Tough times for K12, Inc.

The virtual charter school company that launched an unsuccessful bid to open up an online-based school in North Carolina has been having a rough time in other states.

Cyber (also called online or virtual) schools allow students to take their entire school caseload through their home computer, and the for-profit K12, Inc. has a large chunk of the national market.

K12 officials made reference to their recent troubles this in an earnings call it had today with investors. (K12, Inc. is publicly traded on Wall Street, NYSE: LRN.)

“As the industry leader, K12 often takes the brunt of assaults for online education as our integrity and our effectiveness is sometimes questioned,” said Nathanial Alonzo Roberts, a chairman of the board’s audit committee. “This is to be expected.”

The company also settled an investors lawsuit for $6.75 million that accused company officials of making misleading statements about the academic successes of the schools.

( A transcript of today’s earning call is available here from SeekingAlpha, an investors’ website.)

In Virginia, home to K12’s headquarters, the small school district that hosted the statewide online school plans to drop its affiliation with K12, Inc., according to the Washington Post.

The split would effectively shut down the statewide cyber school, the oldest virtual school in the state that enrolls an estimated 350 students. The school board in Carroll County, a rural area on North Carolina’s border near Mt. Airy, voted to end its affiliation with K12 in mid-April, in part because the oversight was burdensome for a small school district that only had five students in Carroll County enrolled in the program.

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K12,Inc. to settle investor lawsuit

K12, Inc., the for-profit online virtual school company that made a bid to open up a statewide school in North Carolina, plans on settling claims that it misled investors.

The proposed settlement would not require the company to admitting wrongdoing, butK12a would pay investors $6.75 million, according to a preliminary settlement draft in federal court records and obtained by Education Week.

Education Week reports that the lawsuit’s claims about academics and quality would be dismissed and the settlement would stick to allegations about how the company disclosed information about student enrollment and retention.

The investor lawsuit came after a series of negative attention and press accounts questioning whether K12, Inc. (NYSE: LRN) was more focused on profits than educational quality. The lawsuit itself claimed that top officials of K12, Inc. misled the public and investors by downplaying questions about the schools’ educational quality. (Click here to read more about the lawsuit’s initial filing.)

The company has the largest share of the online schooling market, running public schools in 30 states where students from kindergarten through high schools take classes through programs on their home computers while parents act as “learning coaches.”

The company prides itself on offering alternatives to families seeking alternatives for their local school systems, but schools run by the company have low graduation rates and performance outcomes. In Tennessee, where legislators approved the virtual school in 2010 after concerned push from K12 lobbyists, state education officials have found only 16 percent of the 3,200 students in the K-8 program performed at grade level in math.

The company had made a push to open up a statewide virtual charter school in North Carolina in 2011 and 2012 by partnering with Cabarrus County Schools (which would get a kickback for agreeing to host the virtual school) but the State Board of Education, which authorizes charter schools in the state, did not consider its application. The matter is now held up in the appeals court.

Since then, the State Board of Education passed a more stringent application process for virtual charter schools, cutting back on the per-student reimbursement and requiring that graduation rates are within 10 percent of the state average (which is up to 80 percent).

N.C. Learns, non-profit organization put together by the company filed a letter of intent that it intended to apply to open for the 2014-15 school year, but did not submit an application by Friday’s deadline, according to a list of 70 prospective charter schools kept by the N.C. Department of Public Instruction.

(Another online company, Connections Academy, did submit an application to open up a statewide virtual school in the fall of 2014. Connections is owned by Pearson, an international education company (NYSE:PSO).)

K12 could still get a chance to educate North Carolina students (and get a slice of North Carolina public education funding). Legislation creating virtual schools could appear this year, with top state leaders like Gov. Pat McCrory expressing interest in the virtual school.

Stock plummets (again) for K12, Inc.

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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Congresswoman asks feds to probe K12, Inc.

A Florida congresswoman is asking the U.S. Department of Education to investigate allegations that K12, Inc., the Virginia-based for-profit virtual school company, used non-certified teachers to teach classes.

The request was made by U.S. Rep. Corrine Brown,a Democrat from Jacksonville, Fla., according to NPR and the Florida Center for Investigative Reporting.

The request is one of series of blows for K12, which is trying to open a statewide virtual charter school in North Carolina. The company’s request has been denied, but the company and a non-profit organization set up to house the school are appealing the matter to the N.C. Court of Appeals.

Click here to read the letter Brown sent to Education Sec. Arne Duncan.

Another blow for K12 in Florida

A Florida school district refused an application for a virtual charter school contracted with K12, Inc., the for-profit online education company that’s come under fire for management and education quality issues.

From the Ocala Star-Banner:

The board voted unanimously Tuesday to deny the application.

“I’m concerned to go with a contract in the light of the investigation,” said School Board Chairwoman Judi Zanetti.

School Board members Ron Crawford and Angela Boynton agreed they could not support the virtual school because of the state investigation.

Superintendent of Schools Jim Yancey’s urged the board to deny the charter school because board members are not local and he believes K12 is only interested in turning a profit.

If the new school had been approved in Marion County, it would have started as a K-8 school in 2013-14 and would have expanded to all grade levels by 2018-19. At the school’s peak, the enrollment was projected to reach 296 students.

The company is currently under investigation in Florida, a leading state in the push for online education via for-profit companies,  for covering up its use of non-certified teachers for programs that required teachers certified to teach in Florida.

The company is seeking a spot in the North Carolina education market, and is appealing a Wake superior court judge’s decision in an attempt to open up a statewide online school, that would allow students from kindergarten through 12th grade to take classes over their home computers.