Four men accused of defrauding Indiana Education Department for $44 million

Between 2016 and 2018, four men allegedly collected funding for more than 4,500 students who were not actually attending online schools.
gold coins
Stacks of American Gold Eagle bullion coins sit atop $100 bills. (Getty Images)

A federal grand jury indicted three former administrators of two online charter schools on Tuesday for charges related to a conspiracy that defrauded the Indiana Department of Education of nearly $44 million by submitting false enrollment reports, according to the U.S. Attorney’s Office. A fourth man involved entered a guilty plea for his role in the scheme.

Between 2016 and 2018, the defendants submitted false enrollment numbers to the Indiana education department representing the enrollment of more than 4,500 students that were not attending Indiana Virtual School and Indiana Virtual Pathways Academy, according to the indictment.

Both online charter schools are eligible to receive funding from the State of Indiana based upon the number of students attending the school. The indictment accuses the defendants of manipulating that funding process by inflating enrollment numbers to receive more funding.

The defendants are accused of enrolling students with incomplete applications to either school as well as maintaining students’ enrollment after they were considered “inactive.” Most of the purported students never actually attended courses through either virtual charter school, according to a press release from the U.S. Attorney’s Office for the Southern District of Indiana.


In 2017, two of the defendants allegedly fired an employee who contacted the state’s education department in an attempt to notify the officials of fraud that was occurring at Indiana Virtual School.

Tom Stoughton Sr., 74, Phillip Holden, 62, and Percy Clark, 81, are facing a combined 119 charges, ranging from wire fraud to money laundering for their alleged roles in the scheme. The fourth man, Christopher King, 61, entered a guilty plea to conspiracy to commit wire fraud.

Stoughton’s charges involved money laundering, and the indictment lists several related transactions including more than $50,000 in 1-ounce American Gold Eagle bullion coins, $58,000 for a Cadillac, $11,000 in jewelry from Tiffany & Company and about $80,000 in tuition to a private school.

According to the indictment made available by WFYI Public Media, Stoughton owned and controlled both schools, as well as related companies. Holden served as director of Indiana Virtual School but also took on roles related to enrollment and student attendance for both virtual charter schools. Clark served as superintendent of both schools and reported to Stoughton. King was an officer for a company owned by Stoughton and served as Manager of School Operations for both schools and oversaw enrollment.

The schools were authorized and overseen by the public school district Daleville Community Schools. Both online charter schools closed in the fall of 2019 after allegations of inflating enrollment, according to WFYI.


A trial for the three defendants who have not pleaded guilty has yet to be scheduled. If convicted, each defendant faces between 10 to 20 years in federal prison per count.

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