Online schools: Susan Bonilla shelves bill after interest groups water it down

Former California Virtual Academies student Elizabeth Novak-Galloway, 12, plays a video game on her laptop in her home in San Francisco on.
Dai Sugano — Bay Area News Group

By Jessica Calefati, Bay Area News Group

Posted:
08/30/16, 8:09 PM PDT

Updated: 4 hrs ago

0 Comments

California Virtual Academies teacher Julianne Knapp teaches her students during her online class on at a public library in San Jose.
Dai Sugano — Bay Area News Group

SACRAMENTO >> Legislation that originally sought to ban online charter schools from hiring for-profit firms to provide management or instructional services stalled Wednesday in the state Senate almost two weeks after the author substantially amended and watered down the measure.

Assemblywoman Susan Bonilla, a Concord Democrat, introduced Assembly Bill 1084 in response to the Mercury News’ investigation of K12 Inc., the publicly traded Virginia company behind a profitable but low-performing network of “virtual” academies serving about 15,000 students across the state.

The legislation cleared the Senate Education Committee in June on a party line 6-2 vote after a spirited debate about the role private companies should play in public education.

But substantial opposition from the company whose operations she sought to rein in and disagreement between the state’s largest teachers union and an influential charter schools advocacy group about the bill’s goals forced Bonilla to modify its language, removing all references to rules for online schools.

In an interview Tuesday, Bonilla said she carried the bill to ensure that public money for schools is used to educate students, not to enrich corporate shareholders. She said she also had hoped the legislation would boost online schools’ accountability. In the end, however, even the stripped-down version drew unexpected opposition from a school employees union and Republican lawmakers and had to be shelved.

“The bill started out targeting online charter schools because that is where we have witnessed this problem most,” said Bonilla, who is leaving the Legislature this year because of term limits. But “as we delved deeper into the details, it became apparent that because of the complex structures of these organizations, getting to the bad actors would be challenging.”

The newspaper’s stories revealed that K12 reaps tens of millions of dollars annually in state funding while graduating fewer than half of its high school students and that kids who spend as little as one minute during a school day logged onto K12’s software may be counted as “present” in records used to calculate the amount of funding the schools get from the state.

The two-part series also showed that the online schools are not really independent from K12, as the company claims. The academies’ contracts, tax records and other financial information suggest that K12 calls the shots, operating the schools to make money by taking advantage of laws governing charter schools and nonprofit organizations.

In the months since the newspaper published its findings, state Controller Betty Yee launched an audit of the K12-managed California Virtual Academies. And following a probe by the state Attorney General’s Office, K12 agreed to a $168.5 million settlement with the state over claims it manipulated attendance records and overstated its students’ success.

A spokesman for K12 could not be reached for comment on Bonilla’s decision to shelve AB 1084. But an analysis of the legislation prepared by Senate staff members shows the company didn’t oppose the latest version of the measure, which would have required all charter schools to operate as nonprofits.

The reason is that since K12 is technically a “vendor” of the schools it controls, its operations in California wouldn’t have been impacted by the measure at all.

In the weeks since the Senate Education Committee’s hearing on the bill, Bonilla had been working closely with the California Teachers Association and the California Charter Schools Association to craft bill language that satisfied both powerful interest groups. And although the groups agree that for-profit companies like K12 shouldn’t be allowed to run charter schools in this state, they disagreed on strategy.

“We tried for weeks to negotiate something with Ms. Bonilla,” said Jed Wallace, the charter group’s executive director. “What we were trying to do was related, but different.”

The union wanted to keep Bonilla’s original concept of a broad ban. But the charter group supported a more “surgical approach” that would have prohibited companies from having any role in the selection, interview or appointment of a charter school’s board members; barred them from developing, proposing or approving a school’s annual budget or expenditures; and limited the number of teachers the firm could employ or manage directly.

The version of the legislation Bonilla abandoned Wednesday was the result of “compromise” between the two groups, she said, adding that she hopes another lawmaker committed to charter school accountability picks up next year where she left off.

“(My work) sets a firm baseline from which to pursue further legislative fixes in the future,” Bonilla said.

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Online schools: Bay Area Assemblywoman shelves bill after interest groups water it down

By Jessica Calefati, jcalefati@bayareanewsgroup.com

Posted:
 
08/31/2016 04:29:04 AM PDT

SACRAMENTO — Legislation that originally sought to ban online charter schools from hiring for-profit firms to provide management or instructional services stalled Wednesday in the state Senate almost two weeks after the author substantially amended and watered down the measure.

Assemblywoman Susan Bonilla, a Concord Democrat, introduced Assembly Bill 1084 in response to this newspaper’s investigation of K12 Inc., the publicly traded Virginia company behind a profitable but low-performing network of “virtual” academies serving about 15,000 students across the state.

The legislation cleared the Senate Education Committee in June on a party line 6-2 vote after a spirited debate about the role private companies should play in public education.

File photo: Assemblywoman Susan Bonilla, a Concord Democrat, introduced Assembly Bill 1084 in response to this newspaper’s investigation of K12 Inc. (Bay Area News Group archives)

But substantial opposition from the company whose operations she sought to rein in and disagreement between the state’s largest teachers union and an influential charter schools advocacy group about the bill’s goals forced Bonilla to modify its language, removing all references to rules for online schools.

In an interview Tuesday, Bonilla said she carried the bill to ensure that public money for schools is used to educate students, not to enrich corporate shareholders. She said she also had hoped the legislation would boost online schools’ accountability. In the end, however, even the stripped-down version drew unexpected opposition from a school employees union and Republican lawmakers and had to be shelved.

“The bill started out targeting online charter schools because that is where we have witnessed this problem most,” said Bonilla, who is leaving the Legislature this year because of term limits. But “as we delved deeper into the details, it became apparent that because of the complex structures of these organizations, getting to the bad actors would be challenging.”

The newspaper’s stories revealed that K12 reaps tens of millions of dollars annually in state funding while graduating fewer than half of its high school students and that kids who spend as little as one minute during a school day logged onto K12’s software may be counted as “present” in records used to calculate the amount of funding the schools get from the state.

The two-part series also showed that the online schools are not really independent from K12, as the company claims. The academies’ contracts, tax records and other financial information suggest that K12 calls the shots, operating the schools to make money by taking advantage of laws governing charter schools and nonprofit organizations.

In the months since the newspaper published its findings, state Controller Betty Yee launched an audit of the K12-managed California Virtual Academies. And following a probe by the state attorney general’s office, K12 agreed to a $168.5 million settlement with the state over claims it manipulated attendance records and overstated its students’ success.

A spokesman for K12 could not be reached for comment on Bonilla’s decision to shelve AB 1084. But an analysis of the legislation prepared by Senate staff shows the company didn’t oppose the latest version of the measure, which would have required all charter schools to operate as nonprofits.

The reason is that since K12 is technically a “vendor” of the schools it controls, its operations in California wouldn’t have been impacted by the measure at all.

In the weeks since the Senate Education Committee’s hearing on the bill, Bonilla had been working closely with the California Teachers Association and the California Charter Schools Association to craft bill language that satisfied both powerful interest groups. And although the groups agree that for-profit companies like K12 shouldn’t be allowed to run charter schools in this state, they disagreed on strategy.

“We tried for weeks to negotiate something with Ms. Bonilla,” said Jed Wallace, the charter group’s executive director. “What we were trying to do was related but different.”

The union wanted to keep Bonilla’s original concept of a broad ban. But the charter group supported a more “surgical approach” that would have prohibited companies from having any role in the selection, interview or appointment of a charter school’s board members; barred them from developing, proposing or approving a school’s annual budget or expenditures; and limited the number of teachers the firm could employ or manage directly.

The version of the legislation Bonilla abandoned Wednesday was the result of “compromise” between the two groups, she said, adding that she hopes another lawmaker committed to charter school accountability picks up next year where she left off.

“(My work) sets a firm baseline from which to pursue further legislative fixes in the future,” Bonilla said.

Contact Jessica Calefati at 916-441-2101. Follow her at Twitter.com/Calefati.

Students Head Back to School by Staying Home

<i–< School begins August 29 for online public school students

August 25, 2016 04:30 PM Eastern Daylight Time

SIMI VALLEY, Calif.–(BUSINESS WIRE)–Local students in the areas of Kern, Inyo, Santa Barbara and San
Bernardino will begin their first day of the 2016-17 school year on
August 29 from the comfort of their own homes, choosing to attend the
full-time, tuition-free, online public charter school California Virtual
Academy @ Maricopa (CAVA @ Maricopa).

CAVA @ Maricopa is one of 10 independent charter schools in California
that uses the K12
online curriculum
 to offer students in grades K–12 a unique learning
experience. The virtual school setting allows both advanced learners and
those students who need additional assistance the support to find the
individualized learning experience they seek. The K12 online
curriculum enables teachers, parents and the students to build an
individualized learning plan, and provides support and flexibility in
the structure of the school setting.

“The students that enroll in California Virtual Academy @ Maricopa seek
a personalized learning experience that enables them to excel and
explore their own learning style,” said Kimberly Odom, Director of
Special Education. “Each student receives quality instruction and
support in a one-on-one setting as they grow throughout the year.”

Additionally, the schools offer a unique program called Community Day
that combines the best of online learning with weekly face-to-face
interaction. During Community Days students receive instruction from
teachers in math and language arts and participate in various other
educational activities, such as PE and science fairs, while parents
receive support and network with other parents.

CAVA @ Maricopa is still accepting enrollment of students for the
2016-2017 school year. In-person and online information sessions are
being held throughout the month.

For a complete list of back to school events and information sessions or
to learn more about enrolling, visit http://cava.k12.com
or call (866) 339-6787.

California Virtual Academy @ Maricopa

California Virtual Academy @ Maricopa is a tuition-free, online public
schools serving students in K-12 who are residents of Kern, Inyo, Santa
Barbara and San Bernardino counties. California-credentialed teachers
deliver lessons in an online classroom platform provided by K12 Inc.
(NYSE: LRN) with a combination of engaging online and offline
coursework—including a wide variety of books, CDs, videos, and hands-on
materials that are delivered to the student and make learning come
alive. Common household items and office supplies such as printer ink
and paper are not provided. California Virtual Academy @ Maricopa
provides opportunities for advanced learners, and prepares students to
be college and career ready at graduation. Learn more at http://cava.k12.com.

Contacts

Team SoapboxAnne Heavey, 206-528-2550anne@teamsoapbox.com

K12 Inc. Tries to Pivot from Virtual School Failures to Profit from "Non-Managed" Schools

Submitted by Dustin Beilke on January 7, 2016 – 9:01am

If you were a public school and Wall Street didn’t like you that might not seem like such a big deal. What do financiers know about educating children? It’s a big deal, however, if you are K12, Inc., and enticing investors to buy into your low-cost, high yield "cyber school" idea is key to your bottom line.

At K12, Inc.’s stockholder meeting in December, its own investors criticized the schools’ lamentable academic performance and voted down its executives’ proposed salary increases. This is just the latest piece of bad news, which has been coming in rafts for K12 since 2013.

As K12’s executives were being rebuffed by stockholders inside the law offices of Latham & Watkins, in Washington, D.C., outside K12 was picketed by members of the California Teachers Association for more or less the same list of educational shortcomings, as Diane Ravitch noted.

Some editorial boards crow when they receive criticism from two opposing sides of a controversial issue. "If both sides are unhappy we must be doing something right" is the familiar refrain, as if there are only ever two sides to an issue or the sides have equal merit.

In the case of K12, however, it is hard not to wonder how much longer the company can withstand this loud unanimity of animus–even a firm Wall Street insiders like convicted fraudster Michael Milken helped launch, as the Center for Media and Democracy (CMD) detailed in "From Junk Bonds to Junk Schools: Cyber Schools Fleece Taxpayers with Phantom Students and Failing Grades."

No major supporters have yet publicly called for pulling the plug, but anti-public education zealots like the billionaire Walton family and the Koch brothers have plenty of other places to invest in to try to bring down "government schools."

Big, Big Payouts to Execs at Taxpayer Expense

In its recommendation that shareholders vote against the pay proposal, the advisory firm Glass Lewis & Co. said K12 exemplifies a "substantial disconnect between compensation and performance results." Glass Lewis gave the company an "F" for how it paid its executives compared to peers.

In 2015, K12 CEO Nathaniel Davis was making $5.3 million and CFO James Rhyu was making $3.6 million. Their base salaries were $700,000 and $478,500, respectively, which were dwarfed by additional pay and stock for their "performance." (See more details on their total compensation in the pdf uploaded below.)

In all, K12’s five highest paid executives received a total of more than $12 million in compensation last year. That’s one of the reasons CMD has called K12 Inc.’s former CEO, Ron Packard, the highest paid elementary and secondary school educator in the nation.

Nearly 90% of K12’s revenues–and thus its huge pay for executives</a–<comes from Americans' state or federal tax dollars.

K12 Inc. also pays each member of its Board of Directors between $155,000 and $216,000 annually for a few hours of work each year—far more than local school board members make for much more time spent in general. (See uploaded K12 proxy filings below for the details.)

While K12’s promoters love to mention that it is a publicly traded company, it is also trading at its lowest stock price since 2010, down 75 percent from its September 2013 peak.

Meanwhile, a new report from Stanford University’s Center for Research of Education Outcomes (CREDO) found that online charters do a very poor job of educating children. In general, students in online charters lose 42 days of reading in a year, and 180 days of instruction in math. And there are only 180 days of instruction in most public school years.

Enrollment has also dropped almost 5 percent from its peak. No less a business authority than Bloomberg Business investigative reporter John Hechinger presented grim prospects for K12 as of late 2014, and no one has revised them upward.

Millions in K12 Ads at Taxpayer Expense Too

This decrease in business has come despite massive advertising and marketing expenditures by the virtual schools industry. K12 has spent untold millions in public funds on ads—a luxury budget item that traditional public schools are not permitted even when competing with K12 for students.

It spent at least $20 million on ads in 2012 alone, but it has not publicly disclosed ad spending in recent years even as its ads have become more ubiquitous in markets like Wisconsin and Arizona, for example. K12 does not disclose its ad budget in its public annual report.

Plus Taxpayer Money Helps K12 Pay to Play with ALEC Politicians

K12 also spends taxpayer money lobbying state and federal officials. It recently got a seat, for example, on the corporate board of the American Legislative Exchange Council (ALEC), where for years it has also paid for a seat and vote on ALEC’s "Education and Workforce Development" Task Force, which advances a "cash for kids" lobbying agenda.

ALEC corporations spend tens of thousands of dollars each year for such access to lawmakers, and K12 has also paid many thousands of dollars to underwrite some of ALEC’s docket of events for legislators and lobbyists.

Through the ALEC Task Force, K12 has actually had an equal vote with state legislators on so-called "model" bills to divert taxpayer funds away from traditional public schools toward the objectives of ALEC’s private sector funders, to help their bottom-lines and/or legislative agenda.

ALEC’s "Virtual Public Schools Act," for example, even allows virtual schools to be paid the same amount per pupil as traditional public schools even though operations like K12 have no bricks and mortar school house or desks or air-conditioning or gyms, etc., to maintain.

As CMD’s SourceWatch has documented:

"In 2004 when the ‘model’ bill was drafted and approved, both K12 Inc. and Connections Academy were part of the ‘School Choice Subcommittee of ALEC’s Education Task Force, according to an archived version of ALEC’s website from February 2005. The subcommittee recommended six bills for adoption, including the ‘Virtual Public Schools Act.’ According to ALEC, the bill was drafted by Bryan Flood of K12 along with Mickey Revenaugh of Connections Academy, then-Colorado Representative Don Lee (now a lobbyist for K12, see [below]), ‘and the rest of the Subcommittee.’" (Connections is now part of Pearson PLC, a British mega-corporation headquartered in London.)

K12’s reps at ALEC Education Task Force meetings have been its Senior VP for Government Affairs (lobbying), Bryan Flood, along with its VP for Government Affairs, Don Lee, and its Senior Director of Government Affairs, Bob Fairbank.

ALEC’s Education Task Force is co-chaired by Utah state Sen. Howard Stephenson (R-11). Through the ALEC corporate bill mill, Stephenson has even done a roadshow with K12’s Don Lee to drive more business to K12 through legislation. Given his advocacy of efforts to divert tax dollars from traditional public schools to charters and virtual schools, some press in Utah have questioned whether Stephenson is a public servant or a lobbyist for outside interests. (There is no way to independently verify whether Stephenson has actually ever invested in K12 or Pearson, or not.)

Notably, Lee and Fairbank are both former Colorado state legislators who took the revolving door out of public service into well-paid gigs, like peddling what K12 is selling to legislatures across the country. And, the head of their lobbying shop, Flood, is the former flack for then-Gov. John Engler of Michigan, who is now pulling down big bucks for sitting on K12’s Board of Directors: $55,000 in cash plus $100,000 in K12 stock for a few hours of his time last year.

Making "Friends" Everywhere K12 Goes….

Utah, Arizona, and Wisconsin are not the only states where K12 is active and facing criticism. The "Ohio Virtual Academy," for example, which accounted for 10 percent of K12’s revenue in 2014, received failing grades on a state report card for student test-score progress and graduation rates. A state analysis found that only 37 percent of K12’s Ohio ninth graders earned diplomas within four years.

K12’s operations in California have produced similar results, as In the Public Interest (ITPI) has documented, despite K12’s efforts to blame the state. (CMD has partnered with ITPI on research previously.)

Several online charters have cancelled their contracts with K12, and in Tennessee, education commissioner Kevin Huffman called for shuttering the Tennessee Virtual Academy because it had test results "in the bottom of the bottom tier" and is an "abject failure."

Altogether, K12 has lost management contracts or been threatened with school shutdowns in five states.

The National Collegiate Athletic Association (NCAA) also ruled last April that prospective students from 24 K12 Inc. high schools can no longer count credits toward athletic scholarships.

A pro-union decision by the California Public Employment Relations Board no doubt came as more bad news for K12’s brass. The board ruled that the California Teachers Association (CTA) is the exclusive bargaining agent of the more than 750 teachers at the Simi Valley-based California Virtual Academies (CAVA). Teachers have been seeking a stronger voice in improving working conditions and student learning for CAVA’s 15,000 students.

CAVA teachers had been calling for improvements for years. In March 2015 a study of CAVA by ITPI called for better oversight. In June 2015, CTA filed complaints with school districts that authorized CAVA charters throughout California.

K12 Hoping "Non-Managed" Schools Will Save It?

While no one is publicly calling for K12 to shut down, K12 itself is "diversifying its portfolio" in an apparent effort to ease out of the online charter school business.

K12 has built its brand by operating "managed schools" in which K12 runs and profits from all of the programs at a particular K12 school. In a managed school, the company does all of the teaching, curriculum, assessment for the customers—er, students—who choose it over attending a public school or participating in a traditional home-schooling arrangement.

The new revenue stream K12 is pioneering is in what it is now calling "non-managed schools" in which K12 sells the digital content and platform for a school for some other company or entity to run (and be responsible for the results). Non-managed programs have been growing by leaps and bounds as managed virtual schools have fallen on hard times.

The only problem with this model is that managed schools still bring in much more money than the non-managed kind. Some managed schools, for example, bring in $1,849 per student while non-managed schools bring in only $462 per pupil on average.

But, getting some revenue without being responsible for results may be the way for the future of K12: an analysis of K12 figures comparing September 2015 to the prior year showed that enrollment at "managed" virtual schools was declining 12 percent while it is increasing 34.5 percent at "non-managed" schools.

Non-management could take profiting from taking money out of traditional public schools without real accountability to a new level for K12.

CMD’s Executive Director Lisa Graves contributed research to this report.

k12inc 2.pdf

K12 (LRN) Regains Footing After Massive Sell-off

Stephen L Kanaval

Follow
|
Wednesday, 10 August 2016 15:26 (EST)

K12 (LRN)), a technology-based education provider,is now involved in multiple class action lawsuits alleging that the company lied about its student success rates, parent satisfaction, class size, graduates’ eligibility for the University of California and California State University, among other modes of data that was used in press releases and advertisements.

The class action lawsuits stem from a San Jose Mercury News investigation from April this year that looked to expose K12 as a fraudulent moneymaking enterprise that fabricated a wide variety of claims (summarized above).The investigation aimed to demonstrate how K12, a Virginia-based company, took advantage of California education law that have no specific rule about for-profit firms running charter schools in the state. Initially, K12 established online schools with individual, separate names so that the school and the corporation seemed unlinked for tax-exempt purposes because Federal Tax Laws prohibit charitable organizations from working to benefit a company. However, the report alleges that K12 employees started online schools posing as a “group of parents.” The company tried later to open a brick and mortar school in Contra Costa County, but was denied on the grounds that the Virginia administrative entity would be running day-today decision making. In addition, the report found that teachers lied about attendance to keep taxpayer dollars coming, very few online students earned diplomas, the company has reaped $312 million in profits over the last twelve years, schools that oversee the online academies get a cut of revenues and are inclined to turn the other way when they see inaccuracies, and many students test well-below state standards in reading and math.

Now, that being said, the company has rallied since April and many analysts were buying the stock to capitalize on the lower cost. In its most recent press release this Tuesday, the company saw earnings per share fall and revenues slumped by 9%. Following that, the stock was sliding but rallied again this morning. During the same press release, the company also said that they have settled with the Attorney General of California and no wrongdoing was admitted. The company logged a $7.1 million settlement for 4Q as a net charge that will go to taxpayers and government expenses accrued in the probe. The volatility of LRN is well documented and many buyers will stay away as more lawsuits are coming, but the truth is that the company is still enrolling students in public school areas and at-home.

DISCLOSURE:
The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
 Follow LRN K12 Inc 11.70 154,769

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K12 education company settles case with Calif.

Local Education

By Ty Tagami


The Atlanta Journal-Constitution

Updated: 5:08 p.m. Thursday, July 28, 2016Posted: 2:47 p.m. Thursday, July 28, 2016

A company that is paid tens of millions of dollars to provide educational services in Georgia has settled a legal case in California after a state investigation into allegations of improper billing there.

There’ve been no public allegations of impropriety in Georgia, where the company, K12 helps operate Georgia Cyber Academy. The academy has come in for criticism over student results: in 2015, the school earned a D for its academic performance with more than 13,000 Georgia students, as reported by The Atlanta Journal-Constitution.

The Georgia academy is among the five biggest schools managed by K12, officials said. The company educates about as many students at a collection of 14 schools in California called the California Virtual Academies, or CAVA.

K12 was the target of a civil investigation by California Attorney General Kamala D. Harris, whose office alleged that K12 exploited weak charter school oversight in her state to excessively bill CAVA schools by pressuring teachers to sign “doctored” attendance records. Her office also accused the school of telling people it thought were prospective parents that classes were smaller than they really were.

On July 8, K12 agreed to settle for millions of dollars, without admitting to the alleged facts or to wrongdoing. Harris issued a statement saying the company had agreed to a settlement of $168.5 million, which K12 CEO Stuart Udell characterized as “shameless and categorically incorrect” in a conference call afterward with financial analysts.

The company did agree to pay $2.5 million to the state and $6 million to the attorney general’s office. But K12 objects to the way Harris described the other $160 million.

She called it “debt relief to the non-profit schools it manages.” Udell called it “the difference between K12’s contractual price and what the schools can afford to pay” based on their state funding.

“While K12 has a contractual right to recover these balanced budget credits, in all the years that K12 has worked with the CAVA boards we have never sought to recover those amounts,” Udell said on that conference call, according to a transcript provided by K12.

The final judgment in the case describes the $160 million agreement this way: an expungement of a decade’s worth of “credits against amounts otherwise due under managed school contracts.”

Neither the conference call nor the attorney general’s news release addressed another payment: $80,000 to a former CAVA teacher turned whistleblower. She alleged she was fired because she complained about the way K12 changed the attendance records she had submitted. The attorney general intervened in her case and K12 agreed to give her $50,000 to settle her employment-related claims and $30,000 for her legal fees.

Udell told the analysts that the company settled with the attorney general to avoid a “multiyear distraction” and litigation costs that would have been many times what it agreed to pay. He also said the company plans to fight legislation in California that would prohibit charter schools from using for-profit companies like his. And he said K12, which runs some 80 schools in 33 states, has plans to expand, going statewide in Alabama and Virginia and adding schools in other states, including Indiana, Michigan, Nevada and Maine.

K12 education company settles case with Calif.

5:08 p.m. Thursday, July 28, 2016

| Filed in: Education


Comments
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A company that is paid tens of millions of dollars to provide educational services in Georgia has settled a legal case in California after a state investigation into allegations of improper billing there.

There’ve been no public allegations of impropriety in Georgia, where the company, K12 helps operate Georgia Cyber Academy. The academy has come in for criticism over student results: in 2015, the school earned a D for its academic performance with more than 13,000 Georgia students, as reported by The Atlanta Journal-Constitution.

The Georgia academy is among the five biggest schools managed by K12, officials said. The company educates about as many students at a collection of 14 schools in California called the California Virtual Academies, or CAVA.

John Amis

Graduate of Georgia Cyber Academy Brycen Walker of Savannah throws up his hands in jubilation as he follows Tyriq Wade of Columbus to the stage during commencement, Saturday, May 21, 2016, held at Cobb Galleria Centre in Atlanta. The statewide charter school educates more than 13,000 students a year, as young as 5 years old, all online and at about half the cost of traditional public schools. (Photo/John Amis)

K12 was the target of a civil investigation by California Attorney General Kamala D. Harris, whose office alleged that K12 exploited weak charter school oversight in her state to excessively bill CAVA schools by pressuring teachers to sign “doctored” attendance records. Her office also accused the school of telling people it thought were prospective parents that classes were smaller than they really were.

On July 8, K12 agreed to settle for millions of dollars, without admitting to the alleged facts or to wrongdoing. Harris issued a statement saying the company had agreed to a settlement of $168.5 million, which K12 CEO Stuart Udell characterized as “shameless and categorically incorrect” in a conference call afterward with financial analysts.

The company did agree to pay $2.5 million to the state and $6 million to the attorney general’s office. But K12 objects to the way Harris described the other $160 million.

She called it “debt relief to the non-profit schools it manages.” Udell called it “the difference between K12’s contractual price and what the schools can afford to pay” based on their state funding.

“While K12 has a contractual right to recover these balanced budget credits, in all the years that K12 has worked with the CAVA boards we have never sought to recover those amounts,” Udell said on that conference call, according to a transcript provided by K12.

The final judgment in the case describes the $160 million agreement this way: an expungement of a decade’s worth of “credits against amounts otherwise due under managed school contracts.”

Neither the conference call nor the attorney general’s news release addressed another payment: $80,000 to a former CAVA teacher turned whistleblower. She alleged she was fired because she complained about the way K12 changed the attendance records she had submitted. The attorney general intervened in her case and K12 agreed to give her $50,000 to settle her employment-related claims and $30,000 for her legal fees.

Udell told the analysts that the company settled with the attorney general to avoid a “multiyear distraction” and litigation costs that would have been many times what it agreed to pay. He also said the company plans to fight legislation in California that would prohibit charter schools from using for-profit companies like his. And he said K12, which runs some 80 schools in 33 states, has plans to expand, going statewide in Alabama and Virginia and adding schools in other states, including Indiana, Michigan, Nevada and Maine.

Robbins Arroyo LLP: K12, Inc. (LRN) Misled Shareholders According to a Recently Filed Class Action

July 22, 2016 07:59 PM Eastern Daylight Time

SAN DIEGO & HERNDON, Va.–(BUSINESS WIRE)–Shareholder rights law firm Robbins Arroyo LLP announces
that a class action complaint was filed against K12, Inc. (NYSE: LRN) in
the U.S. District Court for the Northern District of California. The
complaint is brought on behalf of all purchasers of K12 securities
between November 7, 2013 and October 27, 2015, for alleged violations of
the Securities Exchange Act of 1934 by K12’s officers and directors. K12
Inc., a technology-based education company, offers proprietary
curriculum, software systems, and educational services to facilitate
individualized learning for students primarily in kindergarten through
12th grade.

“In the Matter of the Investigation of:
For-Profit Virtual Schools.”

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View this information on the law firm’s Shareholder Rights Blog: www.robbinsarroyo.com/shareholders-rights-blog/k12-inc-july-2016

K12 Accused of Lying About The Success Rate of Its Students

According to the complaint, throughout the class period, K12 filed
several press releases and submitted multiple filings with the U.S.
Securities and Exchange Commission touting the company’s business
prospects. The company issued a press release on February 4, 2014,
stating, “Our Managed Schools are now…using many of the new educational
programs we put in place this year which we believe will improve
educational outcomes for all engaged families.” The company further
emphasized that improving academic outcomes is its number one priority
and that it would invest in new systems to drive further improvements
for its students. However, the complaint alleges that K12 officials
failed to disclose that: (1) K12 was publishing misleading
advertisements about students’ academic progress, parent satisfaction,
their graduates’ eligibility for University of California and California
State University admission, class sizes, the individualized and flexible
nature of K12’s instruction, hidden costs, and the quality of the
materials provided to students; (2) K12 submitted inflated student
attendance numbers to the California Department of Education in order to
collect additional funding; (3) as a result, K12 was open to potential
civil and criminal liability; and (4) the company would likely be forced
to end these practices, which would have a negative impact on K12’s
operations and prospects.

On October 27, 2015, Stanford’s Center for Research on Education
Outcomes published a study and a related press release about online
charter schools, including K12, stating, “Innovative new research
suggests that students of online charter schools had significantly
weaker academic performance in math and reading, compared with their
counterparts in conventional schools.” On the same day, K12 reported
disappointing first quarter 2016 financial results compared to the same
quarter in fiscal year 2015, including revenues of $221.2 million
compared to $236.7 million, Earnings Before Interest, Taxes,
Depreciation and Amortization of negative $3.9 million compared to $3.7
million, and an operating loss of $20.5 million compared to an operating
loss of $13.2 million. On October 27, 2015, K12 disclosed in its Form
10-Q that it received a subpoena from the Attorney General of the State
of California, Bureau of Children’s Justice in connection with an
investigation known as “In the Matter of the Investigation of:
For-Profit Virtual Schools.” On this news, K12 stock fell over 20% to
close at $9.71 per share on October 30, 2015.

K12 Shareholders Have Legal Options

Concerned shareholders who would like more information about their
rights and potential remedies can contact attorney Darnell R. Donahue at
(800) 350-6003, DDonahue@robbinsarroyo.com,
or via the shareholder
information form
on the firm’s website.

Robbins Arroyo LLP is a nationally recognized leader in shareholder
rights law. The firm represents individual and institutional investors
in shareholder derivative and securities class action lawsuits, and has
helped its clients realize more than $1 billion of value for themselves
and the companies in which they have invested.

Attorney Advertising. Past results do not guarantee a similar outcome.

Contacts

Robbins Arroyo LLPDarnell R. Donahue619-525-3990 or Toll
Free 800-350-6003DDonahue@robbinsarroyo.comwww.robbinsarroyo.com

Glancy Prongay & Murray Announces the Filing of a Securities Class Action on Behalf of K12 Inc. Investors and Encourages Investors to Contact the Firm

July 20, 2016 02:33 PM Eastern Daylight Time

LOS ANGELES–(BUSINESS WIRE)–Glancy
Prongay & Murray LLP
(“GPM”) announces that it has filed a class
action lawsuit in the United States District Court for the Northern
District of California on behalf of investors who purchased K12 Inc.
(“K12” or the “Company”) (NYSE: LRN)
securities between November 7, 2013, and October 27, 2015,
inclusive (the “Class Period”). K12 investors have sixty days from
the date of this notice
 to file a lead plaintiff motion.

Investors suffering losses on their K12 investments are encouraged to
contact Lesley Portnoy of GPM to discuss their legal rights in this
class action at 310-201-9150 or by email to shareholders@glancylaw.com.

The complaint filed in this lawsuit alleges that throughout the Class
Period, Defendants made materially false and/or misleading statements,
as well as failed to disclose material adverse facts about the Company’s
business, operations, and prospects. Specifically, Defendants made false
and/or misleading statements and/or failed to disclose: (1) that K12 was
publishing misleading advertisements about students’ academic progress,
parent satisfaction, their graduates’ eligibility for University of
California and California State University admission, class sizes, the
individualized and flexible nature of K12’s instruction, hidden costs,
and the quality of the materials provided to students; (2) that K12
submitted inflated student attendance numbers to the California
Department of Education in order to collect additional funding; (3)
that, as a result of the aforementioned practices, the Company was open
to potential civil and criminal liability; (4) that the Company would
likely be forced to end these practices, which would have a negative
impact on K12’s operations and prospects, and/or that K12 was, in fact,
ending the practices; and (5) that, as a result of the foregoing,
Defendants’ statements about K12’s business, operations, and prospects,
were false and misleading and/or lacked a reasonable basis.

If you purchased shares of K12 during the Class Period you have sixty
days from the date of this notice
to ask the Court to appoint you as
lead plaintiff if you meet certain legal requirements. To be a member of
the Class you need not take any action at this time; you may retain
counsel of your choice or take no action and remain an absent member of
the Class. If you wish to learn more about this action, or if you have
any questions concerning this announcement or your rights or interests
with respect to these matters, please contact Lesley Portnoy, Esquire,
of GPM, 1925 Century Park East, Suite 2100, Los Angeles California 90067
at 310-201-9150, Toll-Free at 888-773-9224, by email to shareholders@glancylaw.com,
or visit our website at http://glancylaw.com.
If you inquire by email please include your mailing address, telephone
number and number of shares purchased.

This press release may be considered Attorney Advertising in some
jurisdictions under the applicable law and ethical rules.

Contacts

Glancy Prongay & Murray LLP, Los AngelesLesley Portnoy,
310-201-9150 or 888-773-9224shareholders@glancylaw.comhttps://www.glancylaw.com

Glancy Prongay & Murray LLP

Release Summary

Glancy Prongay & Murray Announces the Filing of a Securities Class Action on Behalf of K12 Inc. Investors and Encourages Investors to Contact the Firm

Contacts

Glancy Prongay & Murray LLP, Los AngelesLesley Portnoy,
310-201-9150 or 888-773-9224shareholders@glancylaw.comhttps://www.glancylaw.com

Latest Editorial Proves The Wall Street Journal Will Defend Almost Any For-Profit Education Company

The Wall Street Journal continued its streak of defending for-profit schools with track records of questionable practices and “abysmal results,” this time shifting its focus away from fraudulent for-profit colleges to attempt to sugarcoat the failing online charter company K12 Inc.

The virtual charter school company K12 Inc. recently reached a $168.5 million settlement with the state of California following an investigation into the company’s marketing and management practices. At the same time, the state’s Education Department has announced an audit of a California virtual charter network managed by K12. The Wall Street Journal’s editorial board was, once again, ready to dismiss facts and defend the for-profit education company against what the board views as a politically motivated attack, baselessly claiming that recently substantiated allegations against K12 are “trumped up.”

The California state investigation into K12, launched by state Attorney General Kamala Harris, alleged that the company had engaged in a number of misleading advertising practices about the quality of its online schools, pushed unfair contracts on public charter partners, and inflated student attendance numbers in order to receive more state funding. It was spurred, at least in part, by a whistleblower report and complaints from educators formerly employed by a California charter network managed by K12. Educators at the K12-managed network moved to unionize in 2014, citing excessive workloads and inability to “effectively advocate for students without the threat of retaliation or job loss.”

An investigative series at the San Jose Mercury News earlier this year concluded that K12’s network of schools “is failing key tests used to measure educational success,” that K12-affiliated “teachers have been asked to inflate attendance and enrollment records used to determine taxpayer funding,” and that the companyexploits charter [and] charity laws for money.” An online education expert explained to The Mercury News that K12 “has shown an inordinate level of failure, yet it’s continually given lifelines by policymakers who have irresponsibly ignored what’s going on.”

Yet the Journal contended that another audit of K12’s management practices “looks trumped up” in a July 17 editorial. Complaining about K12’s settlement with the state of California, the editorial board characterized the investigation of K12 as part of a larger “coordinated assault” on for-profit colleges and education companies and claimed that “Democrats are ambushing” the virtual charter school company. According to the editorial board, the further audit of K12 means “Thuggish government marches on.”

The disastrous results of K12’s schooling model have also been well-documented in media investigations and in research from left-leaning and right-leaning organizations. A New York Times investigation raised red flags about K12’s practices as early as 2011, concluding about the company:

A look at the company’s operations, based on interviews and a review of school finances and performance records, raises serious questions about whether K12 schools — and full-time online schools in general — benefit children or taxpayers, particularly as state education budgets are being slashed.

Instead, a portrait emerges of a company that tries to squeeze profits from public school dollars by raising enrollment, increasing teacher workload and lowering standards.

A 2011 Washington Post report singled out K12’s early lobbying efforts and political contributions, pointing to limited data on the effectiveness of virtual charter schools even as the company successfully opened up state markets for its products through political involvement. In 2012, PolitiFact concluded that a Tennessee politician’s assertion that K12’s results were “the bottom of the bottom” was true.

The most recent reports from Mathematica Policy Research, Stanford University’s Center for Research in Education Outcomes, and the Center on Reinventing Public Education concluded that “students of online charter schools had significantly weaker academic performance in math and reading, compared with their counterparts in conventional schools.” BuzzFeed News’ coverage of the reports concluded that “Both Sides Of The Education Debate Are United In Scorn” for online charters like K12 due to “abysmal results” for students.

But K12 has the corporate and conservative credentials to warrant a healthy defense from The Wall Street Journal.

K12 Inc., until recently, called itself a “proud” member of the corporate-driven bill mill American Legislative Education Council (ALEC), which has pushed virtual schools legislation that would create greater demand for products like those produced by K12. K12 has also contributed financially to the Foundation for Excellence in Education, a pro-privatization think tank founded by Jeb Bush that also frequently touts digital learning tools in its policy recommendations. The majority of K12’s executives hail from the corporate world or from other for-profit education companies, and the head of K12’s “curriculum and products organization” previously spearheaded product development at Pearson Publishing.

The Journal has a long history of defending the sometimes indefensible when it comes to for-profit educational companies, often relying on violent analogies to make its point.

The paper stood by shuttered for-profit college chain Corinthian Colleges, even as the company faced multiple state and federal investigations related to its allegedly fraudulent marketing practices and its efforts to facilitate predatory private lending. In fact, the Journal’s editorial board characterized the numerous investigations, launched because of consumer complaints, as “political revenge” by “California job killer” Kamala Harris and a “drive-by shooting” and “contract hit” by the Obama administration. In April 2015, as the company closed its last remaining campuses, The Wall Street Journal wrote a “last rites” editorial lamenting that “the feds and Kamala Harris put 16,000 students on the street.” The now-defunct company has been held legally responsible for its practices, with several investigations and legal actions concluding that Corinthian had, indeed, misled its students about job placement rates and private loan terms, and that former students were owed debt relief.

The Journal has also repeatedly characterized efforts to address these types of fraudulent practices at other for-profit institutions as “regulatory assault,” a “ploy to win over millennials,” a “contract hit” (again), and a political “stealth attack” akin to “drone strikes,” dismissing evidence that these types of schools have taken advantage of veterans and servicemembers, as well as other innocent students, on the taxpayers’ dime.