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.
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