America’s oldest and biggest school voucher programme paid $2.8 million (pound;1.5m) to a school founded by a convicted rapist.

It was also stung for $330,000 by the unqualified principal of another school to pay for two Mercedes cars while pupils watched films and teachers were unpaid.

The revelations have rocked Milwaukee’s $75m-a-year voucher scheme and raised difficult questions about how to police the growing school choice movement. They came just weeks after the Bush administration announced the first government-sponsored scheme.

David Seppeh has admitted pocketing cheques worth $1,500 each for 235 students who did not attend Mandella Academy of Science and Math. A Mercedes CL-K convertible with a personalised number plate, bought with the voucher money, has been seized as part of a criminal investigation.

Mr Seppeh, who has no teaching licence, set up Mandella (a mis-spelled tribute to Nelson Mandela) two years ago. The school, which closed in February, had no formal curriculum and students spent time watching movies and playing board games.

Staff failed to supervise students properly as morale among unpaid staff slumped, said former assistant principal Gregory Goner, the recipient of the other Mercedes from Mr Seppeh.

“I didn’t watch any movies,” Mr Goner added. “But the kids said they watched The Fighting Temptations. Whatever the movies, they weren’t curriculum-based.”

Mr Seppeh has said he invested his own money in the school and did not see his actions as theft.

The scandal at Mandella was the second bombshell this school year to rock Milwaukee’s 14-year-old parental Choice Program, spurring local lawmakers to beef up the monitoring of participating private schools.

It emerged last year that James A Mitchell, founder of Alex’s Academics of Excellence, funded by the scheme since 2000, served nearly 10 years in prison for rape and remained on probation for tax fraud.

Milwaukee is considered a model for school choice, which some believe offers deprived urban children their only chance of a decent education, by offering them publicly-funded vouchers to escape inner-city state schools for better-equipped private schools.

But Anneliese Dickman, co-author of a recent study of Milwaukee’s programme, said choice is meaningless unless parents can make informed decisions. Private schools have resisted calls for greater accountability, citing concerns about ceding independence, she said.

“People (assume) that if it’s private it has to be better,” Ms Dickman added. “Some of these schools are good, but others are pretty atrocious.

“That’s no different from the (state) system. But at least there you know which schools are not doing a good job because they have to share information,” she said.

Mandella signed up parents at a booth in a local supermarket. “I don’t think parents understood,” said Mr Goner.

Other initiatives in the states of Ohio, Florida, Maine and Vermont have similarly limited supervision. But the scheme approved by Congress for Washington DC will feature tight regulation and standardised testing.