Former Pasadena Schools Superintendent Indicted on Wire Fraud, Money Laundering Charges

A federal grand jury has returned a 28-count indictment charging a former Pasadena Unified School District superintendent and three individuals for their alleged roles in a conspiracy to defraud the Indiana Department of Education (IDOE) through their operation of two online charter schools, Indiana Virtual School (IVS) and Indiana Virtual Pathways Academy (IVPA).

Percy Clark is charged with one count, conspiracy to commit wire fraud. 16 counts of wire fraud and 11 counts, money laundering.

If convicted, each defendant faces between 10 and 20 years in federal prison per count.

Clark served as the PUSD superintendent from 2001 and 2006. He left the district after the board voted to replace him. 

Also charged were Tom Stoughton Sr, and Phillip Holden.
Holden was charged with one count of conspiracy to commit wire fraud and 16 counts of wire fraud. Stoughton was also charged with one count of conspiracy to commit wire fraud and 16 counts of wire fraud in addition to 57 counts of money laundering. 

Christopher King has entered a plea of guilty to conspiracy to commit wire fraud.

Like other public and charter schools, IVS and IVPA received funding from the State of Indiana based upon enrollment and attendance. 

The indictment alleges the defendants manipulated this process to inflate enrollment numbers and ultimately receive more funding.

As a result of these false submissions, IDOE paid in excess of $44 million to IVS/IVPA.

According to the indictment, between the summer of 2016 and 2018, the defendants allegedly submitted false numbers to IDOE representing the enrollment of over 4,500 students that they knew were not attending IVS or IVPA.

The defendants allegedly fudged the numbers by directing employees to stop verifying student interest before they were enrolled or re-enrolled, and by making incomplete student applications available so that the student information could be used to enroll students for the 2017 and September 2018 count days.

Most of these “students” allegedly never actually attended either school.

In the spring of 2017, Holden and Clark allegedly fired an employee who sent an email to IDOE attempting to inform the department of fraud that was occurring at IVS.

Shortly before the September 2018 count day, the defendants allegedly directed their information technology contractor to compile a list of students who were not listed in the Indiana Department of Education database as attending another school and who had previously been unenrolled from IVS or IVPA due to inactivity.

Upon receiving a list of approximately 600 students, the defendants reportedly directed employees to reenroll many of these students and be counted on the September 2018 count day.

After IVPA was created in 2017, the defendants allegedly transferred hundreds of students who had not been attending any classes from IVS to IVPA to continue to “count” and receive money for these students but also “protect” IVS from being held accountable by the IDOE for the students’ non-performance.

IVS and IVPA allegedly paid money received from the State of Indiana to fraudulent for-profit companies, many of which were controlled or operated by Stoughton. Authorities allege that after the money was funneled through these for-profit companies, millions of dollars were paid out to Stoughton and members of his family, Clark, King, and others.

The Indiana State Board of Accounts performed an audit on IVS and IVPA in 2019. The SBOA referred the audit findings to the FBI, U.S. Department of Education Office of Inspector General, Indiana State Police, and Indiana Office of Inspector General, who investigated this case.