Preliminary hearing starts for Epic Charter School founders

March 26, 2024 | Courts|Featured

Oklahoma Watch is covering the week-long hearing in the embezzlement case against David Chaney and Ben Harris, who created Epic Charter Schools and are graduates of Newkirk High School. Check this post for daily updates from the courthouse.

Ben Harris follows his attorneys, his attorneys Joe and Kate White, from an Oklahoma City courtroom on March 25, 2024, the first day of a week-long preliminary hearing. Harris and Epic Charter Schools co-founder, David Chaney, each face 15 felony counts related to the alleged misuse of ten of millions of dollars. (Jennifer Palmer/Oklahoma Watch)

By Oklahoma Watch | Jennifer Palmer

Epic’s former chief financial officer, Josh Brock, is expected to be one of several witnesses this week. 

A judge allotted five days for the preliminary hearing, which is like a mini-trial, with witnesses and evidence and cross-examination. The purpose is to determine whether there’s enough probable cause to proceed to trial.

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Opening Day testimony

A former school board president and an Oklahoma State Bureau of Investigation agent testified on the opening day of a week-long court hearing in the criminal case against the founders of Epic Charter Schools.

The state’s attorneys will attempt to convince Oklahoma County District Special Judge Jason Glidewell there is enough evidence to bind the defendants over for trial.

David Chaney, 44, and Ben Harris, 48, each face 15 charges related to their operation of the online charter school, including embezzlement, money laundering, computer crimes and conspiracy to defraud the state. They have denied wrongdoing.

Chaney, wearing a gray jacket and glasses, appeared with his attorney, Gary Wood. Harris, in a blue suit and pink tie, attended with his attorneys, Joe and Kate White. 

Much of OSBI agent Mark Drummond’s testimony, the first witness, focused on multiple companies involved in Epic and their bank records. Prosecutors allege Chaney and Harris used shell companies to conceal millions in illegal profits. Drummond has been the lead investigator on the case since 2020. 

One bank account belonging to Epic Youth Services, Chaney and Harris’ for-profit company, collected money from the school through a 10% management fee. The company made payments mainly to five entities: Chaney, Harris, a technology company owned by Harris’ wife, chief financial officer Josh Brock through his consulting firm, and lobbyist Bobby Stem. 

Thousands of pages of bank records from multiple accounts were submitted as evidence but won’t be available in the court file. The judge agreed to admit the records under a protective order. 

Doug Scott, former chairman of Epic Charter Schools’ board, took the stand in the afternoon. Scott, an attorney in Tulsa, has known Chaney since they were children. 

Prosecutors questioned Scott about the learning fund, a unique feature that allowed parents to select some educational items. Each year, the school directed a set amount per student to the learning fund, managed by Epic Youth Services. 

Some of the embezzlement charges accuse Chaney and Harris of diverting money in the learning fund to themselves as profit or to other charter schools they managed. 

Prosecutors argued that Epic Youth Services was responsible for managing the learning fund money on behalf of Oklahoma students and weren’t authorized to spend it however they wanted. Attorneys for Chaney and Harris argued that the money was no longer public funds once paid to Epic Youth Services.

Day 2 testimony

Day Two — Tuesday, March 26, 2024

Day two of a preliminary hearing for Epic Charter Schools’ co-founders concluded in the midst of testimony from Jeanise Wynn, the school’s deputy superintendent of finance since 2021. That year, the online charter school was managing fallout from a critical state audit and a contract termination that threatened to close the school. 

Wynn considered it a challenge to right the school’s finances and accepted the job offer, she said in court Tuesday. Right away, some financial practices concerned her. One was the student count Epic used to pay Epic Youth Services for the learning fund, which was higher than the average enrollment. “There was a distinct difference between those two numbers,” Wynn said. “About $8 million if I remember.” 

Legal wrangling over whether Wynn could describe comments Harris made in an executive session of a meeting of the school’s board ate nearly an hour of the day. Defense attorneys objected, arguing the conversation was privileged and confidential. 

“There was a distinct difference between those two numbers. About $8 million if I remember.” Jeanise Wynn

Ultimately, Judge Glidewell allowed Wynn to answer a question about what was said in the meeting, which took place in 2021. 

Harris, Wynn said, informed the board and others in the closed session that Epic Charter Schools had paid money to the Epic charter school in California. Harris’ comment was meant as a heads-up to the board because the information would soon be released in a report.

Throughout the day’s testimony, prosecutors hammered several learning fund policies — that religious curriculum could not be purchased and that parents could not keep items because they belonged to the school — to support the argument that the money being spent was public. Defense attorneys have argued the dollars became private once paid to Epic Youth Services. 

Chandler Winningham, who was hired by Epic in 2018 as director of the student learning fund, also testified.

Both Winningham and Wynn described how Epic employees processed learning fund orders for students at Epic California, despite being employees of Oklahoma. Some of the embezzlement charges accuse Chaney and Harris of diverting money in the learning fund to themselves as profit or to other charter schools they managed.

Renee McWaters, program manager for the state Education Department’s state aid section, also testified Tuesday, describing different funding allocations schools receive and statutory limitations on some of those dollars, such as for textbooks. 

The hearing continues at 9 a.m. Wednesday.

Day 3

Nearly all the testimony on the third day of a hearing in the embezzlement case against Epic Charter Schools’ co-founders came from Salesha Wilken, an auditor in the Oklahoma State Auditor & Inspector’s office. 

The auditor’s office hired Wilken in 2015 and she was one of the three main auditors who worked on the Epic Charter Schools investigative audit released in October 2020. Findings from the audit form the backbone of the state’s criminal case against Epic co-founders David Chaney and Ben Harris and their longtime chief financial officer, Josh Brock. 

Wilken described auditors’ struggle to obtain financial records from Epic Youth Services, Chaney and Harris’s educational management company, in the early stages of the audit. Eventually, bank records were obtained with assistance from the Oklahoma State Bureau of Investigation, Wilken said. 

Those records revealed numerous large and frequent transfers from a bank account the company maintained for the learning fund to the company’s general operating account, Wilken testified. There were 52 such transfers totaling $3.2 million. That concerned her. 

“These were public monies,” Wilken said. “These were for the kids.” 

When the school cut ties with Epic Youth Services in 2021, in the wake of the audit, the account’s balance was about $5 million, she said. Chaney and Harris subsequently invested nearly all of that money in securities. 

In February, Chaney and Harris agreed in a court order to leave that money untouched during the criminal proceedings. The attorney general’s office wants the money forfeited if they secure a conviction. 

On cross-examination, Joe White, who represents Harris, interrogated Wilken for more than 2 1/2 hours. Many times, Wood attempted to get Wilken to describe the money in Epic Youth Services’ learning fund account as private dollars. 

“Can you and I agree the law on what constitutes private funds is gray?” White asked. 

“I can’t offer an opinion on that,” Wilken said. 

Wilken’s testimony wrapped up just before 5 p.m. The hearing continues at 9 a.m. Thursday.

Ed. Note: Oklahoma Watch will add each day’s preliminary hearing highlights to this post.

Day 4 — Thursday, March 28, 2024

A defense attorney on Thursday said Epic Charter Schools’ co-founders David Chaney and Ben Harris spent big in a dark money campaign opposing the state auditor’s re-election in 2022. 

Harris’ attorney, Joe White, tried to cast suspicion on the timing of Chaney and Harris’ arrests in June 2022, days before the Republican primary, painting it as politically motivated. 

Brenda Holt, director of the forensic audit division of the State Auditor & Inspector and the lead auditor on the investigative audit of Epic Charter Schools, answered questions from the witness stand. 

“Can you tell me how much they (Chaney and Harris) donated to your boss’ opponent?” White asked. After Holt said she didn’t know, White followed up with: “Can we agree it was hundreds of thousands of dollars?” 

Some suspected Chaney and Harris were behind the spending against Auditor Cindy Byrd’s re-election. Two political action committees spent more than $638,000 on TV and radio ads to support little-known Republican candidate Steve McQuillen in that race. The groups can keep donors secret and can spend unlimited amounts if it’s not coordinated with campaigns.

Political campaign contributions were one of many elements auditors learned about Chaney and Harris’ spending following their release of the investigative audit in October 2020. At the time, they hadn’t gained access to the credit card statements and bank records of Epic Youth Services, Chaney and Harris’ for-profit charter management company. But shortly after, they collaborated with the Oklahoma State Bureau of Investigation and obtained those records, Holt testified. 

On one credit card account in the name of IAQS, a business of Chaney’s, they found legitimate purchases of educational items commingled with personal purchases. Auditors calculated $817,000 in personal purchases, and just $377,000 in payments from Chaney, Holt said.

In the bank records, they ascertained the total payments (often labeled “guaranteed payment” or GP on the checks’ memo line) added up to $8.7 million for Brock, $23 million for Chaney, and more than $24 million for Harris, Holt said. 

White began cross-examining Holt at 11 a.m., at one point spending hours having Holt walk him through each finding in the 116-page audit individually. He had yet to conclude at the end of Thursday, casting doubt on whether the hearing could wrap up Friday, as scheduled. 

Prosecutors plan to call two more witnesses after Holt, including Josh Brock, Epic’s former chief financial officer. The hearing continues at 9 a.m. Friday.

Ed. Note: Oklahoma Watch will add each day’s preliminary hearing highlights to this post.

Day Five — Friday, March 29, 2024

The state on Friday called its most anticipated witness — former Epic money man Josh Brock — to testify against Chaney and Harris, his former business partners. 

Brock is also charged in the multimillion-dollar embezzlement case. He is cooperating with prosecutors in exchange for a sentence that does not include prison time but 15 years probation and restitution in an amount to be determined, Brock said during his testimony Friday. 

Ben Harris follows his attorneys, Joe and Kate White, from an Oklahoma City courtroom on March 25, 2024, the first day of a week-long preliminary hearing. Harris and Epic Charter Schools co-founder, David Chaney, each face 15 felony counts related to the alleged misuse of ten of millions of dollars. (Jennifer Palmer/Oklahoma Watch)

Brock provided financial services to Epic Youth Services, the management company, and served as encumbrance clerk for Epic Charter Schools at the school’s inception in 2011. Harris recruited Brock because of his financial background; Brock has a bachelor’s degree in finance and accounting and an MBA. 

He wasn’t an employee of either the school or the company but a private contractor. Epic Youth Services paid him $7,333 per month, plus big bonuses: $25,000 if the school received a clean annual financial audit, $10,000 for a balanced budget, and $15,000 for timeliness. 

On top of that, he received a 10% slice of Epic Youth Services’ profits (Chaney and Harris split the rest 50/50). At the height of Epic’s enrollment, Brock’s total compensation was $1.5 million to $2 million, he said.

Over 5 1/2 hours on the witness stand, Brock described how profits drove business decisions in the school’s operation. 

Why did Epic open its blended school model in 2017? To expand the business, Brock said. Why did Epic open a California school? To expand the business, Brock said. 

Why was Epic’s learning fund managed by school employees, not the company? To “minimize cost, maximize profit,” Brock said. 

Even Epic’s first day of school, always after Labor Day in September, was chosen to financially benefit the company. With most other districts starting in August, dissatisfied students were apt to transfer to Epic when it hadn’t started yet, Brock explained.

Brock’s testimony was not complete at the end of the day Friday. Defense attorneys Wood and White said they were unable to return on Monday, so Judge Glidewell scheduled the preliminary hearing to resume May 7.

Ed. Note: Oklahoma Watch will add each day’s preliminary hearing highlights to this post.