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Fall guy.
That’s how attorneys for Phillip Holden, the former director of the Indiana Virtual School, described Holden’s role in a $44 million scheme to inflate enrollment numbers at the online charter school and siphon per-pupil dollars from Indiana.
But U.S. attorneys said Holden knowingly participated in those plans as the right-hand man of school founder Thomas Stoughton, who pleaded guilty to fraud charges on Monday, the day before a joint trial for the men was due to begin.
Instead, Holden was the sole defendant Tuesday at the start of an oft-delayed federal criminal trial centered on the management of IVS, which closed in scandal in 2019.
Holden faces 17 counts of wire fraud and one count of conspiracy to commit wire fraud. In addition to Stoughton’s plea, school superintendent Percy Clark pleaded guilty to conspiracy to commit wire fraud in June 2025 and agreed to pay back around $1.3 million.
According to a 2024 grand jury indictment, Holden was responsible for student enrollment, attendance, and teacher compensation in his role at IVS and Indiana Virtual Pathways Academy, a related school. The indictment alleged that Holden, along with Stoughton and Clark, inflated enrollment numbers to receive per-pupil funding from the state of Indiana. The schools then funneled that money to for-profit companies owned by Stoughton and paid out to Stoughton, Clark, and others in the case, the indictment says.
The charges followed a 2017 Chalkbeat investigation of IVS that found the school had ballooning enrollment, just one teacher for every 222 students, and financial conflicts of interest. The investigation led Indiana lawmakers to tighten funding and attendance requirements for virtual schools.
Indiana Attorney General Todd Rokita has filed a separate $154 million lawsuit against IVS, IVPA, and their officers.
Trial will last several days
At the trial Tuesday, attorneys for Holden said they had lost contact with another person, Merle Bright, who received payments from IVS according to a 2020 state audit of the schools. They asked the court to order Bright’s attorneys to appear in person.
As part of the jury selection process, U.S. attorneys asked potential jurors if they had ever taken an online course, and, if so, how they proved that they were in attendance online. Holden’s attorneys asked potential jurors about their opinions on charter schools.
In opening statements, prosecutors described Holden and Stoughton as financially desperate when they started the school. Holden, they said, was a former police officer collecting unemployment when he was hired.
But the defense characterized Holden as a blue-collar worker who did not financially benefit from the enrollment scheme, earning no more than a $65,000 salary each of his five years with the school. In discussions about emails included as evidence in the trial, they frequently pointed out that Holden was not a sender or a recipient.
Prosecutors said that while Stoughton ordered the inflated enrollment, Holden put it into place by re-enrolling students who had withdrawn prior to count day, which is when Indiana determines how much funding each school receives based on enrollment. A state report found the school enrolled students who had only submitted requests on its website, who had moved out of state, and in one case, a student who had died.
They also said Holden and Stoughton kept a separate spreadsheet of actively enrolled students in order to pay teachers only for students who were actually attending classes, rather than the inflated figure.
The trial is expected to last into next week, according to U.S. District Judge Richard Young, with breaks on Friday and for the afternoon of Election Day.
Aleksandra Appleton covers Indiana education policy and writes about K-12 schools across the state. Contact her at aappleton@chalkbeat.org.
