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contacted District 2 Com- duty at the courthouse to the county commission- mcalesternews.com
State takes Epic’s management firm to court
By JENNIFER PALMER
OKLAHOMA WATCH
Mar At the heart of the issue
is something Epic calls the
10 “learning fund.” It’s a major
draw for students and fam-
ilies and has helped propel
2020 Epic’s stunning enrollment
growth.
Here’s how it works: Epic
Page makes at least $1,000 avail-
able to each student annu-
A006 ally in the student’s learn-
ing fund. Dollars are de-
Clip ducted for their choice of
resized
curriculum and for a pleth-
40% ora of other items of their
choice, such as laptops and
iPads, science kits and craft
supplies, soccer club fees,
horseback riding lessons,
gymnastics and summer
camps.
Parents don’t receive the
money directly but instead
request a purchase from
Epic. Epic transfers the
money to Epic Youth Ser-
vices, according to the court
filing, which then pays the
vendors directly. There are
more than 1,400 private
learning-fund vendors.
The school makes period-
ic transfers of state funding
into a checking account
specifically for learning
fund purchases. The school
transfers into a separate
checking account 10% of its
total revenue to Epic Youth
Services for a management
fee.
Epic was founded by Da-
vid Chaney and Ben Har-
ris; the two men also own
Epic Youth Services LLC.
Chaney and Harris have
split at least $10 million in
profits from Epic Youth
Services between 2013 and
2018, according to the
OSBI, which is investigat-
ing Chaney and Harris on
allegations of embezzle-
ment and racketeering.
Chaney and Harris have
denied wrongdoing, and no
charges have been filed.
Through an attorney, they
responded to the auditor’s
court motion with a written
statement.
“The state Auditor’s legal
position – that private busi-
nesses are subject to state
audit – should concern ev-
ery business owner in Okla-
homa. Epic Youth Services
has offered to voluntarily
allow the auditor to review
records appropriate to their
request, but we have re-
ceived no response prior to
this court filing. We will
vigorously fight for the pro-
tection that has historically
been provided to private
businesses like Epic Youth
Services.”
They added they have
on Care
e Family
Property of OPS News Tracker and members of the Oklahoma Press Association.
y
provided documents, some
of which were not public
records, and explanations
to assist the auditor “volun-
tarily” and to be “helpful
and transparent.”
In its court filing, the au-
ditor says it worked with
Epic Youth Services
for five months in at-
tempts to come to a
compromise to obtain
the records associat-
ed with public dollars
while maintaining
the company’s priva-
cy and proprietary informa-
tion.
“EYS was unwilling to
disclose the records in the
manner necessary for the
State Auditor to accurately
reconcile the revenue and
expenditures associated
with the Learning Fund
accounts,” the filing states.
REQUESTS AND SUBPOENAS
Epic Charter Schools has
experienced rapid,
jaw-dropping growth, from
just over 1,700 students its
first year, 2011, to nearly
30,000 this year. Only Okla-
homa City and Tulsa Public
Schools enroll more stu-
dents.
Virtual schools in Okla-
homa are funded like tradi-
tional schools, through a
weighted per student for-
mula. As Epic’s student
numbers have grown, so
has the amount of public
state funding allocated to
its schools – a combined
$118 million last school
year.
As Epic’s share of stu-
dents and funding swelled,
the agencies and boards
responsible for oversight
remained fairly hands off.
Legislative attempts to im-
prove oversight have been
incremental. But last sum-
mer, a criminal inquiry by
the Oklahoma State Bu-
reau of Investigation picked
up steam, with two search
warrants filed five weeks
apart. Then Gov. Kevin
Stitt requested an investi-
gative audit of the school
and its related companies.
As auditors began diving
in, they hit a brick wall.
That wall is Epic Youth
Services.
Auditors first attempted
to obtain financial and oth-
er records through public
records requests. In Sep-
tember, they issued a sub-
poena for an organizational
chart of Epic Youth Ser-
vices, a list of employees
and contact information,
learning fund revenue re-
ceived and spent since July
2015, and a vendor list.
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A second subpoena on
Nov. 6 called for credit card
statements and Quick-
Books data on learning
fund purchases, and bank
statements, for a five-year
period beginning July 2014,
as well as an explanation of
Epic’s $250 tech-
nology fee.
In a third subpoe-
na, delivered Feb.
25, Epic was given
24 hours to comply.
Auditors specified
again some records
previously sought
and added that they want-
ed access to all Epic Char-
ter Schools email accounts,
vendor contracts, docu-
ments and software used to
administer the learning
fund. In addition, the sub-
poena seeks documents re-
lated to an $85 service fee
charged to student learning
fund accounts and records
of learning fund expendi-
tures.
When that was rebuffed,
the Attorney General’s Of-
fice filed a court motion on
the auditor’s behalf, asking
a judge to force the release
of the records.
State Auditor Cindy Byrd
said her office needs a com-
plete picture of an entity’s
finances to do their job, and
they haven’t received it
from Epic. She also said
what they are asking for is
typical for this type of au-
dit.
“We don’t want anything
to be withheld from the
taxpayers,” Byrd said.
LEARNING FUND WAS EARLY
ISSUE
Questions about the le-
gality of the learning fund
arose in Epic’s second year
when its original sponsor
– Graham-Dustin school
district— brought concerns
to its attorney, Laura
Holmes, of The Center for
Education Law.
Holmes and Gra-
ham-Dustin’s superinten-
dent, Dusty Chancey, in
2012 met with Epic
co-founders Harris and
Chaney (then superinten-
dent); Bobby Stem, former
Epic school board member
and now a lobbyist for Epic
Youth Services; Josh Brock,
chief financial officer, and
Brad Clark, then a private
attorney representing Epic
and now lead attorney for
the state Education De-
partment.
Holmes told Epic their
learning fund arrangement
violated the state constitu-
tion and were considered
“gifts” to private individu-
als, according to an OSBI
search warrant affidavit.
She cited an attorney
general’s opinion.
When it was suggested
the private management
company, Epic Youth
Services, pay the extracur-
ricular activities from its
management fee, Holmes
agreed, the affidavit says.
But that’s not what hap-
pened.
T h r e e m o n t h s l a t e r,
Chaney opened a checking
account for the learning
fund, titled “EYS Learning
Fund,” making himself and
Brock authorized signers,
according to a second writ-
ten affidavit by the OSBI
agent. Brock transferred
$1.2 million in state-appro-
priated funds to the ac-
count in the 2012-13 school
year, increasing the amount
each year. That account was
used to pay the hundreds of
private vendors.
Meanwhile, revenue from
the 10% management fee
that the school paid Epic
Youth Services went to a
separate account, “EYS
General Fund,” at the same
bank.
Approximately $42 mil-
lion in state funds has been
deposited into the learn-
ing-fund account between
2011 and 2019, according to
the state auditor’s motion,
which cited a Tulsa World
story.
The money flowing from
Epic to Epic Youth Services’
learning fund account was
coded by Brock as “instruc-
tional services” in the state
cost accounting system–
even though instructional
services are limited to ex-
penses by a teacher, for a
recorded grade and includ-
ed on a student’s transcript,
the affidavit says.
Many of the learning-fund
vendors are not certified
teachers, which, according
to the OSBI agent, made
the transactions fraudu-
lent.
Epic and its supporters
say the learning fund is a
unique way to allow par-
ents to choose how some of
their allocated dollars are
spent, and pays for stu-
dents’ supplemental sup-
plies, art, music, athletics
and physical education
they would have access to
in a traditional school.
The OSBI seized a laptop
and bank statements from
one vendor, OKC Storm, in
August. OKC Storm offered
basketball, swimming, ten-
nis and track and field and
invoiced Epic for players’
fees, uniforms and training.
The state auditor’s mo-
tion is scheduled to be
heard in Oklahoma County
court March 26.
• Oklahoma Watch is a nonprofit,
nonpartisan media organization that
produces in-depth and investigative
content on public-policy issues facing
the state. For more Oklahoma Watch
content, go to oklahomawatch.org.