Two Carmel men are among three people indicted by a federal grand jury for their alleged roles in conspiring to defraud the Indiana Department of Education of more than $44 million by inflating enrollment totals of students attending two online charter schools.
Those charged are:
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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
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Percy Clark, 81, of Carmel, one count of conspiracy to commit wire fraud, 16 counts of wire fraud and 11 counts of money laundering
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Phillip Holden, 62, of Middletown, one count of conspiracy to commit wire fraud and 16 counts of wire fraud
Christopher King, 61, of Green Fork entered a guilty plea to conspiracy to commit wire fraud.
According to the indictment, between at least 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 Indiana Virtual School or Indiana Virtual Pathways Academy.
IVS and IVPA received funding from the state based upon the number of students a school claimed to be enrolled and attending. The indictment alleges the defendants manipulated this reporting process to inflate enrollment numbers and ultimately receive more funding. As a result of these false submissions, IDOE paid in excess of $44 million to IVS/IVPA.
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 the students counted 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 IDOE 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 are accused of directing 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 to fraudulent for-profit companies, many of which were controlled or operated by Stoughton. After the money was funneled through these for-profit companies, millions of dollars were allegedly 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. A trial for the three defendants who have not pleaded guilty will be scheduled later. If convicted, each defendant faces between 10 and 20 years in federal prison per count.
Former Lawrence Township superintendent among those indicted in fraud case
By Leila Kheiry
Percy Clark, 81, was the longtime superintendent of Metropolitan School District of Lawrence Township, and while lauded for his administrative skills, he was asked to resign in spring of 1996 following accusations of an extramarital affair with another administrator.
According to a March 19, 1996, article from the Indianapolis News, then-board member Dan FitzGibbon read a statement to a room filled with parents and educators, stating that Clark had lied to the board repeatedly over 18 months.
According to the article, the board stated that their top administrator had to be someone trustworthy, and that it wasn’t the affair but the deception that led them to ask for Clark’s resignation.
Clark had been suspended by the board March 15, 1996 — a Friday. On March 18, a day before his resignation was accepted, the Indianapolis News ran an article that Clark had been taken to the hospital the previous afternoon for a likely overdose of prescription medication.
Clark, who was Marion County’s first Black school superintendent, had led the Lawrence Township district for 14 years. He was 53 when he resigned.
Clark was back in a school district’s leadership role a few years later as superintendent of the Pasadena Unified School District in California. He took over that role in 2001 after a few years with Edison Schools, a for-profit company that operated public schools.
He left the Pasadena job in 2006, according to a Los Angeles Daily News article, after that district’s school board voted to replace him following disagreements over finances.
At some point between then and 2016, Clark returned to Indiana, where he became one of several men who started the Indiana Virtual School and Indiana Virtual Pathways Academy. He now faces federal charges of wire fraud and money laundering related to both of those online schools.
Metropolitan School District of Lawrence Township declined to comment, other than stating that it has been nearly 30 years since Clark served the district.
