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K12, Inc., a for-profit virtual education company looking to open a statewide virtual school in North Carolina, took a fairly major hit yesterday on Wall Street when a stocks analyst downgraded the company’s performance outlook.

A Wells Fargo analyst took the stock from a favorable “outperform” stock rating Monday to a more neutral rating of “market performance” based on ongoing questions being brought up about the quality of education it offers at Colorado Virtual Academy, according to KUNC, a public radio station in Colorado.

The company (NYSE: LRN) has the largest reach of for-profit online providers in the country, and runs virtual public schools in 29 states. Students from kindergarten to 12th grade can take their entire school curriculum from their home computer, at the expense of public taxpayers.

The Colorado online school had a graduation rate of just 12 percent in 2010. To compare, North Carolina’s statewide graduation rate topped 80 percent for the first time last year, a number that political leaders of all stripes say is still too low.

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A for-profit virtual school company fighting to open a public school in North Carolina isaccused of violating state law in Florida by having teachers falsify attendance records.

K12, Inc., a Virginia-based company that runs online-based public schools in 29 states, is under investigation by the Florida education department after several K12 teachers refused to sign class rosters with students the teachers had never taught.

From the Florida Center for Investigative Reporting, which reported on the Florida investigation Tuesday:

The Florida Department of Education has launched an investigation of K12, the nation’s largest online educator, over allegations the company uses uncertified teachers and has asked employees to help cover up the practice.

In one case, a K12 manager instructed a certified teacher to sign a class roster of more than 100 students. She only recognized seven names on that list.

“I cannot sign off on students who are not my actual students,” K12 teacher Amy Capelle wrote to her supervisor. “It is not ethical to submit records to the district that are inaccurate.” Read More

N.C. Learns, the group behind a proposal for a virtual charter school, plans on appealing a Wake Superior Court judge’s order that put the school’s plans on indefinite hold.

The school would have been run by K12, Inc., a Wall Street-traded educational company that gets most of its revenue from public dollars for online-only schools it runs in more than two dozen state around the country.

Wake Judge Abraham Jones ruled on June 29 that the state board didn’t have to review an application  submitted by the online-only school, and overturned an administrative judge’s decision to grant the school permission to open.  (Click here to read a past story about the case.)

N.C. Learns, a non-profit whose start-up costs are being paid for by K12, Inc., is appealing Jones’ order to the N.C. Court Of Appeals, according to a notice of appeal filed in the Wake County Courthouse July 27.

The N.C. School Board Association and the N.C. Justice Center joined the state board in opposing the virtual charter school, arguing that school districts around the state would have their funds depleted for an online-only school with questionable performance in other states. (N.C. Policy Watch is a project housed under the N.C. Justice Center, an anti-poverty statewide advocacy group.)

The appeal is also seeking to overturn Jones’ decision to allow the school board association from intervening in the case, according to the notice written by state Sen. Fletcher Hartsell, who was hired to serve as the attorney for the proposed virtual school.

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An administrative law judge will hear this afternoon from a proposed virtual charter school run by Wall Street investors that hopes to open its virtual doors to North Carolina students this fall.

N.C. Learns, a non-profit group set up to house a virtual charter school run by the online education giant K12, Inc., (NYSE: LRN), filed a grievance in March against the State Board of Education, arguing that it should be allowed to open this fall despite missing other deadlines because the company had gotten the blessing of an individual school district. (Click here to read our previous story about the legal suit.)

Update, 3:30 p.m.: N.C. Administrative Law Judge Beecher Gray ruled that the state board should have reviewed the school’s application, and the judge gave the school approval. Unless the state appeals or gets a stay, the virtual school can open this fall, according to Gray’s ruling from the bench. A final written order will be issued in coming days.

The school, which would contract fully with K12, sent its application endorsed by the Cabarrus County school board to the state board in February – other charter schools hoping to be approved as part of the “fast-track” approval process had sent their applications into the N.C. Department of Public Instruction in November.

The state board approved nine new charters schools as part of the fast-track process in March, the first group to gain approval since the state legislature lifted the 100-school cap on charter schools last year (Charter schools are public schools funded with public education dollars that operate outside of traditional school districts by non-profits.) The state is now in the process of sifting through 60-plus more schools that have applied to open for the 2013-14 school year (notably, K12 did not submit an application in that bunch either.)

K12, who had hired a former state representative for the area to lobby on their behalf, had persuaded the Cabarrus County school board to back its application in January, but hopes to serve students statewide.

The company, in its applications to both the state board and Cabarrus school officials, wants to enroll as many as 1,750 students in its first year, to the tune of $18 million in public school funding.

Arguing on behalf of the non-profit at today’s hearing will be state Sen. Fletcher Hartsell, a prominent Republican lawmaker from Cabarrus County, that the non-profit retained as its legal counsel. It’s not entirely clear who is paying for Hartsell. The non-profit indicated in documents filed with the state board that it had no cash on hand but a draft copy of a contract with K12 said the company would cover all start-up costs associated with opening the virtual charter school.

The state education board is asking the judge dismiss Hartsell’s claims, and has argued that the school didn’t follow the proper procedures in its applications, and that the state is developing a way of evaluating virtual education applicants because of concerns about quality.

Reporter Sarah Ovaska will be going to the hearing, and you can follow updates from her via Twitter at @SarahOvaska.