Jury convicts man in scheme that cost Indiana more than $60 million

STATEWIDE–An Indiana man has been convicted of 18 federal charges for his role in a scheme that fraudulently obtained more than $60 million in state education funding through two online charter schools.

Phillip Holden, 65, of Middletown, was found guilty of 17 counts of wire fraud and one count of conspiracy to commit wire fraud following an eight-day trial. He faces up to 20 years in federal prison per count and is scheduled to be sentenced Feb. 25, 2027.

The case involved Indiana Virtual School and Indiana Virtual Pathways Academy, which prosecutors said inflated student enrollment numbers to receive millions of dollars in state funding.

Thomas Stoughton, 77, of Carmel, founded both schools. He pleaded guilty to 76 federal charges the day before his trial was scheduled to begin, 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 prison for each wire fraud count and up to 10 years for each money laundering count. His sentencing is scheduled for March 11, 2027.

According to court documents and evidence presented at trial, Holden served as director of operations for both schools. From 2016 to 2018, he participated in a scheme with Stoughton and three other school employees to inflate enrollment numbers reported to the Indiana Department of Education.

The schools received state funding based on enrollment. Prosecutors said the defendants submitted false enrollment figures claiming more than 6,000 students were enrolled between the summers of 2016 and 2018. The schools received more than $60 million in excess state funding as a result.

Employees were instructed to stop verifying student interest before enrollment or reenrollment. Incomplete applications were used to enroll people who never attended classes, including some who had graduated, joined the military, transferred to other schools or died.

Before a September 2018 enrollment count, the defendants also directed a contractor to identify about 600 former students who were no longer active but were not listed as attending another school. Employees were then instructed to reenroll many of them.

Prosecutors also said the defendants transferred hundreds of inactive students from Indiana Virtual School to Indiana Virtual Pathways Academy after the second school was established in 2017. That allowed the schools to continue claiming state funding for those students while avoiding accountability measures tied to student participation and performance.

Holden also retaliated against an employee who tried to report the scheme to the Indiana Department of Education in 2017, according to trial evidence. Prosecutors said Holden threatened and ultimately fired the employee after learning about the disclosure.

The investigation found that the schools paid substantial amounts of state funding to for-profit companies controlled or operated by Stoughton. Millions of dollars were later distributed to Stoughton, members of his family and other defendants.

Three other defendants have also pleaded guilty.

Former Superintendent Percy Clark, 84, of Carmel, pleaded guilty to conspiracy to commit wire fraud. Christopher King, 64, of Greens Fork, pleaded guilty to the same charge in 2023 and is scheduled to be sentenced Feb. 10, 2027. Kyle Schroeder, 52, of Fishers, pleaded guilty to misprision of a felony and is scheduled to be sentenced Feb. 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 included testimony from 40 witnesses and more than 350 exhibits.

The FBI, Indiana State Board of Accounts, Indiana Office of Inspector General and Indiana State Police investigated the case. U.S. District Judge Richard L. Young presided over the trial.

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