Several accused in Indiana school fraud want suit dismissed

Several people and companies linked with two now-closed Indiana online charter schools have asked a judge to dismiss claims against them in a lawsuit alleging a fraud scheme that cost the state more than $150 million.

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

The defendants argued before a Hamilton County judge last week that the lawsuit was not specific enough about how they violated state law and that they should not be personally liable, WFYI-FM of Indianapolis reported. Two defendants also asked the court to delay the lawsuit because they say they may be under an ongoing federal criminal investigation.

A ruling from the judge isn’t expected for at least a few weeks.

The schools were shut down 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.

B.J. Brinkerhoff, an attorney for Stoughton and other defendants, said the state’s lawsuit fails to describe illegal actions.

“Nowhere in the complaint does the state allege what law was broken,” Brinkerhoff said.

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

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