Investigators say two men at the helm of Epic Charter Schools defrauded taxpayers out of tens of millions of dollars over a decade. Details of the scheme, which the state auditor called the largest abuse of taxpayer dollars in Oklahoma history, will be unveiled in court this week.
A hearing in the embezzlement case against David Chaney and Ben Harris begins Monday. Oklahoma County District Special Judge Jason Glidewell allotted five days for the preliminary hearing, which is like a mini-trial, with witnesses and evidence and cross-examination. The purpose is for the judge to determine whether there’s enough probable cause to proceed to trial.
Chaney and Harris are each charged with fifteen felonies, including embezzlement, money laundering, computer crimes and conspiracy to defraud the state. They have denied wrongdoing.
Epic’s former chief financial officer, Josh Brock, faces the same felony charges but waived his preliminary hearing. He is expected to be one of several witnesses this week and will likely take a plea deal.
His attorney, Irven Box, said Brock is ready to move forward.
Chaney and Harris founded Epic in 2010 and contracted with their own for-profit company, Epic Youth Services, to manage the school for 10% of all revenue. That fee exceeded the state’s 5% cap on school administration expenses.
Chaney was also the school’s superintendent until 2019, allowing him to negotiate contracts and control the school’s finances. Brock was the chief financial officer of both the school and the company, which gave him the authority to handle both sides of financial transactions between Epic and the management company.
In addition to the management fee, Epic Youth Services collected money for the learning fund, an account set aside for students’ laptops, extracurricular activities and other expenses. The amount ranged from $800 to $1,000 per student annually under Epic Youth Services. Investigators said Epic Youth Services kept unspent funds in that account instead of returning the money to the school.
Epic cut ties with Chaney, Harris and Brock in 2021 and restructured amid a contract dispute with its authorizer, the Statewide Virtual Charter School Board. It is still the state’s largest online school but is no longer privately managed.
Shell Companies and False Invoices
Chaney, Harris and Brock were arrested and charged in June 2022 under the state’s Racketeer Influenced and Corrupt Organizations Act, or RICO.
Prosecutors allege the men diverted tens of millions of dollars meant for students’ education through a complicated scheme involving shell companies and false invoices.
More students equaled more state funding rolling in. At its peak in the fall of 2020, Epic had a roster of 60,000 students.
Some of the charges involve illegally moving funds between Epic’s Oklahoma schools and an out-of-state charter school and using student learning fund money to make credit card payments. The credit card was used for school purchases and personal expenses. It was used to buy political influence, investigators said, via political campaign donations and lobbyist payments.
The men are also charged with money laundering by forming a shell company, Edtech, LLC, to conceal profits and justify fraudulent management fees between 2017 and 2021, a time when law enforcement and state regulators had ramped up investigations. Gov. Kevin Stitt called for an audit of the school in July 2019. State Auditor Cindy Byrd’s findings, released in October 2020, laid the groundwork for the criminal charges.
Prosecutors’ review of Epic Youth Services’ bank accounts revealed the company collected more than $69.3 million in management fees between 2013 and 2021, court records show. Of that, the trio split $55 million: Harris received $25 million, Chaney received $23 million and Brock received more than $7 million.
Oklahoma Attorney General Gentner Drummond is seeking jail time and full restitution, he said in an interview with the Tulsa World in January 2022, shortly after taking over the criminal case from the Oklahoma County district attorney.
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Oklahoma Watch, at oklahomawatch.org, is a nonprofit, nonpartisan news organization that covers public-policy issues facing the state.
