Six years after a state audit found that a pair of virtual schools inflated enrollment by thousands of students — improperly collecting more than $68 million in public funds — two of the people behind the alleged scheme are expected to go to trial on federal wire fraud charges in July.
As charter schools, Indiana Virtual School and Indiana Virtual Pathways Academy were free to families and publicly funded. The schools, which were forced to close in 2019, claimed to serve more than 7,000 students at their peak. But state and federal investigations found that many of them were ghost students who did not take classes or earn credits.
The U.S. Attorney’s Office for the Southern District of Indiana arrested three men in connection with the fraud trial in 2024, after a federal investigation into the virtual schools’ operations. One of those men pleaded guilty. The other two are expected to go to trial.
The trial — which has been rescheduled three times — is now expected to begin at 9 a.m. on July 28 in the United States Courthouse, 46 E. Ohio Street.
Indiana also seeks more than $156 million in two related civil cases.
In a 2021 case, Attorney General Todd Rokita sued the schools, multiple vendors that provided services to them, and 14 individuals with ties to the schools and companies that were inappropriately paid.
Last summer, Rokita brought a second, previously unreported case: he sued the tiny rural school district that was supposed to oversee the virtual schools along with two district administrators.
Neither of the civil cases have been scheduled for trial.
Criminal case approaches trial
In the federal case, Indiana Virtual School Founder Thomas Stoughton and Phillip Holden, who helped oversee the schools, were charged with conspiracy to commit wire fraud and more than a dozen counts of wire fraud.
Stoughton was also charged with money laundering. The indictment lists several transactions involving “criminally derived property.” They include more than $50,000 in 1-ounce Golden Eagle coins, $58,000 for a Cadillac sedan, $11,000 in jewelry from Tiffany & Company, and about $80,000 in tuition to the private Park Tudor School.
The U.S. Attorney’s office and an attorney for Stoughton did not immediately respond to requests for comment. Jon Little, Holden’s attorney, said: “My client Mr. Holden is innocent. We are very much looking forward to going to trial in July.”
Most recently, the court delayed the trial — which had been scheduled for September — at the request of Stoughton’s lawyer Mark Inman. Inman is a private attorney paid by the federal defenders program, which ran out of money part way through 2025.
Legal experts tell WFYI another delay appears unlikely.
Because the trial has already been rescheduled repeatedly, it would be harder to make the case to delay it again, said Karen Woody, a professor at Washington & Lee University School of Law.
“The judge is going to get fed up with postponing and just want this handled at some point,” Woody said. “There starts to be a point where both sides would prefer, I think, to have this handled.”
The attorneys also appear to be moving toward a July trial based on the court filings, said Mark Stuaan, a visiting professor at IU McKinney School of Law. Stuaan previously worked as an assistant U.S. attorney in the Southern District of Indiana and in private criminal defense.
The case appears unlikely to end with plea deals, Stuaan said.
Stoughton and Holden both turned down plea agreements. If they were to make an agreement at this point, Stuaan said: “It's a virtual certainty that the prosecution's proposal is not going to be as favorable as it would have been six months ago or a year ago because they've spent time and effort getting ready for trial.”
Two other men involved with the schools have already pleaded guilty to wire fraud conspiracy charges.
Percy Clark, who was charged in 2024, pleaded guilty last year. Clark, who was superintendent of Indiana Virtual School and Indiana Virtual Pathways Academy, avoided prison time but will serve five years of probation and pay restitution.
Christopher King was former manager of school operations for a company that provided services to the schools. He pleaded guilty before the others were charged.
Civil suits not yet scheduled
The state’s first civil lawsuit, filed in 2021, targets Stoughton, Holden and several other individuals and businesses with ties to the schools.
Rokita filed a second lawsuit in August 2025, against Daleville Community Schools and administrators at the time of the alleged fraud.
Daleville is the rural district that oversaw the schools, even though they enrolled students from across the state. It collected just more than $3 million in fees for that oversight, according to the complaint.
It’s typical for Indiana charter school authorizers to take fees. But the attorney general argues that Daleville failed to provide appropriate oversight, and because the schools were overpaid, those fees were also overpaid.
The suit seeks more than $2 million from the district, former-superintendent Paul Garrison and David Stashevsky. Stashevsky spent a year working as superintendent of Indiana Virtual School while also working for Daleville, according to the lawsuit.
Stashevsky, who was promoted to assistant superintendent for Daleville, referred WFYI to a district website with information about the virtual charter schools.
“Given the pending litigation, I do not believe it would be appropriate for me to provide additional comment beyond the public record at this time,” Stashevsky said in an email.
Attorneys for the defendants did not respond to a request for comment. Neither did Daleville’s current superintendent, Jason Callahan, who is not named in the suit.
Both lawsuits are based on a 2020 audit from the state board of accounts, which found the schools received $68.7 million in public money to educate ghost students. It also found the schools made improper payments of more than $85 million in public funds to multiple companies linked to school officials and their family members.
The audit followed a 2017 investigation from Chalkbeat Indiana that exposed substantial problems at Indiana Virtual School.
In the federal case, the prosecution has asked to use an email to Holden with a link to the Chalkbeat investigation as evidence that he knew about the ghost students.
Contact WFYI investigative education reporter Dylan Peers McCoy at dmccoy@wfyi.org.
