RIVERSIDE COUNTY, CALIFORNIA — A March 2025 audit commissioned by the Riverside County Office of Education found evidence of fraud and misappropriation of funds in the Val Verde Unified School District's diploma program with Pegasus California School, according to the Larson LLP report. The diploma program between Val Verde Unified School District and Pegasus California School was halted.

In March 2025, the Riverside County Office of Education retained the Los Angeles-based law firm Larson LLP to examine the ties between Val Verde Unified School District and Pegasus California School. The audit found sufficient evidence of fraud, misappropriation of funds, or other illegal fiscal practices associated with the partnership between the two institutions.

"We found that a California public school district improperly issued diplomas to students in China," said Stephen Larson, a partner at Larson LLP, in a statement. "The broader record shows those California credentials may have been used to create false legitimacy for students seeking entry into American universities."

The audit found that the Western Association of Schools and Colleges would not accredit Pegasus California School because it did not meet the association's standards. A copy of the Pegasus California School diploma obtained through a public records request shows that it was issued by the Val Verde Unified School District.

The Riverside County Office of Education referred the matter to the US Attorney's Office for the Central District of California for potential criminal prosecution of the Pegasus Diploma Program, according to court papers. State education authorities released an audit of the arrangement and referred it to the local district attorney.

An investigation in 2021 reported a relationship between Val Verde Unified School District, current and former state education officials, and Pegasus California School, a private school in Qingdao, China, that charges students thousands of dollars a year in tuition. County education officials said in court papers that they were concerned that diplomas issued by Val Verde Unified School District to Pegasus California School students violated state code and that there may have been fraud, misappropriation of funds, or other illegal fiscal practices associated with the partnership.

Federal prosecutors opened an investigation into the arrangement between Val Verde Unified School District and Pegasus California School in late 2023, according to public records. As of May 2024, the investigation was active and a county education official had been interviewed in April 2024, court papers show.

In May 2024, the Riverside County Office of Education sued the Fiscal Crisis and Management Assistance Team, alleging that its investigation was inadequate, court papers show. In February 2025, a judge ordered that the Fiscal Crisis and Management Assistance Team's reports on Pegasus California School remain confidential, according to a court order.