The Oklahoma State Bureau of Investigation executed another search warrant Wednesday in its investigation into Epic Charter Schools, and its inquiry now includes new allegations against administrators and governing board members.
Documentation of the new search warrant, filed in Oklahoma County District Court, reveals that agents seized potential evidence of:
• Embezzlement and second-degree forgery by Epic’s co-founder and former superintendent, David Chaney, and Chief Financial Officer Josh Brock
• Unlawful proceeds by Chaney
• Willful neglect and omission to perform duty by public officers by four members of the school’s governing board
Two of the named individuals, Mike Cantrell and Doug Scott, are still listed on the board’s roster; the other two, Travis Burkett and Peter Regan, appear to be former board members.
Court records show that agents went to the home of Kurt Talbott — a coach whose organization provides home-schooled students with basketball, swimming, tennis, and track and field opportunities — and seized bank statements and his computer. The organization, OKC Storm Athletics, contracts with Epic as a vendor to receive public funding.
Each Epic student has access to up to $1,000 annually that, once any curriculum and technology costs are covered, can be paid out for extracurricular or educational activities through something Epic calls the Learning Fund.
The newly revealed allegations concern how Epic has paid out and reported the expenditure of millions of dollars in state-appropriated funds through its Learning Fund for student activities, including dancing lessons, gymnastics, memberships and “various other non-elective functions.”
In his affidavit to the court for obtaining the search warrant, an OSBI agent wrote that Talbott’s records of OKC Storm Athletics’ invoices, personnel and payment records for employees and subcontractors, and bank statements are potential evidence.
The governing board is accused of authorizing payments “without exercising proper oversight.”
According to the court records, Epic’s co-founders, Chaney and Ben Harris, as well as their lobbyist, Bobby Stem, Chief Financial Officer Josh Brock and then-attorney Brad Clark had been warned in May 2012 that the still-new charter school could be violating state law with its initial method of making Learning Fund payments. The issue raised reportedly was the fact that the payments were for “extracurricular activities where the students received no elective credit.”
Clark now serves as general counsel for the Oklahoma State Department of Education, and his wife, Tiffany Clark, is Epic’s contract school governing board clerk.
The warning, which came from an attorney for Epic’s first authorizer, Graham-Dustin Public School District, was that the appropriated funds were restricted to public use and the payments from the learning fund were considered “gifts” to private individuals.
According to the OSBI, in August 2012, Epic devised a new means of making Learning Fund payments by which it transfers lump sums of public dollars to a private, for-profit company called Epic Youth Services, which manages Epic Charter Schools and is owned by Chaney and Harris.
Brock reportedly told the OSBI that first academic year, 2012-13, that those transfers amounted to $1.23 million. And an OSBI agent wrote: “Josh Brock has transferred an equal or greater amount each year from 2013 to the present time.”
The issue, the OSBI agent wrote, is that Brock coded the transfer of funds as “instructional services” in the Oklahoma Cost Accounting System, which all public schools must use to account for their use of public funds. And instructional services “must be a course supported by a teacher of record, a recorded grade and included on the transcript,” the agent wrote.
Chaney and Brock are accused of “knowingly and intentionally” using the Learning Fund to make fraudulent expenditures, concealing the fraudulent expenditures by disguising the payments as instructional services and falsifying corporate records, according to the court documents.
And Chaney is accused of unlawful proceeds by opening a bank account “to acquire and conceal the transfer of State-appropriated funds.”
The OSBI agent wrote that all four governing board members named in the court records “refused to talk with me.”
In late February, the Tulsa World broke the story that the OSBI and the U.S. Department of Education’s Office of the Inspector General were investigating Epic.
In mid-July, the OSBI revealed in public court records that its investigators are looking into allegations of embezzlement, obtaining money by false pretenses and racketeering at Epic. And the World obtained other public records that show the Federal Bureau of Investigation has also been probing Epic’s student enrollment practices and finances.
At that time, agents went to the home of an Epic teacher and seized potential evidence in its investigation of whether Epic had wrongly obtained millions of taxpayer dollars by falsely inflating its student enrollment figures.
On Wednesday afternoon, the OSBI declined to comment on the new court filings in the Epic Charter School investigation “due to the fact it is an ongoing investigation.”
Chuck Richardson, an attorney for Epic, issued the following written press statement late Wednesday: “Epic and its founders will continue to cooperate with investigators, who have now been probing the school for more than six years. It is important to note that no charges have ever been filed. We are confident that the end result of this investigation will be as it has always been — no finding of wrongdoing.”
An hour later, a statement directed to Epic employees and parents was posted on the school’s social media accounts, stating that “our school, CFO and current and past board members have done nothing wrong.”
“Many of you have likely read the latest article from the Tulsa World. Please do not let this distract you from your important work in preparing for the upcoming school year. Today’s action by the OSBI is simply the latest in six years of continued allegations that we continue to prove false at every opportunity,” says the statement from new Superintendent Bart Banfield.
The Epic Board of Education released a statement after meeting in executive session for an hour and a half Wednesday night, repeating much of the information released earlier in the day in Richardson’s statement and on social media.
“EPIC will continue to fully cooperate with investigators and we are pleased the governor and state superintendent have asked the state auditor and inspector to independently review EPIC’s previous three annual school audits,” the statement says in part.
“We have full faith in the faculty and staff of EPIC and their commitment to the students and families we serve. We know our faculty and staff are dedicated to making the 2019-2020 the most successful school year to date and we have full confidence they will.”
Epic Charter Schools: A Tulsa World investigation