Oklahoma state investigators claim an online charter school pocketed millions in taxpayer funds by inflating its enrollment and tricking parents into participating in the alleged fraud.
Epic Charter Schools’ founders, David Chaney and Ben Harris, face accusations of enrolling “ghost students” who received little or no instruction because they already attended private schools or their parents homeschooled them. Investigators said Epic offered families who double-enrolled an $800 “learning fund” they could spend without any obligation to receive instruction through Epic.
Approved purchases—funneled through Epic’s chief financial officer—included furniture, musical instruments, horseback and karate lessons, toys, and computers. In another violation of Oklahoma state law, Epic also paid families’ membership dues to homeschool organizations.
Epic Charter Schools received nearly $113 million in taxpayer funds last year.
Launched in 2011, the online school now serves more than 21,000 students, rivaling the size of Oklahoma’s largest public school districts. Chaney and Harris own the for-profit company that manages Epic schools in exchange for a 10 percent cut of the revenue, which includes millions of dollars in state funding calculated on a per-pupil basis.
The Oklahoma State Bureau of Investigation claims that on top of the ghost student scheme, Epic also paid hundreds of vendors for extracurricular activities, a practice prohibited by Oklahoma state law. Last week, the bureau obtained a search warrant targeting the home of a coach who provided athletic services to homeschool students through the online school.
Epic has placed plans to expand into Texas on hold pending the outcome of the investigation.
Parents say they didn’t know the extent of the alleged scam.
In a warrant issued in July, SBI agent Tommy Johnson said many Epic teachers admitted they knew about the enrollment padding and referred to the ghost student families as “members of the 800 club.” In his interviews with parents, Johnson said many of them acknowledged they enrolled their students for the sole purpose of accessing the $800 fund even though state law prohibits dual enrollment. Parents said Chaney characterized the arrangement as merely accessing a state-funded tutoring option, making it seem like a legitimate enhancement to their child’s homeschool or private-school education.
Chaney and Harris issued a statement denying the accusations. “We are confident the facts will once again vindicate our team,” they wrote, referring to an earlier investigation for fraud several years ago. According to the office of the state’s attorney general, authorities never officially closed that case.
Online charter school scams are popping up more often.
Similar cases have arisen in Ohio, Indiana, and California. Authorities in California indicted 11 people on multiple criminal charges of creating phantom institutions that defrauded taxpayers of more than $50 million.
Greg Richmond, CEO of the National Association of Charter School Organizers, said current state laws are not designed to deal with charter schools, especially online schools like Epic.
“When you put all that together, someone who is ill-intentioned can drive a truck through that, and we’ve seen that happen now in several states,” Richmond said. “And because they are virtual schools, they’re not misappropriating funds for 300 or 400 kids. It can be 3,000 or 4,000 kids, so the scale is at a whole other level compared to a brick-and-mortar school.”