Preliminary hearings began March 25 in the District Court of Oklahoma County in Oklahoma City in a case in which prosecutors claim charter school officials stole millions from Oklahoma taxpayers. Lawyers for the accused say their clients provided education services during the pandemic.
David Lee Chaney and Benjamin Scott Harris are facing one count of racketeering, six counts of embezzlement, two counts each of using a computer system or computer network to execute a scheme to defraud and presenting false claims to the state and one count each of acquiring unlawful proceeds, acquiring unlawful proceeds in excess of $50,000, obtaining money by false pretenses, and money laundering.
A preliminary hearing allows a judge to hear the state’s evidence and determine whether it is enough to justify a trial on the charges presented.
According to court records, Mr. Chaney and Mr. Harris founded a non-profit organization, Community Strategies Inc. (CSI), in 2009. They then reportedly set up Epic Youth Services (EYS) as the charter management company for Epic Charter Schools.
Joe White, an attorney with the Oklahoma City law firm of White and Weddle, represents Mr. Harris. He said that rather than view his client as a criminal, the state should realize how many students were served by Epic Charter School. He pointed out that what began as an online school grew into the largest public school in the state with 60,000 students.
As he questioned former Epic Charter School board member Douglas Scott, Mr. White said the state had mischaracterized Epic Youth Services’ work. He said the organization did much more than provide administrative support.
He pointed out that EYS administered the Student Learning Fund, secured funding, handled all administrative tasks, and handled other responsibilities.
“And enrollment kept going up, up, and up, didn’t it?” he asked Mr. Scott.
A key issue in the case is whether money managed by the for-profit Epic Youth Services was public money subject to review by the state or the company’s private funds.
Oklahoma State Bureau of Investigation Special Agent Mark Drummond, the state’s lead investigator, believes the defendants set up EYS and a company called Edtech as shell companies.
“I felt it was another layer to cover the disbursement of these funds,” Mr. Drummond testified.
Mr. White took issue with that assertion. He said the money EYS received was payment for its services. So, once the money was in EYS accounts, it became private funds to be used at EYS’s discretion.
However, prosecutors said that even private companies must account for how they use public funds.
Joshua Brock, the charter school’s former CFO, waived his right to this week’s hearings and has reportedly reached an agreement with prosecutors to testify.
Mr. Scott also took issue with the claim that Mr. Harris and Mr. Chaney hand-picked a board of directors to oversee the operations of EYS, Epic One-on-One Charter Schools, and Epic Blended Charter Schools.
He admitted knowing Mr. Chaney since they were both boys, but the lawyer from Tulsa said he agreed to serve on the board for one reason.
“I believe in [the charter school concept],” he testified.
Mr. Drummond told the court it appeared that the board went along with whatever Mr. Chaney and Mr. Haris recommended, often approving their plans by unanimous vote. Mr. Scott denied that.
In 2019, OSBI began looking into allegations of fraud, and Gov. Kevin Stitt requested State Auditor and Inspector Cindy Byrd’s office perform an investigative audit.
“This is a serious situation, and it involves millions of state and federal tax dollars that had been directed to personally profit two owners of an education management company,” she said during the online briefing.
Mr. Chaney’s lawyer, Gary Wood, of Oklahoma City, said that Ms. Byrd’s office actually issued several reports. He said the audit reports were riddled with errors. He and Mr. White said the state relied heavily on that report Mr. Wood claimed contained up to “30 percent” in errors.
Contracts ‘Don’t Change’ a Deal’s Legal Status
Mr. White said that Mr. Chaney and Mr. Harris operated EYS and the charter schools in good faith based on advice they received from lawyers. He pointed out that lawyers advised them on each decision and that they had contracts and other documents showing that work.Mr. McMahon said the fact that lawyers wrote a document doesn’t change a deal’s legal status.
“Having a contract doesn’t make an agreement legal,” he said.
The audit report and court records allege that between May 1, 2010, and July 1, 2022, Mr. Chaney and Mr. Harris lined their own pockets with public education money.
“With one hand, Brock and Chaney were invoicing Epic, and with the other hand, they were approving payments from Epic to EYS,” the audit report reads.
Epic Charter Schools has a new board. In a statement released in 2022, then-board chairman Paul Campbell vowed to turn the organization around.
“Great challenges lie ahead but the thousands of parents that have placed their trust with our team should not worry. I promise you we will be here day after day and year after year to see your child thrive,” Mr. Campbell’s statement reads.
