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Lawsuit seeks $150M from Indiana online schools fraud claims

"This massive attempt to defraud Hoosier taxpayers through complex schemes truly boggles the mind," Attorney General Todd Rokita said.
Credit: AP
FILE- In a Sept. 13, 2019 file photo the closed office of Indiana Virtual School, in Indianapolis, is seen with a message to creditors taped to the door stating that it no longer had assets or bank accounts. The leaders of two now-closed Indiana online charter schools are accused in a new lawsuit of defrauding the state of more than $150 million by padding their student enrollments and inappropriately paying money to web of related businesses. (AP Photo/Tom Davies, File)

INDIANAPOLIS — The leaders of two now-closed Indiana online charter schools are accused in a new lawsuit of defrauding the state of more than $150 million by padding their student enrollments and inappropriately paying money to a web of related businesses. 

The lawsuit announced Monday by the Indiana attorney general's office comes nearly two years after Indiana Virtual School (IVS) and Indiana Virtual Pathways Academy (IVPA) shut down amid a state investigation that found they improperly claimed about 14,000 students as enrolled even though they had no online course activity. 

IVS and IVPA operated online charter schools sponsored by Daleville schools from 2015 to 2019, when Daleville officials revoked the charters because the online charter schools failed to meet minimum academic standards and didn't comply with accounting, among other reasons.

The State Board of Accounts (SBOA) later found the virtual schools misrepresented the number of enrolled and attending students and that the schools wrongfully received more than $68 million from the State of Indiana.

The schools also are said to have wrongfully paid more than $85 million of public funds to a web of related businesses. These payments had no invoice or no itemized information on the invoice.

Indiana Attorney General Todd Rokita's lawsuit seeks more than $154 million in damages. 

“This lawsuit is historic because it represents the largest amount of monetary damages ever sought by our office following a State Board of Accounts investigation,” Rokita said. “This massive attempt to defraud Hoosier taxpayers through complex schemes truly boggles the mind. This case demonstrates once again that public servants must remain ever vigilant in our work to safeguard the public treasury from opportunists.”

An audit linked much of the misspending to Thomas Stoughton, who headed the schools until 2017. An attorney for Stoughton declined to comment.

This matter has also been referred to federal and state criminal investigative agencies.