Indiana Virtual Charters Charged with Defrauding State of Over $150 Million

Indiana Attorney General Todd Rokita filed suit against three virtual charter schools in an effort to recoup more than $150 million that the state says was wrongly obtained or misspent by the schools, The Indianapolis Star reported.

The State Board of Accounts conducted a special investigation that found that Indiana Virtual School, Indiana Virtual Pathways Academy, and Indiana Virtual Educational Foundation “had inappropriately received more than $68.7 million,” and that an additional $85 million was “improperly paid to 13 different vendors that were related to the schools through a common employee or family member.”

State investigators revealed that the charter schools “inflated their enrollment to defraud the state” by enrolling students who had merely requested information on the school’s Web site and by re-enrolling students who had left the schools, the paper reported. In one case, a school kept a deceased student officially enrolled for more than a year after the student’s death.

Investigators also found that from the 2016-17 school year to the 2018-19 school year, Indiana Virtual School and Indiana Virtual Pathways Academy “received more than $103 million in state funds and funneled more than $85 million to related parties.” Among them, American Pathways Academy – whose CFO, Merle Bright, is the father of the schools’ CFO, Greg Bright –received more than $32 million from the schools for which there are no invoices.

“The state calculated that American Pathways was overpaid by more than $22 million,” the Star reported, because the fees charged by the company were based on inflated enrollment figures. Merle Bright is also a signer on multiple bank accounts for the schools, and “signed more than $3 million worth of checks that the schools paid to American Pathways.”

Two other organizations that Merle Bright is connected with–Eightbit and Cyber Educational Services–were overpaid by more than $14 million and $8 million, respectively. AlphaCom, which was founded by the virtual schools’ founder Thomas Stoughton and for whom Merle Bright served as CEO and Treasurer, was overpaid by nearly $10 million, according to state investigators. More than $2 million in checks to AlphaCom were signed by the company’s founder, Stanton.

Indiana Virtual School and Indiana Virtual Pathways Academy operated in Daleville since 2011 and 2017, respectively, until Indiana Virtual Pathways’ charter was revoked over “issues with both academic performance and compliance with the state laws and regulations,” according to the Star.