The co-founders of Epic Charter Schools were charged Thursday with wrongfully pocketing millions of taxpayer dollars and spending money intended for students on political contributions and personal expenses.
The Oklahoma State Bureau of Investigation arrested Ben Harris, David Chaney and their chief financial officer, Josh Brock, at 10 a.m. Thursday. They were booked into the Oklahoma County jail on a $250,000 bond.
All three were charged in the felony case with racketeering, four counts of embezzlement, using a computer for a fraudulent scheme, presenting false claims to the state and acquiring unlawful proceeds.
Harris, 46, and Chaney, 43, also were charged with obtaining money by false pretenses and two further embezzlement counts.
An attorney representing Brock, 40, said his client denies any wrongdoing. Legal counsel for Harris and Chaney could not be reached Thursday afternoon.
Oklahoma County District Attorney David Prater filed the charge Thursday afternoon.
The arrests stem from a nine-year investigation into their management of Epic Charter Schools, a public virtual charter school system.
Harris and Chaney founded Epic in 2011. They also established a private company, Epic Youth Services, that operated the school system and earned 10% of its yearly education funding.
Brock acted as CFO for the school system and the company.
Epic severed all ties with the co-founders, Brock and their business in May 2021.
"We have suspected this day was coming for a long time and, frankly, expected these results," said Epic's school board chairperson, Paul Campbell. "Hopefully, this is a day of healing for our Epic family."
The 10% management fee generated more than $69 million for Epic Youth Services since 2013, an OSBI agent reported in a 50-page affidavit detailing the allegations behind the charge.
Of the $69 million, Harris individually received over $24.8 million. Chaney earned more than $23.2 million, and Brock was paid $7.1 million, the OSBI agent reported.
Investigators allege Harris, Chaney and Brock cost taxpayers $22 million by engineering a "complicated criminal enterprise" through their management of charter schools.
"This has been a very complex and arduous investigation with many roadblocks causing delays in getting to the truth," OSBI Director Ricky Adams said in a statement. "Harris, Chaney and Brock came up with a ‘get rich quick scheme’ that lined their pockets with tax dollars that were to be spent for the benefit of Oklahoma students."
The defendants' company owned a bank account called the Learning Fund that was meant to support lesson plans, technology and extracurricular activities for Epic students. They filled the Learning Fund with taxpayer dollars meant for the school, claiming to designate $800 to $1,000 for every student.
Rather than using all of it on student needs, the defendants spent Learning Fund dollars on personal credit cards and diverted money from the account into their private company's general fund, according to the OSBI affidavit.
Chaney partially paid his personal credit card bill with Learning Fund dollars, court documents state.
He used that personal credit card for vacations and political donations to state schools Superintendent Joy Hofmeister, state Rep. Preston Stinson and congressional candidate Stephanie Bice, investigators found.
"If true, it's outrageous they would use the Learning Fund, meant for children, as their own personal trough for political contributions," Hofmeister said. "And frankly, if they thought their contribution would ensure favored treatment by me, they were clearly mistaken as I directed the clawback of $20 million from Epic in misappropriated funds and penalties."
Stinson and Bice could not be reached for comment late Thursday.
Much of the OSBI affidavit reflects findings the Oklahoma State Auditor and Inspector's Office uncovered in a 2020 audit of Epic.
State Auditor and Inspector Cindy Byrd now alleges Harris and Chaney bankrolled two political action committees supporting her opponent in the June 28 Republican primary.
"This is so much bigger than two men and a charter school," Byrd said at a news conference Thursday afternoon. "Harris and Chaney had used funds meant for students' education to control and manipulate elections and public policy in this state."
Chaney made a $100,000 donation to the conservative think tank Oklahoma Council of Public Affairs, which became a vocal critic of the state auditor, according to the affidavit.
OSBI investigators said the co-founders encouraged school employees to enroll students in Epic who already attended private schools or were homeschooled.
These children, called "ghost students," received received little to no education from Epic and merely increased the headcount used to determine the school's funding, the affidavit states.
Investigators said Harris, Chaney and Brock falsified financial statements to the Oklahoma State Department of Education.
Several Epic school leaders and state education officials were attending an Oklahoma State Board of Education meeting at the time of the arrests.
Epic officials were in the midst of responding to a scathing investigative report from the state Education Department, which alleged Tuesday the school system has had deep deficiencies in its attendance policies and governance.
The four-hour state board meeting quickly ended Thursday afternoon as word of the OSBI announcement spread throughout the room.
Epic Superintendent Bart Banfield said the timing of the arrests were "definitely a surprise." He said the school system has been cooperating with the OSBI.
"I don't know how to describe it," Banfield said. "I wish I could put it into words what I'm feeling today, but there's mixed emotions tied to it because we worked with them. They founded our school. They operated the school for the better part of a decade. So, they'll have their day in court. That will be for a judge and jury to decide."
About 37,000 students attend Epic, more than any enrolled at a traditional school district in Oklahoma.
Hofmeister said the co-founders' alleged scheme robbed not only Epic students but Oklahoma schoolchildren statewide.
"It is unconscionable that the alleged deceitfulness of the school’s founders made them multimillionaires at the expense of taxpayers," Hofmeister said in a statement. "This fraud was allowed to happen because of cracks in state law that still exist today."
Contributing: Reporters Nolan Clay and Carmen Forman
Reporter Nuria Martinez-Keel covers K-12 and higher education throughout the state of Oklahoma. Have a story idea for Nuria? She can be reached at email@example.com or on Twitter at @NuriaMKeel. Support Nuria’s work and that of other Oklahoman journalists by purchasing a digital subscription today at subscribe.oklahoman.com.
This article originally appeared on Oklahoman: Epic Charter Schools co-founders arrested for alleged financial crimes