A decade of scandal at Epic Charter Schools

• Beth Wallis
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As more news emerges about embezzlement schemes at Epic Charter Schools, it might be difficult to keep up with the saga. That’s why StateImpact’s Beth Wallis asked Oklahoman newspaper reporter Nuria Martinez-Keel to get us up-to-speed on the last decade of Epic’s scandals. Martinez-Keel covers education at The Oklahoman and has been with the publication for four years.

Beth Wallis: Well, Nuria, thank you for coming and talking with me today. I appreciate it.

Nuria Martinez-Keel: Thanks for having me.

Wallis: So Epic Charter School, back in the news. The state auditor indicated last week there were millions more dollars involved in the scandal than what we thought. And now the new state attorney general announced his office was going to take back control of prosecuting the Epic founders and CFO. But before we get into all of that, I wanted to remind listeners of how we got here. So let’s start the saga at the beginning. How did Epic start and what was it supposed to be? 

Martinez-Keel: Epic Charter Schools was our state’s first virtual charter school, which is obviously a charter school handled mostly in a virtual format. They started in 2011, and it wasn’t until 2013 that they came under criminal investigation. 

I think, you know, Epic for a long time would make the argument that part of why they were so under scrutiny is because they were delivering something entirely new to our state’s education landscape, and that there were people who didn’t like how they disrupted the status quo — which, one can say they definitely did. I mean, you can see their rapid, rapid growth, obviously, that what went into supercharged mode during the pandemic when a lot of folks were fearful of sending their children to a school building. 

And so, you know, they came in and they shook things up because they were delivering school in a new way. Obviously, there were methods of delivering online school in the state that existed before then. But for a school district to exist solely in a virtual format — or, Epic would say not solely, but mostly in a virtual format — that was something pretty new in our state.

Wallis: Well, so there were a few different schemes that Ben Harris, David Chaney and Josh Brock were alleged to have been part of. Can you describe some of them?

Martinez-Keel: Where do I begin? I would say the first time the public really got any insight into what law enforcement was looking at was in July 2019, and that’s when they released a search warrant of a teacher’s house. Which, the teacher, you know, was only a small part of the actual court document. But that was the reason that this was filed in court publicly in the first place. And that was when they first laid out to the public what their investigation really was. 

And one of the through lines of this whole scandal has been the Learning Fund. Epic used the Learning Fund to pay for students’ extracurricular activities, to cover any supplemental curricula that they wanted to use to supplement their learning. It could be used in a number of different ways, but it really was to pay for extracurricular activities that they might have had in a school or a traditional school environment that they wouldn’t have in virtual school. So they could take that money and pay for karate classes or a football team, something like that.

Wallis: That sounds great, what happened?

Martinez-Keel: Basically, lawmakers allege that this was a slush fund, that it was a hotbed for embezzlement, and nobody could really look at this — at least not from the public — because the co-founders’ company, which managed the school and earned 10% of the school’s annual revenue, this company called Epic Youth Services, was actually who was in charge of the Learning Fund. The school would receive its funds from the state, pay 10% of its funds to the management company just solely for managing the school. And then they also handed funds over for the Learning Fund. It was a separate bank account that was paying for extracurricular activities, for supplemental curricula, and it was under the charge of this private business. 

And they would argue, they would deny records requests. And they argued even to the state auditor that you can’t look at this because it belongs to a private business. And they fought tooth and nail to keep the public from seeing that. And as we discovered later, that there [were] quite a few things to learn, quite a few questionable expenses, uses on personal credit cards, on political donations, that were allegedly coming out of that Learning Fund. So that was the first time, though, that we really got any kind of insight that something could be going wrong here with this Learning Fund. 

Also, the OSBI also alleged in 2019 that Epic had illegally inflated its enrollment count by counting students in their school enrollment who really weren’t receiving an instruction from Epic — little to no instruction from Epic teachers. And OSBI referred to them as quote unquote “ghost students.” That was the first time we ever really heard that term, which has sort of taken on a life of its own in political discourse since then. That was the first big shoe to drop, as far as this Epic investigation has gone. And we’ve seen some of those similar accusations arise again and again, especially focusing on that Learning Fund. 

Wallis: Do we have an idea of the dollar amount that has been taken from the state? 

Martinez-Keel: When the co-founders and their chief financial officer were arrested this summer and charged in Oklahoma County District Court, the [district attorney] alleged, and OSBI alleged that they had cost taxpayers $22 million through an alleged criminal enterprise that they managed through their oversight of the school. 

Wallis: So they cost taxpayers $22 million, but they took home more money from this. So how did they get that extra money?

Martinez-Keel: Like I said, the way that the payment to that company was structured was by paying them 10% of the school’s annual revenue every single year. And as Epic got bigger and bigger, that revenue went up and up and up. And so 10% in 2011 was only a modicum of the 10% that they were earning in 2020. Just so listeners know, Oklahoma public schools are funded based on the number of students that are enrolled. And Epic’s enrollment absolutely skyrocketed. And so they did take home quite a bit of money that later leadership in Epic realized was no longer acceptable. They couldn’t be paying 10% of their annual revenue just for a charter management company. 

Wallis: So a 2020 state investigative audit found tons of those problems you just described. Charter schools in Oklahoma have to be sponsored by an established body like the State Board of Education or an existing school district. How did Epic’s sponsor react to learning the results of this investigation? 

Martinez-Keel: So the sponsor of Epic’s biggest branch, the Statewide Virtual Charter School Board, is a very small state agency. It’s mostly just centered on this board and a couple of staff members. But if a virtual charter school wants to exist in the state of Oklahoma, they have to be sponsored by this board. And Epic’s biggest branch, which was at the time called Epic One-on-One, which was the solely online platform, was sponsored [by] this board, and it was at risk of being shut down because of these allegations — specifically the allegations found in the state audit report of Epic that came out in October 2020. 

The Statewide Virtual Charter School Board initiated the process to terminate its contract with Epic, which would mean that the biggest branch of the school, which made up 60% of its students, would cease to exist if that contract were terminated. And at the end of the day, that contract was maintained. But the board used it as a significant point of leverage to negotiate a lot of improvements at the school, specifically instructing them to correct a lot of the issues that were found in that state audit.

Wallis: And so those founders, they’ve been arrested and charged as of this last summer. What kinds of charges are they looking at, and what kind of repercussions could there be for them? 

Martinez-Keel: Yeah, so the two co-founders, Ben Harris and David Chaney, and their chief financial officer, Josh Brock, were charged with embezzlement, racketeering, obtaining money through false pretenses, using a computer for allegedly a criminal enterprise, a litany of charges. Basically using this public school, allegedly, to maintain a criminal enterprise. And that criminal case is still ongoing. As you said earlier, it’s under the guise of the attorney general now, no longer with the Oklahoma County [District Attorney], and I expect that to carry on for a very long time, as most criminal cases do. 

Wallis: And are they looking at felony convictions?

Martinez-Keel: Yes, I believe all of their charges are at the felony level, if not most of them. 

Wallis: So then the State Board of Education voted last summer to downgrade Epic’s accreditation. Functionally, what does that mean? 

Martinez-Keel: Basically, when a school’s accreditation is knocked, it really gets their attention depending on the level of severity. There is a tiered list of accreditation statuses, one with being totally accredited, no deficiencies at the top, and at the very bottom is non-accredited, which means this school no longer exists. And so, in-between, there [is a] list of tiers, depending on the number of violations that were found. 

So right now, Epic has been placed on Accredited with Probation, which is one step above totally dissolving the school — one step above not having any accreditation at all. So that’s a pretty severe penalty. And that really requires a lot of state oversight — regular presentations to the Board, or at least regular contact with the State Department of Education to show what improvements are being made. Usually the State Department of Ed will create a list of specific issues that they are demanding the school address in order to improve that accreditation status. And so Epic was placed on probation back in July, which is the month that all school accreditation statuses are reviewed. And we’ll see, you know, if they prove to the State Board of Ed that they deserve to have a better accreditation status in the future.

Wallis: So Epic is still in operation. What’s next for them? 

Martinez-Keel: They’ve gone through quite a bit of turnover over the past couple of years. I think the folks over there would say that they’re at a much more stable place than they were just a couple of years ago. The co-founders are no longer affiliated with the school. The school board has been overhauled from the era when the co-founders were in charge. 

That was a complaint that the state auditor had, which was alleging the co-founders had handpicked, you know, their friends to serve on Epic’s school board to theoretically ensure that there was very little critical oversight of what they were doing. That school board has been turned over. It’s an entirely new group that cut ties with those co-founders and are very determined to move forward without any charter management company involved at all. 

You still do have the same superintendent who was working under the co-founders, who the co-founders actually hired to run the school in 2019. And he was actually named in the affidavit in which the co-founders were charged, alleging that he might have had a role to play in the enterprise as well. But Epic’s superintendent has not been charged with a crime. The school board agreed to keep him on for another year. So, you know, maybe there’s some things to discover, what will happen next with that, if they do agree to keep him on more long term or if they go in a different direction. 

But things seem to have steadied a lot over there. It seemed like they were constantly in turmoil from year to year. And now I think a lot of folks at Epic are grateful that the waters have calmed quite a bit. 

Wallis: Well, Nuria, really appreciate your reporting over the last, oh gosh, lots of years on the Epic saga. Thank you so much for talking today. 

Martinez-Keel: Thanks so much for having me.