Judge rejects blocking Indiana online school fraud lawsuit

A judge is allowing state officials to continue with a lawsuit against several people and companies linked with two now-closed Indiana online charter schools facing allegations of a fraud scheme that cost the state more than $150 million.

A Hamilton County judge issued an order Monday rejecting arguments from those connected with Indiana Virtual School and Indiana Virtual Pathways Academy that the lawsuit was not specific enough about how they violated state law, WFYI-FM of Indianapolis reported.

The lawsuit filed by the state attorney general’s office in July accused the two online schools of padding their student enrollments and inappropriately paying money to a web of related businesses before they were shut down in 2019.

The schools closed amid a state investigation that found they improperly claimed about 14,000 students as enrolled even though they had no online course activity. A state audit linked much of the misspending to Thomas Stoughton, who headed the schools until 2017.

Judge Michael Casati ruled that the lawsuit against Stoughton could proceed, writing that its allegations provided sufficient detail.

Casati also denied requests for delays from two defendants who said they might be under an ongoing federal criminal investigation.

The FBI and federal prosecutors have declined to comment on the status of any investigation.

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