A Texas tech executive accused of helping funnel millions out of the Los Angeles Unified School District pleaded not guilty Friday, as prosecutors push forward in what they describe as one of the biggest alleged corruption schemes in district history.

Gautham Sampath, 53, appeared in a downtown Los Angeles courtroom where he was arraigned on felony charges including money laundering and conflict-of-interest violations tied to public contracts, according to the Los Angeles County District Attorney’s Office.

Before Judge Teresa McGonigle, Sampath entered a not guilty plea. He was released on his own recognizance under strict conditions: surrendering his passport, remaining in the United States and complying with all laws.

The case now moves to June 10, when it will be determined whether there is enough evidence to push the case toward trial.

At the center of the scandal is Sampath’s alleged partnership with former LAUSD IT project manager Hong “Grace” Peng, 53, of Pasadena.

Peng has already pleaded not guilty to similar felony charges, including money laundering and having a financial interest in contracts she oversaw.

Prosecutors say the two orchestrated a multi-year “pay-to-play” operation tied to LAUSD’s MiSiS student information system, steering lucrative work to Sampath’s company, Innive.

Between 2018 and 2022, Peng allegedly helped direct more than $22 million in contracts to the firm while secretly benefiting from the arrangement.

In return, Sampath is accused of routing more than $3 million back to Peng through a web of intermediaries designed to conceal the payments.

District Attorney Nathan Hochman blasted the alleged scheme as a “blatant abuse of public trust,” accusing the pair of diverting taxpayer dollars meant for students into their own pockets.

Authorities say the operation may have been even broader.

According to the criminal complaint, Innive collected more than $39 million in payments from LAUSD between 2017 and 2023.

Explosive text messages cited by investigators appear to show the pair openly discussing how to exploit the system, and how to hide it.

In one exchange, Sampath allegedly asked, “What r the other opportunities in LAUSD. That we can exploit,” with Peng responding, “Yea, a lot of them.”

Other messages suggest effort to cover their tracks.

“Delete all watsup chats… if anyone sees the text about these internal things it will be a prb,” Sampath wrote in February 2018, according to prosecutors.

Peng, in another message, allegedly laid out a strategy to inflate billing: “I have a way to get those money. Can load them up more work, then charge more hours.”

Investigators say the duo also discussed setting up multiple companies to move money and avoid detection.

“We need to come up with lot of companies… at least 3-4 to take out the money… Close to million will be transferred to you,” Sampath allegedly wrote.

Peng even floated establishing entities overseas, suggesting locations including Hong Kong, China or Singapore, according to the complaint.

The fallout has extended beyond criminal charges.

LAUSD has filed a civil lawsuit against both Sampath and Peng, accusing them of violating state conflict-of-interest laws and concealing financial ties while influencing contracting decisions.

The complaint alleges Peng participated in procurement, evaluations, and approvals involving millions of dollars while maintaining undisclosed financial and personal connections to Sampath.

It also claims the contractor failed to disclose those conflicts despite clear ethical obligations.

“Los Angeles Unified is committed to full compliance with all applicable laws, and we expect our employees and business partners to comply with the highest standards of ethics and integrity,” Acting Superintendent Andres E. Chait said in a statement, vowing accountability and efforts to recover taxpayer funds.

Peng resigned from the district in late 2022 after search warrants were executed at her home and workplace as the investigation intensified.

The probe, led by LAUSD’s Office of Inspector General alongside the District Attorney’s Bureau of Investigation, has been active since the allegations first surfaced in April 2022.

With both defendants denying the charges, the high-stakes case now heads toward a pivotal June hearing that could determine whether the explosive allegations land before a jury.