To recover missing paychecks, Indiana Virtual School counselors file a federal lawsuit

Three former Indiana Virtual School counselors are suing to recover their final paychecks from the rocky weeks before the troubled online school unceremoniously dissolved last summer.

If the lawsuit proceeds, it could suss out who shoulders responsibility for the mess left behind by Indiana Virtual School and Indiana Virtual Pathways Academy, which collapsed under the weight of a $47 million enrollment scandal.

The lawsuit names as defendants the two schools, the nonprofit that held their charters, the schools’ founder, two businesses contracted by the schools, and the school district that authorized and oversaw the virtual charter schools.

The counselors — James R. Stanbrough, Angela M. Holmes, and Carrie L. Bennett — were not paid for work in July and August, according to the lawsuit filed in federal court this month. The state had cut off funding after auditors found the two virtual charter schools had artificially inflated their enrollment numbers by nearly double. Confusion swirled as the schools threatened closure but claimed to remain open, despite laying off support staff and their office going dark.

As they helped students finish courses and transfer to new schools, educators said they were told they would be paid. The three counselors each made about $5,000 per month, according to the lawsuit.

It wasn’t until Aug. 22 that a lawyer for the virtual charter schools said 38 teachers and a handful of administrators wouldn’t receive paychecks for their July and August work.

Robert Hunt, a Carmel employment attorney representing the three counselors, declined to comment on the lawsuit. The filing in the U.S. District Court’s Southern District of Indiana notes that the counselors filed wage claims with the state and were directed by the Indiana attorney general’s office to pursue litigation.

When the online schools lost their charters in August, school board members immediately resigned — despite pending state and federal investigations, an unpaid state debt of $40 million, and thousands of student records still needing to be transferred.

The lawsuit zeroes in on the school’s founder, Thomas Stoughton, who it claims was responsible for the day-to-day management of the schools, the nonprofit board, and the companies running the schools, AlphaCom and Bitloft. His ties to the companies benefitting from lucrative contracts with Indiana Virtual School — creating a potential conflict of interest — were the subject of a 2017 Chalkbeat investigation.

Chalkbeat could not reach Stoughton for comment. Officials from Bitloft, a creative agency that features the Indiana Pacers as a client on its website, did not return a phone call seeking comment.

An attorney for Daleville Community Schools, the virtual charter schools’ authorizer, declined to comment on pending litigation. Virtual school officials had sought funds from the district to pay teachers after they said the schools had run out of money — a request that Daleville did not grant.

While some blame Daleville’s lax oversight for leading to the problems at Indiana Virtual School and Indiana Virtual Pathways Academy, Daleville officials have contended that they intervened as soon as they discovered potential wrongdoing at the schools.