,156,179 by AlphaCom.
- $1,255,000 by A Simple Reminder.