A former charter school educator has plead guilty in what is being called one of the largest cases of public education fraud known in Indiana.. Photo by Tingey Injury Law Firm, Unsplash.

News Release

INDIANAPOLIS — The former director of two since-closed virtual charter schools in Indiana has agreed to plead guilty to federal charges of wire fraud conspiracy, as part of a $44 million plan to defraud the state’s Department of Education.

Carmel’s Percy Clark, 82, who helped oversee the Indiana Virtual Pathway Academy and Indiana Virtual School, admitted to taking part in a plan to artificially increase the number of students enrolled, to obtain tens of millions of dollars in state education funding.

Court documents show that Clark will avoid jail, but but will be on probation for five years, including two years of home confinement without electronic surveillance. He will also be jointly responsible for the payment of $44.6 million in compensation.

Clark was superintendent of Lawrence Township Schools from 1982 to 1996, but resigned after the school board accused him of lying about an extramarital affair with an elementary school principal.

The arrest was one of three in 2024, coming after a multi-year federal investigation by the FBI and U.S. Attorney’s Office for the Southern District of Indiana.

Clark is expected to be in Indianapolis federal court on Wednesday, June 11 while co-defendants Thomas Stoughton and Phillip Holden will be heard in court Friday, July 11.

Clark was initially charged with conspiracy to commit wire fraud, 11 counts of money laundering and 16 counts of wire fraud. Former U.S. attorney Zachary Myers said at the time that if convicted, Clark could face 10 to 20 years in federal prison on a single charge.

The Indiana Virtual School and the Indiana Virtual Pathway Academy were once two of the state’s largest online charter schools — meaning publicly funded, but privately ran. Despite the enrollment of thousands of students, both schools were scrutinized over their school performance and financial transactions.

In 2017, Chalkbeat Indiana published a survey of virtual schools in Indiana and found a teacher-student ratio of one to 222.

Education leaders abruptly suspended the program in 2019, amid state investigations alleging public funding was being given for students who did not actually attend classes.

According to federal prosecutors, school leaders including Clark submitted misleading enrollment data to the Indiana Department of Education between 2016-18. Thousands of students in submitted data had already left the schools or never logged on. Investigators even discovered a student enrolled after their death.

Prosecutors claim Clark and Holden fired an employee who tried who inform the Indiana Department of Education of the fraud via email in 2017.

The indictment says that the state sent a total of more than $44 million in payments based on the inflated figures.

Clark was aware of facts that should have alerted him to the fraud, the plea agreement states, but he purposefully avoided learning the truth. The government says Clark personally collected more than $1.2 million as part of the scheme.

The agreement says that Clark could face the confiscation of $1.26 million in assets. The compensation, totaling $44.6 million, must be paid jointly by the convicted co-defendants in this case.

In addition to accepting responsibility, Clark waived the right to appeal the sentence.

Prosecutors have described the plan as one of the largest cases of public education fraud known in Indiana.  The two schools were run under a Daleville Community Schools charter, a small public school district in east-central Indiana.

This case has led to calls for stricter supervision of virtual charter schools in Indiana, mainly as the number of students entering online learning continues to grow.

Last year, Christopher King, AlphaCom’s former director of school operations, pleaded guilty to wire fraud conspiracy. According to a report by Chalkbeat Indiana, AlphaCom is a for-profit company hired to run the Indiana Virtual School and the Indiana Virtual Pathway Academy.

In 2021, a lawsuit was opened against the two virtual schools, several service providers and several individuals, including Clark, who were associated with the school or its activities. The active civil lawsuit, filed by Indiana Attorney General Todd Rokita, seeks more than $154 million in improperly used public funds.