OSBI conducts second search in Epic investigation
The OSBI has seized new evidence in an embezzlement investigation into Epic Charter Schools.
In a search warrant affidavit filed Wednesday, agents raised new allegations of forgery and willful neglect against Epic, the state’s largest virtual charter school system.
The OSBI searched the home of Kurt Talbott, of OKC Storm Athletics, an Epic vendor. Investigators alleged the home-school athletics organization unlawfully received state funds from Epic.
“Kurt Talbott employed over a dozen coaches who were not certified teachers and provided direct instruction to players,” OSBI agent Tommy Johnson reported in the search warrant. “Kurt Talbott admitted that state appropriated funds were used to buy uniforms for Epic students, cover some of the costs of paying the coaches, and other expenses of the OKC Storm.”
Talbott told Johnson that he directly invoiced Epic for players’ fees, uniforms and training. OKC Storm coaches home-school students in basketball, swimming, tennis, cross country, track, golf, pom and volleyball.
When reached by phone, Talbott said he would speak with a reporter later, but he did not return further calls for comment.
Epic has denied any wrongdoing throughout the investigation.
"Epic and its founders will continue to cooperate with investigators, who have now been probing the school for more than six years,” the school said in a statement Wednesday. “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.
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“We are unable to elaborate beyond this statement due to the fact that the school has not been provided the affidavit that has been provided to some members of the media."
Epic was advised in 2012 that it is illegal to use state funds for extracurricular activities where students receive no elective credit, according to the warrant filed in Oklahoma County District Court.
Epic concealed unlawful payments to students’ families and vendors by having its private management company, Epic Youth Services, make the transactions, according to the warrant. Epic Youth Services is owned by Epic co-founders David Chaney and Ben Harris, and it receives a portion of the school's state-appropriated funds to manage the virtual system.
Chaney opened a bank account for Epic Youth Services to pay money to vendors and students’ families for extracurriculars. Chief Financial Officer Josh Brock told investigators he transferred $1,229,700 of state appropriated funds into the bank account for the 2012-2013 school year, Johnson reported. Brock has transferred an equal or greater amount each year since 2013.
Investigators alleged the virtual school masked the payments by directing funds to Epic Youth Services under the code “instructional services.” Epic Youth Services then paid 1,200 vendors, who weren’t all certified to instruct students for public school purposes. Instructional services must be a course supported by a teacher of record, a recorded grade and included on the transcript.
Members of Epic’s Board of Education – Travis Burkett, Mike Cantrell, Peter Regan and Doug Scott – committed willful neglect by authorizing the payments without exercising proper oversight, the OSBI alleged. Only Scott and Cantrell still remain on Epic’s board.
The OSBI also alleged the evidence in the case showed Brock and Epic co-founder David Chaney jointly committed embezzlement and forgery.
Once the investigation concludes, the OSBI is expected to present the evidence to Oklahoma County District Attorney David Prater, who would decide whether to file criminal charges.
Johnson found at least two instances where Epic paid money to convicted felons to provide direct instruction to students in violation of state law, according to the warrant.
Chaney personally helped form a relationship with an Oklahoma City sectarian school, identified as RHCA, whose founder and principal pleaded guilty to mortgage fraud in Florida federal court in 2010.
The principal, identified as Ms. LDW, converted RHCA into a tutoring center under the “Epic model” and enrolled her students in Epic.
Students at the learning center received half of the state-required hours of instruction, and none of the staff were state certified teachers.
Johnson also found Epic accepted a vendor who was convicted of felony driving under the influence in Payne County in 2016, according to the warrant. The vendor advertised as a personal trainer and offered direct instruction to students for physical training.
Last month, agents seized a laptop and a cellphone from the Oklahoma City home of an Epic teacher. Agents alleged in the previous search warrant that Epic embezzled millions of taxpayer dollars and dual-enrolled “ghost students,” who received little to no instruction from the virtual school.
These students either were home-schooled or were enrolled in private and sectarian schools. The families of these students received $800 to $1,000 from Epic’s learning fund to enroll in the virtual school, the OSBI alleged.
Many of the home-school parents welcomed the payments, but they had no intent for their children to receive instruction from Epic, according to the July search warrant.
Agents reviewed bank statements that showed Brock spent hundreds of thousands of dollars to buy non-instructional items for ghost students, the warrant states. These learning fund purchases included furniture, musical instruments, toys, laptop computers, games, horseback riding and Karate lessons, according to the warrant.
Nolan Clay contributed to this report.