An Indiana man has been convicted of 18 federal crimes for his involvement in a scam that fraudulently obtained over $60 million in state education funds through two online charter schools.
Phillip Holden, 65, of Middletown, was convicted of 17 counts of wire fraud and one count of conspiracy to commit wire fraud after an eight-day trial. He faces up to 20 years in federal prison per offense and is set to be sentenced on February 25, 2027.
The case concerned Indiana Virtual School and Indiana Virtual Pathways Academy, which prosecutors claimed misrepresented student enrollment counts to gain millions of dollars in state financing.
Thomas Stoughton, 77, of Carmel, established both schools. The day before his trial was to begin, he pled guilty to 76 federal crimes, including 58 counts of money laundering, 17 counts of wire fraud, and one count of conspiracy to commit wire fraud.
Stoughton faces up to 20 years in jail on each wire fraud count and up to ten years for each money laundering charge. His sentencing date is set for March 11, 2027.
Holden was the director of operations for both institutions, according to court documents and testimony presented during the trial. From 2016 to 2018, he was involved in a plan with Stoughton and three other school workers to inflate enrollment figures provided to the Indiana Department of Education.
The schools received state financing based on their enrollment. Prosecutors said the defendants provided fake enrollment data, claiming more than 6,000 students registered between the summers of 2016 and 2018. As a result, the schools got over $60 million in surplus state funds.
Employees were directed to stop checking student interest prior to enrollment or reenrollment. Incomplete applications were used to enrolll persons who never took classes, including those who had graduated, joined the military, moved to another institution, or died.
Prior to a September 2018 enrollment count, the defendants asked a contractor to identify around 600 former students who were no longer enrolled but were not reported as attending another school. Employees were then told to re-enroll many of them.
Prosecutors also said the defendants transferred hundreds of inactive students from Indiana Virtual School to Indiana Virtual Pathways Academy when the second school opened in 2017. This enabled the schools to continue receiving state financing for those pupils while avoiding accountability standards based on student involvement and performance.
Holden also retaliated against an employee who attempted to disclose the scam to the Indiana Department of Education in 2017, according to trial testimony. Prosecutors claim Holden threatened and eventually dismissed the employee after learning of the information.
The investigation discovered that the schools transferred significant sums of state revenue to for-profit enterprises managed or operated by Stoughton. Millions of cash were later distributed to Stoughton, his family, and the other defendants.
Three additional defendants have pled guilty.
Former Superintendent Percy Clark, 84, of Carmel, pled guilty to conspiracy to conduct wire fraud. Christopher King, 64, of Greens Fork, pled guilty to the same offense in 2023 and is expected to be sentenced on February 10, 2027. Kyle Schroeder, 52, of Fishers, pled guilty to misprision of a felony and is due to be sentenced on February 11, 2027.
“For years, the defendants treated taxpayer-funded education dollars as a personal revenue stream, siphoning millions of dollars away from their intended purpose,” U.S. Attorney Tom Wheeler said. “Every dollar obtained through this fraud scheme was money meant to educate and support Indiana students.”
“This verdict represents a significant victory for Indiana taxpayers and for every Hoosier who expects public education dollars to be used for their intended purpose,” Indiana State Examiner Paul Joyce said. “The evidence presented during this case demonstrated a deliberate scheme to manipulate student enrollment figures and divert millions of dollars from Indiana’s education system.
“While others involved in this conspiracy ultimately chose to accept responsibility for their actions, Phillip Holden maintained his innocence and exercised his right to a trial. After hearing the evidence, the jury found him guilty on all counts.”
The trial featured testimony from 40 witnesses and over 350 exhibits.
The FBI, Indiana State Board of Accounts, Indiana Office of Inspector General, and Indiana State Police all investigated the matter. Richard L. Young, a US District Judge, presided over the trial.
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