Epic Charter Schools embezzled millions with 'ghost students,' Oklahoma State Bureau of Investigation says

A state investigation alleges Epic Charter Schools, the state’s largest virtual charter school system, embezzled millions in state funds...

A state investigation alleges Epic Charter Schools, the state’s largest virtual charter school system, embezzled millions in state funds by illegally inflating enrollment counts with “ghost students.”

The Oklahoma State Bureau of Investigation alleged Epic co-founders David Chaney and Ben Harris “devised a scheme to use their positions as public officers to unlawfully derive profits from state appropriated funds.”

An OSBI agent made the allegations in a search warrant that sought evidence of embezzlement, obtaining money by false pretenses and racketeering.

Investigators reported Chaney and Harris “created a system of financial gain at Epic” when they founded the virtual charter school in 2010. The two co-founders have managed the virtual charter school through a for-profit company, Epic Youth Services, which receives a portion of Epic’s state funds.

Epic, which enrolled just under 20,000 students last year, is a public charter school that receives state education funding for each student enrolled. There is no cost to students to attend.

In a statement emailed to The Oklahoman, Epic referred to the allegations as a "coordinated effort" to attack a fast-growing school that "makes status quo education lobbying groups uncomfortable," said Shelly Hickman, assistant superintendent of communications for Epic.

“We are audited by the Department of Education and state approved auditors each school year and are supremely confident that we operate our public school system within the boundaries of state and federal law," Hickman added. "Since our inception in 2011 we have time after time proven ourselves innocent of all allegations. We will again."

In its search warrant, OSBI alleged between 2013 and 2018, Chaney and Harris unlawfully received $10 million in profits from Epic Youth Services and split the total.

OSBI agents reportedly found dozens of “ghost students” counted in Epic’s enrollment numbers, though they were homeschooled or also attended private and sectarian schools, according to the search warrant, which was filed Tuesday in Oklahoma County District Court.

These students were enrolled in Epic but “received little or no instruction from Epic teachers.”

“Ben Harris and David Chaney enticed ghost students to enroll in Epic by offering each student an annual learning fund ranging from $800 to $1,000,” OSBI reported in the warrant. “… The parents of many of the homeschool students admitted they enrolled their children in Epic to receive the $800 learning fund without any intent to receive instruction from Epic.”

Several parents refused instruction from Epic teachers but continued to accept the $800 learning fund and expenses, investigators found. Many Epic teachers dubbed these families “members of the $800 club,” investigators said.

Chaney reportedly estimated during a board meeting in April 2013 that 30% of Epic students were homeschooled. The OSBI alleged Chaney was personally involved in recruiting homeschool, private and sectarian school students for dual enrollment in Epic.

Investigators spoke with multiple parents, schools and day care centers that all reported Epic incentivized them to dual enroll children. Many children were enrolled at Epic without their parents’ knowledge or consent while the school or learning center received money from Epic, according to the warrant.

One woman, whom investigators only identified by her initials LDW, operated a sectarian school in Sapulpa when Epic presented her with an opportunity for an “economic windfall.” The woman converted her school to a learning center under the “Epic model” to take advantage of the economic benefits, agents reported.

LDW allowed students to work on Epic assignments for three hours to get credit for a full school day, though state law requires six hours of instruction. LDW and her staff were not certified teachers. In fact, investigators said LDW should have been prohibited from working on school premises because she is a convicted felon, having pleaded guilty in 2010 to mortgage fraud in Florida federal court.

Ghost students were not held to general Epic policies for attendance and academic standards, investigators reported. Epic's truancy policy stated any student who didn't complete at least five graded assignments over 10 consecutive days would be withdrawn.

One teacher told the OSBI that she was pressured to drop poor-performing students from enrollment so they wouldn’t count against Epic’s standardized test scores.

"(The teacher) forced the students into truancy by giving them assignments that were impossible to complete, and they were withdrawn from Epic," the search warrant states. “The students were later re-enrolled without the knowledge or consent of their parents.”

One student withdrew from Epic when her family moved to Portland, Oregon, from Oklahoma City in September 2017. However, she was still listed as a student at an Epic blended learning center through the 2017-18 and 2018-19 school years.

The student’s name still belonged to the roster of Epic teacher Jennifer Patton. OSBI agents seized Patton’s computer Monday evening while serving the search warrant at her Oklahoma City home. Patton could not be reached for comment.

The OSBI found Harris allowed hundreds of students to remain on Epic’s rolls even though they no longer attended Epic.

Oklahoma State Superintendent Joy Hofmeister called the allegations from OSBI "extremely serious and disturbing."

"The State Department of Education stands ready to work with any criminal investigation to determine if public education and countless Oklahoma taxpayers have been defrauded of millions of dollars," Hofmeister said in a statement. "In the meantime, it is important to let the legal system do its work. For the sake of Oklahoma students and families all across the state, we must ensure accountability of all education funding. We understand that today's events may create confusion and stress for many students and families. They have our support.”