Former Pasadena Superintendent Avoids Prison In $44 Million Virtual School Fraud Case

A former superintendent of the Pasadena Unified School District will avoid prison time after pleading guilty in one of Indiana’s largest public education fraud cases.

Percy Clark will serve five years of probation — including two years of home confinement without electronic monitoring — under a plea agreement filed in federal court on May 27 for his part in a fraud that involved inflating student enrollment, according to WFYI Indianapolis, a nonprofit news organization. Clark will also be jointly responsible for $44.6 million in restitution.

Clark led Indiana Virtual School and Indiana Virtual Pathways Academy and was among three people arrested in 2024 following a multiyear investigation by the U.S. Attorney’s Office for the Southern District of Indiana and the Federal Bureau of Investigation. He is scheduled to appear in federal court in Indianapolis on June 11. Co-defendants Thomas Stoughton and Phillip Holden have plea hearings set for July 11.

The two virtual schools — once among the largest in Indiana — operated under a charter from Daleville Community Schools, a small public District in east-central Indiana. Despite receiving millions in public funding, the schools were plagued by poor academic performance and questions about financial management.

In 2017, an investigation by Chalkbeat reported there was just one teacher for every 222 students. The schools closed abruptly in 2019 as state agencies investigated allegations they received funding for students who were not actively enrolled.

Federal prosecutors say Clark and others submitted false enrollment data to the Indiana Department of Education between 2016 and 2018, allowing the schools to collect more than $44 million in state funds. Investigators discovered thousands of students listed as enrolled had either left or never logged in — and in one case, a student was counted after their death.

In 2017, Clark and Holden allegedly fired an employee who had alerted the state to the fraudulent activity.

According to the plea agreement, Clark acknowledged he was aware of facts that should have raised red flags about the enrollment data but deliberately avoided confirming the truth. He is accused of personally receiving over $1.2 million as part of the scheme. The agreement includes potential forfeiture of $1.26 million in assets and a waiver of his right to appeal.

Clark was initially charged with conspiracy to commit wire fraud, 16 counts of wire fraud, and 11 counts of money laundering. Each count carried a potential sentence of up to 20 years in federal prison.

Clark is also a defendant in a civil lawsuit filed in 2021 by Indiana Attorney General Todd Rokita. That case seeks to recover more than $154 million in allegedly misused public funds from the schools, associated vendors, and individuals involved.