Indiana Republicans say law adequate despite school fraud

Indiana Republican leaders are resisting steps toughening state laws on privately operated online schools, pushing aside blame in the alleged enrollment inflation by two such schools that wrongly collected $69 million in taxpayer money.

The state audit of Indiana Virtual School and Indiana Virtual Pathways Academy released this month outlined how they paid nearly $86 million to companies linked to the schools’ founder or his associates with little or no documentation about what services they provided.

Republicans who dominate the state Legislature have rejected complaints from Democrats that responsibility for the fraud rests with lax regulations dating from the 2011 GOP-driven state education overhaul. Gov. Eric Holcomb and GOP legislative leaders did say this past week that they would give up campaign contributions from sources related to the two schools, which Democrats say topped $100,000 to state Republicans since 2015.

The Republican-controlled Senate education committee voted down on Wednesday a Democratic proposal that would’ve required charter schools, which are privately operated with state funding, to be covered by surety bonds that would refund the state for instances of fraud.

Committee Chairman Sen. Jeff Raatz, a Richmond Republican, pointed to a law adopted last year after the possible enrollment padding became public that added a new requirement that online schools drop from their enrollment figures any student who is a habitual truant.

The State Board of Accounts found the two online schools improperly claimed about 14,000 students as enrolled between 2011 and 2019, even though they had no online course activity. Other allegations included a deceased student being counted more than a year after his death and two students who moved to Florida in 2011 included as enrolled as recently as the 2018-19 school year.

“I’m of the opinion, after a great deal of checking on things, that things are fairly well set into place to make sure that anything like this doesn’t happen again,” Raatz said.

Democrats assert that Republicans are shirking their responsibility for a massive fraud involving the schools that received 100% of their funding from the state and that the 2011 law over such schools had “no teeth.”

“It’s because they failed to supervise,” said Democratic Rep. Ed DeLaney of Indianapolis. “We passed thin legislation with no regulatory structure.”

Republican House Speaker Brian Bosma assigns blame to the state Department of Education for not properly confirming the schools’ enrollment claims. That agency is led by state schools Superintendent Jennifer McCormick, who has split with fellow Republicans over her support for increased scrutiny of charter and private schools that receive state money.

“It’s pretty tough to legislate, to overcome criminal intent,” Bosma said.

The Indiana investigation comes as similar enrollment inflation cases involving online charter schools have happened in Ohio, Oklahoma and California.

The Indiana audit report said its findings had been given to federal and state authorities for possible criminal violations. A federal grand jury subpoena to the schools in August was included in documents released last year, but a spokeswoman for the U.S. attorney’s office in Indianapolis has declined to comment.

Past attorneys for the schools, which shut down last summer, or their founder, Thomas Stoughton, have declined to discuss the allegations or haven’t returned telephone messages seeking comment. Three online charter schools operated by other organizations with about 6,400 students continue operating, according to the state education department.

The Department of Education said it hasn’t had the authority to oversee whether charter schools are complying with state and federal laws.

“To blame the Department of Education for the malfeasance at these schools is unwarranted and counterproductive, as we have worked within our legislatively created authority and capacity,” the department said in a statement.

Stoughton and at least three companies improperly paid by the online schools made about $107,000 in state campaign contributions since 2015. That included $10,000 each for Holcomb, Bosma and the Republican Senate and House campaign committees, while less than $1,000 went to Democrats.

Holcomb and GOP legislative leaders say they will donate those contributions to education organizations—decisions announced after state Democratic Chairman John Zody called acceptance of the money “shady” and “politics as usual for Indiana Republicans to push policy that benefits their deep-pocketed donors.”

Holcomb said the enrollment fraud “dragged on too long.”

“We know there’s been wrongdoing on a scale that I couldn’t have imagined,” Holcomb said. “We’ve got to figure out how.”