DENVER -- The Denver Public School District has launched an internal investigation after 7NEWS started asking questions about potential fraud. At issue are claims of fake classes and phantom students created to boost the "October Count" to get more school funding.

Count day determines how many students are enrolled in a particular school, and how much money the school district will get from the state.

Several internal school documents and e-mails reveal so-called "dummy" classes set up by administrators at Denver's Contemporary Learning Academy. The "dummy classes" and the fake students who are enrolled in them appear to be an effort to falsify enrollment numbers on student count day to get more money from the state.

"The school is pretending that classes exist, which do not. It is pretending that there are students enrolled attending those fake classes -- students who are not," said a source speaking on the condition of anonymity.

Late Thursday night, security guards seized two hard drives from the school in north Denver.

Serious questions remain about whether this was an incident isolated to the Contemporary Learning Academy, or whether it is a systemic issue district-wide.

"It is absolutely unethical," said the source. "It's cheating every single one of us. I felt cheated as a citizen of Colorado and an employee of the school. I was asked to participate in this. We were exploited."

A former CLA counselor contacted 7NEWS Friday morning after watching the story on 7NEWS Thursday evening.

"These kind of practices have gone on for years. I was forced to falsify records because I was young and didn't know better," said the counselor, speaking on condition of anonymity.

Contemporary Learning Center is an alternative high school for students who have struggled in traditional academic settings. Its student body is largely male (58 percent) and minority youngsters, including 60 percent Hispanic and 27 percent black students. Nearly 80 percent of students receive free or subsidized lunches.

The high school only has about 250 students with a low student-teacher ratio of about 9-to-1.

The school has struggled with low test scores and past controversy.

CLA failed to achieve "Adequate Yearly Progress" benchmarks in 2007. Under the No Child Left Behind Act, that means the school failed to meet the minimum levels of improvement set by the state for student performance and other accountability measures.

For 2008 Colorado Student Assessment Program testing, none of the school's 9th and 10th graders met math standards and only 1 percent met writing standards.

A former CLA principal, Dave Debus, resigned in December 2007 after a male student accused him of inappropriately and repeatedly touching him. The student, whose family filed an intent to sue letter with the school district, accused Debus of ordering the boy to appear in his office on a day the school was closed to students.

Yet the district attorney's office said a review of the police investigation found no criminal conduct.

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