In his request for a search warrant, a law enforcement agent described Epic Charter Schools as being set up a decade ago as a profit-generating “scheme.”
And he described the school’s co-founders as deeply involved in alleged embezzlement of state funds and obtaining money under false pretenses – such as personally recruiting “ghost students” to boost the school’s funding and allowing students who completed no work or moved out of state on the school’s rolls.
All of which begs the question: Who is responsible for oversight of Epic? And have they done enough to be a check on the state’s largest virtual school?
Co-founders David Chaney and Ben Harris, in a joint statement, say the allegations are false.
“We will continue to cooperate with investigators, as we have throughout the history of our school. We are confident the facts will once again vindicate our team,” their joint statement reads.
The allegations outlined in the Oklahoma State Bureau of Investigation’s search warrant have drawn the attention of the highest-ranking state officials. Gov. Kevin Stitt has asked to be briefed on the investigation, and Superintendent of Public Instruction Joy Hofmeister called the allegations “extremely serious, disturbing.” On Friday afternoon, Stitt and Hofmeister announced they have requested an investigative audit on Epic Charter Schools and its related companies by the state Auditor & Inspector, looking at the past three years.
What will ultimately result from the audit and OSBI investigation is unclear. The accounts of alleged wrongdoing in the affidavit and the intense news coverage have put pressure on public officials to do something. Yet as a charter school, Epic is more loosely regulated than traditional district schools and is an icon of school choice to supporters. So increased efforts to curb its practices could meet resistance.
Epic, the brand name for Community Strategies Inc., is a nonprofit 501(c)(3) organization and has a board of directors, which is the first line of accountability. They serve as both a nonprofit board and the school’s board.
Above that, there’s the Statewide Virtual Charter School Board, which is a small state agency with a governor-appointed board charged with overseeing and authorizing each statewide virtual school.
Then there’s the state Department of Education, which accredits Epic as a charter school, and Rose State College, which sponsors Epic’s separate charter school composed of blended learning centers in Oklahoma City and Tulsa. The school is audited by an independent auditor each year, and until Friday, an investigative audit had never been sought from the State Auditor.
As a nonprofit, Epic is also subject to IRS rules for tax-exempt charities requiring transparency and banning campaign activities and profits for shareholders.
Charter school authorizers – in Epic’s case, the Statewide Virtual Charter School Board – have two main responsibilities, said Greg Richmond, chief executive officer of the National Association of Charter School Authorizers. Those are making sure taxpayers are getting what they paid for and children are getting a good education.
Richmond said part of the problem with virtual school accountability is most school laws were not written with virtual schools in mind.
“That creates uncertainty around how things are supposed to be administered and creates openings which a disingenuous person can take advantage of,” he said.
Several states have uncovered fraud at virtual schools at taxpayers’ expense. A large virtual charter in Ohio closed abruptly last year and the state ordered it to repay $80 million. In Indiana, state investigators say two virtual charter schools received public funding based on inflated enrollments and have ordered the school to return $40 million.
Statewide Virtual Charter School Board
Richmond says one weakness in accountability that he commonly sees in states is that virtual schools are overseen by a separate agency, and that agency is often understaffed and underfunded.
Oklahoma’s virtual charter school board has just three staff members, two of whom oversee the state’s virtual charter schools. It also has a six-member board, which includes Executive Director Rebecca Wilkinson.
While Oklahoma had just four statewide virtual schools in 2018-19, those schools reported a total of more than 25,000 students.
Wilkinson said the board “has and continues to cooperate with the Oklahoma State Bureau of Investigation.” She declined to comment further.
She has previously raised concerns about Epic’s academic scores and student turnover. She has spearheaded a new accountability system for virtual schools to measure their performance. If the schools fail to meet the board’s criteria, they can lose their charter and be shut down. The new accountability system begins this year with Epic and Oklahoma Virtual Charter Academy, and the other schools will be added as their contracts are renewed.
Wilkinson also began more closely tracking virtual schools’ attendance by requiring them to submit student counts monthly — an effort to determine whether there are big jumps or drops in enrollment at certain points in the year. This check likely would not catch “ghost students,” defined by the OSBI as students enrolled at Epic who received little or no instruction but were recruited and kept on the rolls to inflate enrollment and state funding.
Epic’s School Board
Epic’s board meets quarterly and is comprised of five members.
Mike Cantrell is head of an oil and gas investment company in Ada, Betsy Brown is a lawyer in Norman and Adam Reynolds is co-owner and founder of Centennial Home Mortgage in Edmond.
Another attorney, Doug Scott of Tulsa, holds the chairman position. Also on the board is Liberty Mitchell, an Epic graduate and daughter of Oklahoma City broadcast and podcast producer Scott Mitchell.
The board appears to be fairly hands-off in its role in the school. For instance, at the September meeting, there was only one vote, on a consent docket, and it was approved unanimously. The entire meeting lasted 25 minutes, according to the meeting minutes.
Epic typically holds two school board meetings, one after the other: One is for its fully virtual school, the other is for its blended school. Both boards have the same members.
Epic makes aggressive efforts to influence state officials.
Epic’s two founders have contributed over $157,000 in campaign contributions since 2016 to lawmakers and other elected officials. With their spouses’ donations, the total climbs to nearly $193,500. The recipients include dozens of legislators as well as Joy Hofmeister and Attorney General Mike Hunter.
The OSBI began an investigation into Epic in 2013 at the request of Gov. Mary Fallin. Those findings were referred to the Attorney General’s Office but charges were not filed. Though many assumed the investigation was closed, the latest search warrant reveals the OSBI never closed the case and continued investigating behind the scenes. The same agent working the case then filed the latest search warrant.
Epic’s two co-founders supported Hofmeister in her successful 2014 bid to replace her predecessor, Janet Barresi, donating a combined $9,000 to her campaign. Barresi had publicly tussled with the school in a 2013 lawsuit over Epic’s report cards.
Hofmeister’s campaign has received more than $40,000 since 2016 from Chaney and Harris and their spouses.
Within her office, the person tasked with giving Hofmeister legal advice, general counsel Brad Clark, previously worked for attorney Bill Hickman, who represents Epic and many other charter schools. Clark represented Epic in lawsuits against the department in 2010 and in 2013.
The for-profit company that manages Epic, Epic Youth Services, employs lobbyist Bobby Stem. Epic Youth Services is owned by Chaney and Harris.
Each year Epic hosts its own Capitol Day, with thousands of students and families descending on the statehouse. This year Chaney and Harris took a photo with Gov. Stitt, and Chaney posted it to his Facebook page.
Four bills addressing virtual schools were filed last session and one of those was signed into law. House Bill 1395, by Rep. Sheila Dills, R-Tulsa, and Sen. Dewayne Pemberton, R-Muskogee, requires virtual schools to be subject to the same financial reporting and audits as school districts, and requires virtual charters that contract with managing organizations to detail how those dollars are spent.
Sen. Ron Sharp, R-Shawnee, has been raising concerns about Epic for months. On Wednesday, he called on the Legislature to withhold Epic’s funding for 2019-20 until the investigation is complete. Sharp is a former history teacher.
Concerns about virtual schools, and in particular Epic, have been voiced by a number of lawmakers.
“This school has consistently demonstrated questionable actions in how money is spent (most often not directly on students), financial decisions, the way attendance is calculated and their questionable record keeping,” said Rep. Melissa Provenzano, D-Tulsa. “Given the strict oversight the state Department of Education has for brick-and-mortar schools, I am eager for their response to this situation and their plans to keep this from ever happening again.”
Rep. Jacob Rosecrants, D-Norman, said, “This is exactly why so many of us legislators, especially those of us on the common education committee, have been calling for real accountability for virtual charters. Unfortunately, I believe these findings are just the tip of the iceberg.”
Three states cap or in some way limit virtual charter school enrollment, according to the Education Commission of the States — something the Oklahoma Legislature has never attempted.
State Department of Education
Like all public schools, Epic is audited each year. The most recent audits – for Epic One-on-One statewide virtual school and Epic Blended – were completed by CBEW Professional Group, based in Cushing. The audits only cover the activities of the school, not Epic Youth Services, the for-profit that contracts to manage the school.
The audits found no deficiencies and found the school in compliance.
“We are audited by the state Department of Education and state-approved auditors each school year and are supremely confident that we operate our public school system within the boundaries of state and federal law,” Shelly Hickman, a spokeswoman for Epic, said July 16.
However, the scope of these types of audits is more shallow than an investigative audit, which until Friday had never been requested on Epic, according to the State Auditor. Only certain entities can request audits: the state Department of Education, the governor, House and Senate leaders jointly, the attorney general, the Statewide Virtual Charter School Board, the school’s own board or a district attorney.
Hofmeister has requested an investigative audit of one charter school operator, Dove Schools, during her tenure, but not of Epic. Wilkinson, who heads the Virtual Charter School Board, has requested one investigative audit of a school, ABLE Charter School, but not Epic. Dove is still open and ABLE has since closed.
On Friday, Hofmeister commended the governor’s action.
“As every public dollar is precious, it is critical that there be full transparency and accountability for how those dollars are spent,” she said.
Oklahoma Watch reporter Trevor Brown contributed to this story.
“Oklahoma Watch is a nonprofit, nonpartisan media organization that produces in-depth and investigative stories on important issues facing the state. For more Oklahoma Watch content, go to oklahomawatch.org.”