California's Attorney General announced on Friday a settlement agreement with K12 Inc., a for-profit online charter school operator, and the 14 affiliated non-profit schools known as the California Virtual Academies (“CAVA Schools”) that it manages, over alleged violations of California’s false claims, false advertising and unfair competition laws.
As part of the settlement, which is subject to court approval, K12 will provide approximately $160 million in debt relief to the non-profit schools it manages—“balanced budget credits” that were accrued by the schools as a result of the fee structure K12 used in its contracts—and will pay $8.5 million in settlement of all claims. In addition, K12 agreed to implement significant reforms of its contracts with the CAVA Schools, undergo independent reviews of its services for students with disabilities, ensure accuracy of all advertisements, provide teachers with sufficient information and training to prevent improper claiming of attendance dollars, and change policies and practices to prevent the kinds of conduct that led to this investigation and agreement.
The settlement resolves an investigation that claims to have found the “virtual” academies operated by K12 in California used deceptive advertising to mislead parents 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 their instruction, hidden costs, and the quality of the materials provided to students.
The California Attorney General's press release, with links to the complaint and settlement agreement, are here.