3 state employees cheated Arizona school voucher program, indictments say

PHOENIX — Three former employees of the Arizona Department of Education have been indicted on charges of cheating the school voucher program out of more than $600,000 through fraudulent applications.

Attorney General Kris Mayes announced Thursday that in some cases the three, as employees of the department involved in approving requests for voucher funds, created "ghost children'' with forged birth certificates.

In other cases, funds were requested for real people but they were adults, not children eligible to receive the tax money to attend private and parochial schools, Mayes said.

Mayes declined to say how the employees spent the more than $600,000. But she said it appears the money did not go to educating any children but instead was spent on unspecified luxury items, some in the neighborhood of $20,000 to $40,000 each.

Mayes said there also were instances where the three employees submitted forged paperwork saying students had special needs that entitled them to more than the typical $7,300 voucher from the program.

Mayes, a Democrat, said the fraud was made possible by the fact the Republican-controlled Legislature never provided proper oversight of the program, formally known as "empowerment scholarship accounts,'' when it opened its eligibility in 2022 to all public school students. 

That expanded the program from 12,000 children, mostly with special needs, to more than 70,000 students, the attorney general said, "many of whom were already attending private schools on their parents' dime before this taxpayer-funded coupon for the wealthy was passed by the Legislature.''

Mayes acknowledged the three employees had worked there since before the expansion occurred in 2022. Their tenure also predated January 2023 when state schools chief Tom Horne, a Republican and a supporter of universal vouchers, took office from Democrat Kathy Hoffman, who opposed the expansion. 

Mayes said, though, that her investigators found that the start of the alleged fraud pretty much coincided with the expansion.

But House Speaker Ben Toma, the architect of voucher expansion, said the three indicted employees "began defrauding the state well before the passage of universal ESAs.''

Mayes also said the problems were not caught by Horne, who heads the education department, or his staff.

"Our investigators were tipped off about the case not by the Arizona Department of Education but rather by a credit union who noticed unusually large in-person cash withdrawals and contacted our office,'' Mayes said.

She said the employees were not fired until her investigators began to look into the issue.

Indicted were Delores I. Sweet, Dorrian J. Jones and Jennifer Lopez, on a 40-count indictment alleging conspiracy, fraud, forgery and money laundering. Sweet, Jones and Lopez were in a position to accept and review requests for vouchers and then approve them, Mayes said.

Horne said it is important to note that all three were employees he inherited from the Hoffman administration, "whose oversight of the empowerment scholarship account was lax."

"In fact, it was so loose that when I took office, I faced dozens of parents at State Board of Education meetings furious at me for placing more controls on expenses and spending requests," Horne said. 

That, however, relates to parents' requests for authorization for specific expenses, not the question of fraudulent applications which is at issue here.

Horne also said that so far this year he has referred seven instances of suspected fraud to Mayes' office.

"And, despite her efforts to smear this department, we will continue to do so," he said. 

Toma said it would be wrong to blame the fraud on universal vouchers.

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"As we've seen in cases involving school districts, the Arizona Health Care Cost Containment System, unemployment insurance, and other governmental entities and programs, criminals invariably seek to exploit systems for personal gain,'' he said in a prepared statement.

"Yet the law stands ready to hold them accountable,'' Toma said. "I'm pleased to see today's indictments for fraud from the attorney general, which highlights the effectiveness of the state to identify fraud.''

Toma took a swat at Mayes for blaming it on the expansion. "It's regrettable that critics of Arizona's highly popular and successful ESA program are predictably seizing this opportunity to politicize and undermine it,'' he said.

Vouchers of public funds to let students attend private and parochial schools were originally made available in Arizona, more than a decade ago, only for students with special needs that could not be met in public schools.

Over the years the Republican-controlled Legislature expanded it, taking in foster children, children of military families, reservation residents and students in schools rated D or F.

The 2022 law made it available to all 1.1 million students attending public schools after proponents, led by Toma, rejected calls for limits, such as an income cap.

Strictly speaking, the amount of individual vouchers is only slightly more than per-student state aid to public schools.

But that does not take into account students who previously were in private schools with the cost being paid by their parents. There is evidence to show that the sharp rise in voucher participation is from those students.

That has led to charges by Democratic Gov. Katie Hobbs that the expanded cost of vouchers is part of the reason the state is looking at a deficit of $1.8 billion for the balance of this fiscal year that ends June 30 and the new budget year beginning July 1.

There also have been charges that the Department of Education is approving expenses for items that have no apparent educational value, such as ski trips, driving lessons and even a Lego set.

Mayes said Thursday that's a separate issue than the question of providing dollars for individuals who are not eligible, either because they are adults or they don't exist at all. She said that, aside from the acts of the three former employees, she knows where the blame lies.

"I believe it is high time for the Legislature to get serious about putting some regulations to prevent the fraud that we're seeing today from happening in the first place,'' she said.

What isn't known, Mayes said, is whether this kind of fraud is more common than the indictments reflect. 

"That's what we want to get to the bottom of,'' she said. "And I will tell you this: from what our investigators found there are very few controls and very little accountability in terms of analyzing birth certificates at the Department of Education.''

As proof, Mayes displayed one of the certificates submitted for a "ghost'' student, which she said had clearly been torn and manipulated.

Other signs should have been obvious, she said, like the fact that one of the former employees submitted three certificates all bearing the same date of birth. Mayes said that should have caught the attention of someone in the process — if there was proper oversight.

"One of the issues is, does ADE even have the resources right now to analyze those birth certificates?'' Mayes asked. "There are legitimate questions about how many of these birth certificates are actually being scrutinized by the Department of Education and what they're doing to scrutinize them.''

Horne said that when he took office in 2023 he hired John Ward, a 19-year veteran of the state Auditor General's Office, to oversee the financial structure of the voucher program. He said Ward is now director of the program.