Former Indiana virtual charter school official to plead guilty in $44M fraud case

A former administrator of two defunct Indiana virtual charter schools has agreed to plead guilty to a federal charge of wire fraud conspiracy as part of a sweeping $44 million scheme to defraud the state’s education department.

Percy Clark, who helped oversee Indiana Virtual School and Indiana Virtual Pathways Academy, admitted to participating in a plan to inflate student enrollment numbers to obtain tens of millions of dollars in state education funding.

According to a plea agreement filed in federal court on May 27, Clark will avoid prison time but serve five years of probation, including two years of home confinement without electronic monitoring. He will also be jointly responsible for paying $44.6 million in restitution.

A lawyer for Clark did not immediately respond to a request for comment.

Clark is one of three defendants arrested in 2024 following a multiyear federal investigation by the U.S. Attorney’s Office for the Southern District of Indiana and the FBI into the virtual schools’ operations.

Clark is set to be in federal court in Indianapolis on June 11. His co-defendants, Thomas Stoughton and Phillip Holden, are scheduled for plea hearings on July 11, according to court records.

Clark was originally charged with conspiracy to commit wire fraud, 16 counts of wire fraud and 11 counts of money laundering. At the time, former U.S. Attorney Zachary Myers said that if convicted, Clark could face up to 10 to 20 years in federal prison for each count.

Indiana Virtual School and Indiana Virtual Pathways Academy were once two of the state’s largest online charter schools, which are publicly funded and privately managed. Despite enrolling thousands of students, both schools faced scrutiny over their academic performance and financial dealings. 

In 2017, Chalkbeat Indiana published an investigation into Indiana Virtual School that found there was only one teacher for every 222 students.

School leaders abruptly shut down the programs in 2019 amid investigations by the state alleging they received public funding for students who were not actually attending classes.

Federal prosecutors allege that school leaders, including Clark, misrepresented enrollment data submitted to the Indiana Department of Education between 2016 and 2018. In reality, thousands of students either never logged in or had already left the schools. Investigators even found that one student was enrolled after their death.

In the spring of 2017, prosecutors claim Clark and co-defendant Holden fired an employee who sent an email to the Indiana Department of Education attempting to inform them of the fraud at Indiana Virtual School.

In total, the state sent more than $44 million in payments based on the inflated numbers, according to the indictment.

According to the plea agreement, Clark admits he was aware of facts that should have alerted him to the enrollment fraud but deliberately avoided learning the truth. The government alleges Clark personally received more than $1.2 million as part of the scheme.

The agreement also stipulates that Clark may face forfeiture of assets valued at $1.26 million. The restitution owed — $44.6 million — is to be paid jointly with any co-defendants convicted in the case.

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

Prosecutors describe the scheme as one of the largest known cases of public education fraud in Indiana. In 2024, the U.S. Attorney’s Office said the defendants “manipulated student data and misused public funds intended to support student education.” 

The two schools operated under a charter from Daleville Community Schools, a small public school district in east-central Indiana.

The criminal case has led to calls for stricter oversight of virtual charter schools in Indiana, particularly as enrollment in online learning continues to increase. 

Last year, Christopher King — former manager of school operations for AlphaCom — pleaded guilty to conspiracy to commit wire fraud. AlphaCom is the for-profit company that was hired to manage Indiana Virtual School and Indiana Virtual Pathways Academy, according to reporting from Chalkbeat Indiana.

In 2021, Indiana Attorney General Todd Rokita filed a lawsuit against the two virtual schools, several service vendors, and several individuals including Clark connected to the schools or those companies. The civil suit, which remains active, seeks more than $154 million in improperly spent public funds.

Eric Weddle is WFYI's education team editor. Contact Eric at eweddle@wfyi.org or follow him on X at @ericweddle.