Epic Charter Schools’ founders, who were arrested Thursday, shifted millions of school dollars to company credit cards, which were used to make political campaign donations, fund a lobbyist and pay personal expenses like vacations, the Oklahoma State Bureau of Investigation alleges in court documents.
Following a yearslong investigation into alleged embezzlement of taxpayer funds, the co-founders of the state’s largest online school were arrested Thursday, along with the longtime chief financial officer, court records show.
David Chaney, 43, Ben Harris, 46, and Josh Brock, 40, were booked into the Oklahoma County Detention Center Thursday morning. Each is charged with racketeering, embezzlement, obtaining money by false pretense, conspiracy to commit a felony, violating the Oklahoma Computer Crimes Act, submitting false documents to the state and unlawful proceeds.
Investigators said the men ran a complicated criminal enterprise using the online charter school and a for-profit company, Epic Youth Services.
The scheme has cost the state more than $22 million, according to the OSBI.
The charges involve co-mingling of funds, excessive and unnecessary management fees, use of Oklahoma tax dollars in California, political influence, concealment of profits, submission of false invoices and the illegal use of employees.
One of the school’s largest recruitment tools, the learning fund, was used to conceal illegal purchases, agents alleged. For the learning fund, Epic makes at least $1,000 available to each student annually in a virtual account. Parents can allocate those dollars for curriculum, laptops and extracurricular activities.
Parents don’t receive the money directly. Instead, they request a purchase from Epic and the school transfers the money to Epic Youth Services, which pays the vendor.
Chaney and Harris used a separate bank account to make learning fund purchases, and investigators found Chaney and Harris didn’t return unused learning fund dollars.
The account received nearly $145 million between 2015 and 2021. More than 50 times, Chaney, Harris and Brock transferred public funds from the learning fund account to the private bank account for Epic Youth Services, which was then used to pay a lobbying firm. Capital Gains, a lobbying firm run by Robert Stem, a longtime friend of Harris’, was paid more than $500,000.
State Auditor and Inspector Cindy Byrd, whose office helped with the criminal investigation after several audits, said more than $55 million in public funds could have gone to the founders. The exact amount won’t be known until the Internal Revenue Service completes its own investigation.
Byrd, in a press conference at the Capitol, said Epic used a similar management and business structure to conceal expenses at its California school, Oxford Prep, as it did in Oklahoma.
“Epic Youth Services received thousands of dollars in consulting fees for Oxford Prep from 2013 to 2016,” Byrd said. “When Harris and Chaney and Brock created this complex scheme, which is the linking of nonprofits with for-profits to make money, it looks very similar to what was done in Oklahoma.”
Byrd, who is running for reelection in the primary election on Tuesday, said she had expressed concerns publicly and privately about Epic’s business practices under its founders and former CFO. She detailed more than $200,000 in political contributions to various candidates in the 2016 and 2018 elections, as well as money for public relations, lobbying and legal services to deflect questions about the school’s operations.
“The state auditor’s office has fought to ensure that this situation was not swept under the rug, even when Harris and Chaney utilized tax dollars to silence and discredit the investigation and findings,” Byrd said.
The political giving, some paid using a student learning fund credit card, continued in the 2020 election cycle. This time, much of the money was given to political action committees making independent expenditures to support or oppose candidates, Byrd said. Among the candidates targeted by those dark-money groups was Sen. Ron Sharp, who had called for an investigation into Epic in 2019. Sharp lost his reelection bid.
The affidavit said Chaney used his American Express to donate $100,000 in 2019 and 2020 to the Oklahoma Council of Public Affairs, an Oklahoma City-based think tank that has supported school choice. Epic Youth Services also donated more than $55,000 to the State Chamber of Oklahoma, which later filed a friend-of-the-court brief in a lawsuit supporting Epic’s legal position in keeping secret expenditures from the student learning fund.
Byrd called the embezzlement “the largest abuse of taxpayer funds in the history of the state.”
“Government is not a private business,” she said. “It is a stewardship of services, which means the taking and spending of money must be done in accordance with the law and with accountability and transparency.”
Epic Youth Service continued to embezzle funds after the audit began, the affidavit states. And while the company made periodic repayments, the amount repaid was more than $1 million less than the amount taken.
One of Chaney’s credit cards, used to make student learning fund purchases, was also used to pay for vacations and personal purchases, agents allege. And it accumulated points worth nearly $40,000.
The OSBI’s investigation started in 2013 at the request of Gov. Mary Fallin but accelerated in 2019 when investigators served two search warrants to collect evidence.
Later that year, Gov. Kevin Stitt called for an investigative audit of the school. The findings, released in 2020, revealed more than $125 million of the school’s revenue was directed to Harris and Chaney’s company, Epic Youth Services from 2015 to 2020. The two founded the school in 2011.
Epic severed ties with the co-founders, their company, and Brock last year.
Paul Campbell, who has served as Epic’s board chair since 2021, said Thursday he was not surprised by the arrests. “We’ll let the justice system do its part,” he said.
See all of our Epic Charter Schools coverage dating back to 2016 here.
Paul Monies, Keaton Ross and Whitney Bryen contributed to this story.
Jennifer Palmer has been a reporter with Oklahoma Watch since 2016 and covers education. Contact her at (405) 761-0093 or firstname.lastname@example.org. Follow her on Twitter @jpalmerOKC.