K12 Inc. Data Breach Puts thousands of students at risk

It's hard to believe school districts are still contracting with this horrible company.

K12 Inc. is the largest for-profit online alternative to actual public schooling. Trump's Ed Secretary Betsy DeVos touts the company and other for-profit cyber charter schools as a viable alternative to public schools. But her support for K12 Inc. and other private companies that run them, may have more to do with her and her husband's investment portfolio than with any positive results for students.

The company has been rocked with scandal and has long been under investigation for its shady business dealings. Here's the latest...

A K12 Inc. company database that included information for 19,000 students was available for anyone with an internet connection to see for at least a week, according to a report from Comparitech, which describes itself as a pro-consumer organization that offers security services.

It's not clear that anyone with ill intentions accessed the information during the data exposure, which lasted from June 23 until July 1.

The data came from the for-profit virtual education provider's A+nyWhere Learning System, a software package used by more than 500 school districts, according to K-12 Inc. Students' names, genders, birthdates, school names, and more were visible. In all, there were over 7 million records available. -- Digital Education

K12 Inc. says the breach is no big deal. Goes on about its business.

MEANWHILE...Ron Packard, the founder and former CEO of K12 Inc. who now runs Accel Charter Schools, is buying up closed public schools.

The Accel chain already has 41 schools in Ohio, including 14 in Cleveland, after starting business here just four years ago. Those include schools once run by the former White Hat, I Can and Mosaica networks, which Packard took over to launch Accel.

DeVos had investments in cyber charter schools

Trump's Ed Secretary Betsy DeVos touts online learning and cyber charter schools as a viable alternative to public schools. But her support for these virtual schools and the private companies that run them, may have more to do with her and her husband's investment portfolio than with any positive results for students.

This from Politico:

K12 is the company DeVos and her husband had an “investment interest” in, according to paperwork released in 2006 by her husband’s unsuccessful gubernatorial campaign in Michigan. A DeVos spokeswoman did not respond to questions about the size of the investment, which is not listed as current in her federal disclosure forms. 

She and her husband invested in virtual school powerhouse K12 Inc. before she became secretary. At least two of the school choice groups DeVos helped found, Great Lakes Education Project and the American Federation for Children, pushed for virtual charters — including in DeVos’ home state of Michigan.

But while cyber school companies generally are reaping big profits, K12 Inc. stock has been a bust.

As for measurable student learning, the cyber schools' results in state after state, from Florida to Pennsylvania, have lagged far behind face-to-face public schools.

In Pennsylvania, where more than 30,000 kids are enrolled in virtual charter schools,  the graduation rate is a dismal 48 percent. Not one virtual charter school meets the state’s “passing” benchmark. And the founder of one of the state’s largest virtual schools pleaded guilty to a tax crime last year.

K12 Inc. in particular, has been a sewer of corruption since it was founded by former GOP education sec William Bennett. The company was forced to remove Bennett as chairman of its directors following a series of racist remarks and gambling scandals which threatened the company's marketability.

K12 Inc. has been under investigation by the Government Accountability Office (GAO), the investigative arm of Congress, which has been looking into K12's involvement in a project that received an improper multimillion-dollar grant from the Department of Education during Bennett's tenure at the firm.

K12 Inc. stock sinking like a stone

The Tucson Weekly reports:

Things aren't looking good for the publicly traded K12 Inc., which runs online charter schools in states around the country (Its Arizona Virtual Academy has more than 4,000 students). The schools are funded by taxpayer dollars, like all charter schools, so the corporation's profits and its CEO's $5 million salary come from taxpayer money it doesn't spend on its students' educations. K12 Inc.'s stock value has plummeted from $38 in September, 2013, to its current $12.60. The downward slide over the past few months has taken it into dangerous territory. Most stock analysts have revised their recommendations downward from Buy to Hold or Sell.

The notoriously poor education K12 Inc.'s schools provide isn't the issue, at least not directly. The problem is, the customer base hasn't grown sufficiently, stores are closing and new stores haven't opened as expected — I mean, the schools haven't picked up enough new students, some of K12 Inc.'s charters have severed ties with the corporation, and some states are balking at allowing schools to open. When you're running a for-profit school, students are customers and schools are stores, so it's really the same thing, which is the problem with for-profit education.

'The last honeypot for Wall Street'

Venture capitalists and for-profit firms are salivating over the exploding $788.7 billion market in K-12 education, writes Lee Fang at The Nation.

“It’s really the last honeypot for Wall Street,” says Donald Cohen, the executive director of In the Public Interest, a think tank that tracks the privatization of roads, prisons, schools and other parts of the economy.

K12 Inc.’s lobbyists helped author model legislation to develop sweeping voucher laws through the American Legislative Exchange Council, a conservative group that provides state lawmakers with template legislation. Though state by state lobbying figures are difficult to come by, given the patchwork of varying laws, K12 Inc. has hired dozens of local officials to ensure that these voucher laws are quickly passed with few amendments. “We have incurred significant lobbying costs in several states,” K12 Inc. noted in a filing with the SEC.

The wild expansion of privately-managed charters

NEWS RELEASE 

NATIONAL EDUCATION POLICY CENTER

For Immediate Release November 26, 2013

Contact:  Jamie Horwitz, 202-549-4921, jhdcpr@starpower.net

Private Education Management Organizations Running Public Schools Expand –

44 Percent of Charter School Students in 2011-12 Attended Schools Operated by EMOs

New report shows 908,000 students in 2011-2012 attended privately-managed schools in 35 states plus D.C. – a major increase from 733,000 enrolled a year earlier. Michigan (204 schools) Florida (177), Ohio (110) and Arizona (108) have the most privately-managed schools.

An increasing number of for-profit education management organizations are expanding into online teaching.

BOULDER, CO – Across the nation, schools managed by for-profit firms such as K12 Inc, National Heritage Academies and Charter Schools USA, as well as nonprofit education management organizations (EMOs) such as KIPP, continue to increase the number of students they enroll, despite a scarcity of evidence showing positive results. Students across 35 states and the District of Columbia now attend schools managed by these non-government entities. Oklahoma and Tennessee have added schools run by EMOs since the last edition of this report.

The report, Profiles of For-Profit and Nonprofit Education Management Organizations: Fourteenth Edition – 2011-2012, was released today by the National Education Policy Center (NEPC), which is housed at the University of Colorado Boulder.

“There is growth in number of schools and students served in both for-profit and nonprofit sectors, although growth among schools operated by nonprofit EMOs continues to outpace the for-profit sector. Growth has slowed for for-profits in brick-and-mortar school settings. The real growth in the for-profit sector is with companies that operate virtual schools,” said the report’s lead author Dr. Gary Miron, a professor of evaluation, measurement and research at Western Michigan University. “The growth of virtual schools, which is fueled by millions in advertising dollars, is astounding because of the sketchy academic results reported by the schools that operate online.”

The report is the NEPC’s latest edition in its series of profiles of EMOs, companies that are contracted to manage charter schools and other public schools. The EMO sector emerged in the 1990s as part of an effort to use market forces and private entities to reform public education.

For-Profit Operators

Since the 1995-1996 school year, the number of for-profit EMOs has increased from 5 to 97, and the number of schools operating has increased from 6 to 840. Enrollment has grown from approximately 1,000 students in 1995-1996 to 462,926 in 2011-2012.

While the actual number of for-profit companies has grown very little over the past few years, many of the large and medium-sized EMOs are expanding into new service areas, such as supplemental education services and virtual schooling.

Imagine Schools was the largest for-profit EMO in 2011-2012 in terms of the number of schools it manages. The company managed 89 schools during the 2011-2012 school year, but it has lost a number of contracts since then. The next largest for-profit operators in

2011-2012, in terms of numbers of schools, are Academica (76) and National Heritage Academies (68).

However, in terms of enrolled students, the largest EMO is K12 Inc., which operates virtual schools. Because of the large enrollments in its schools, the total enrollment of K12 Inc.’s schools exceeded that of any other for-profit -- or nonprofit -- EMO, with 57 schools enrolling 87,091 students.

Nonprofit Operators

Nonprofit operators have shown more robust growth in brick-and-mortar school settings than for-profit operators, both in terms of new nonprofit EMOs and new managed

schools. A total of 201 nonprofit EMOs were identified and profiled in this year’s report, including 31 large nonprofit EMOs, 68 medium-sized and 102 small nonprofit EMOs.

The overall number of students in nonprofit EMO-managed schools has increased dramatically in recent years, from 237,591 in 2009-10 to 445,052 during the 2011-2012 school year. KIPP, the Knowledge is Power Program -a national charter school network -- remained the largest nonprofit EMO, with 98 schools and just over 35,045 students in 2011-2012.

Virtual Schools

The number of virtual schools operated by EMOs increased from 60 in 2009-2010 to 91 in 2011-2012. This represents 10.8 percent of all schools managed by for-profit operators.

As noted, the largest for-profit operator is K-12 Inc., which operates full-time virtual schools. It should be noted that some of the largest for-profit EMOs are beginning to lose contracts with brick-and-mortar schools and are shifting attention into virtual education.   "Most virtual schools are charters, are full-time, and are statewide in their scope,” said the report’s coauthor, Charisse Gulosino of the University of Memphis. “As it stands, research, policy and practice have not kept pace with virtual schooling’s growth --reflecting the need for deliberation about its impact and implications for public K-12 education.”

Full Report is Available on the Web

Profiles of For-Profit and Nonprofit Education Management Organizations: Fourteenth Edition - 2011-2012 can be found on the web at: http://nepc.colorado.edu/publication/EMO-profiles-11-12

The report is the nation’s most comprehensive examination of the private entities that operate public schools.

Tilson short-selling K12Inc.

Hedge-funder Tilson

You would think that the online learning company, K12Inc. would find synergy with hedge-funder Whitney Tilson, the money bags behind DFER and a co-founder of TFA and KIPP board member. But no! Tilson would never let ideological unity get in the way of super-profits. So Tilson is having his T2 Fund short-sell the hell out of K12 stock, hoping the company collapases. In fact, he calls the company “a catastrophe for education” in spite of solid financials.

So why is Tilson shorting K12? In addition to his research alleging that conditions and academic performance at each of K12’s online academies have declined significantly since its IPO, Tilson said he believed companies like K12 undermine the charter school movement in which he is deeply entrenched and that he has spent years fighting for.

“I try and separate my emotion from whether it’s a good investment,” Tilson said.

I could have told him and his investors that months ago. In fact, I did just that, last November. But would they listen? NOOOO. Now writes Buzz Feed,

The king of the privatized virtual learning world, K12Inc. has investors checking to see if they're still wearing their shorts. The problem continues to be extravagant costs stemming from huge salaries paid to top execs, plus K12 students scoring behind kids in brick-and-mortar schools.

So on one rare sunny day, Tilson and I will hopefully both be celebrating ( him with champagne and me with 4-buck Chuck) the death of K12Inc.

K12 Inc. lags far behind face-to-face schools in Florida

The thing about privatization is, there's little or no public accountability. Take for example, K12 Inc., the e-learning company that competes with traditional schools for a piece of the  multi-billion-dollar education pie.

Progress Florida also found that K12 schools are not only lagging behind in performance, but they also have “fewer students qualifying for free-or-reduced-lunch, fewer students with disabilities, fewer ELL students, and fewer minority students.” But K12's poor performance hasn't hurt their bottom line any.  In 2012, K12 Inc. experienced “a 35 percent increase in revenue to more than $700 million, the report found.”

According the report:

“…Notably only 27.7 percent of K12 Inc. schools make adequate yearly progress—a national metric of measuring student achievement—and this figure is merely half nearly half the rate achieved by public face-to-face schools. The on-time graduation rate for K12 Inc. schools is 49.1percent, compared to 79.4 percent for all students in the states in which K12 Inc. operates.”

 Lisa Larson-Walker (Slate)

Speaking of Florida, Tea Party Gov. Rick Scott's regime is awash in scandal and corruption. Not only has he lost his privatizing school chief, Tony Bennett, to a grade-changing scandal, but now his biggest outside campaign contributor, Bill Edwards, has been caught swindling Florida military families and veterans.

Ironically, the one's crying the loudest over the Bennett resignation, besides Jeb Bush and his GOP pals, are the so-called Democrats for Education Reform (DFER) and Obama's ed chief, Arne Duncan.

Who says there's no bi-partisanship?

Education reporting the way it's supposed to be done

Woodard

Congratulations to Colin Woodard, recipient of a 2012 George Polk Award for Education Reporting for his special report, "The profit motive behind virtual schools in Maine."

Woodard writes:

Internal K12 Inc. emails obtained last winter by Seminole County Public Schools and forwarded to investigators suggest the company was using uncertified teachers in violation of Florida law, even after being warned by officials not to do so. K12 operates the Seminole Virtual Instruction Program for the district. The content of the emails was confirmed by Seminole County school officials...

..."So if you see your name next to a student that might not be yours it's because you were qualified to teach that subject and we needed to put your name there," Samantha Gilormini, K12's Florida Virtual Program project manager, wrote Seminole County teachers in February 2011. One teacher, Amy Capelle, balked at signing the form and pointed out that only seven of the 112 students listed on her form were actually hers.

K-12Inc. A sewer of corruption

K-12Inc., the largest and most politically connected of the for-profit on-line learning companies, is at it again. They have been caught up in scandal after scandal, which never seems to keep them from getting lucrative, no-bid contracts with school districts.  The latest horror story emanates from Virginia where dozens of former K-12 employees are claiming that the company uses fraudulent tactics mask the astronomical rates of student turnover within their network of cyber charter schools..

NewsWorks reports that:

The former employees allege that K12-managed schools aggressively recruited children who were ill-suited for the company's model of online education. They say the schools then manipulated enrollment, attendance and performance data to maximize tax-subsidized per-pupil funding.

K12's motivation for manipulating the numbers, according to the suit, was to keep billing traditional public school districts for as many students as possible.
The U.S. District Court in the Eastern District of Virginia has denied a request from K12 to dismiss the case. 

A trial could take place this spring.

K12 Inc. stock sinking like a stone

The king of the privatized virtual learning world, K12Inc. has investors checking to see if they're still wearing their shorts. The problem continues to be extravagant costs stemming from huge salaries paid to top execs, plus K12 students scoring behind kids in brick-and-mortar schools.

Market Watch reports:  K12 Inc.'s fiscal first-quarter profit slipped 5.3% as the online education provider saw a double-digit revenue increase weighed down by a continued rise in costs.The stock has fallen 42% in the past 12 months. In the latest period, instructional expenses were up 17%, and selling, general and administrative expenses rose 15%.

Virtual learning from K12 Inc.

New video exposes ALEC's ed task force

 Here's a great tool you can use in meetings and classrooms to educate about ALEC's role in privatizing public schools, curriculum and testing. The video has a good critique of cyber-schools, the Virtual Schools Act currently being pushed in several states by ALEC,  and companies like, K12 Inc. which are making millions in profits even while being currently under federal investigation.

Cyber schooling could be one the great scams of our time

New study shows cyber kids falling behind

"Children who enroll in a K12 Inc.cyberschool, who receive full-time instruction in front of a computer instead of in a classroom with a live teacher and other students, are more likely to fall behind in reading and math." -- Gary Miron, NEPC fellow

Two stories on cyber-learning caught my eye this past week. The first had to do with the closing of a privately-run cyber charter school in Pennsylvania, due to financial mismanagement. According to the July 10th Edweek story, the state then issued charters to 4 other new cyber-charters.

The second story was about last week's FBI raid on  the office of Pennsylvania Charter Cyber School founder Nick Trombetta, who is suspected of misusing Pennsylvania tax dollars to fund his out-of-state ventures. The FBI raided the administrative offices of PA Cyber and other ventures founded by Trombetta, including the Avanti Management Group -- a for-profit consultant firm based in Ohio.


But the topper is the release this morning of a new report by the National Education Policy Center (NEPC) at the University of Colorado which shows that students at K12 Inc., the nation’s largest virtual school company, are falling further behind in reading and math scores than students in brick-and mortar schools. These virtual schools students are also less likely to remain at their schools for the full year, and the schools have low graduation rates.

“Our in-depth look into K12 Inc. raises enormous red flags,” said NEPC Director Kevin Welner.

Duncan and K12 founder Bennett

K12 was started by Republican operative and former Sec. of Education William Bennett but the company was forced to remove Bennett as chairman of its directors following a series of racist remarks and gambling scandals which threatened the company's marketability. K12 Inc. has been under investigation by the Government Accountability Office (GAO), the investigative arm of Congress, which has been looking into K12's involvement in a project that received an improper multimillion-dollar grant from the Department of Education during Bennett's tenure at the firm.

I posted twice last December about K12's financial problems, it's plummeting stock prices and the company's huge executive salaries. About the same time came a New York Times story by Stephanie Saul, "Profits and Questions at Online Charter Schools", which called out K-12, not on its stock prices, but on how badly its "portfolio schools" like Agora Cyber Charter School are doing.

Back in 2010, I posted on my SmallTalk blog about the connections between K12 founder William Bennett and Ed Sec. Arne Duncan. 

******

Now, thanks to the NEPC report, we can see the connection between all this dirty cyber dealing and its negative impact of student learning.

Can Chicago schools afford K12 Inc. exec salaries?

Reader J.C. (not Brizard) makes a good point. If Chicago mayor and school boss, Rahm Emanuel moves ahead with his plan to throw another large no-bid contract K12 Inc.'s way, a big chunk of that money will go towards covering boss Ron Packard's $5 million annual compensation package.

Not to mention other K12 exec salaries, including:

• Chief financial officer Harry T. Hawks earned about $544,000 — significantly less than his 2010 package, which was worth $1.8 million.
• George B. Hughes Jr., executive vice president of school services, received $717,000, down from $799,000 in 2010.
• Bruce J. Davis, executive vice president of worldwide business development, earned $686,000. The company has high hopes for overseas expansion possibilities and recently bought part of a Chinese enterprise that teaches English online.
• Chief marketing officer Celia M. Stokes earned $690,000. Stokes’s job goals included “developing branding strategies for our business units, improving marketing efficiency and developing our call center operations.”

K-12 Inc. stock price plummets. Should we care?

Uh oh! The speculators are speculatin' and the short-sellers are short selling. K-12 Inc. stock is in free-fall and Andy Rotherham at Eduwonk (who denies holding any shares) sound downright panicky and hedgey. While he is not currently contracting with K-12, his Bellweather consulting company has done work with them in the past. The stock market is to edu-profiteers like Rotherham, what standardized test scores are to DOE bureaucrats and big-city mayors, indicators of their future employment and marketability.

The trouble began Monday when a New York Times story by Stephanie Saul, "Profits and Questions at Online Charter Schools", called out K-12, not on its stock prices, but on how badly its "portfolio schools" like Agora Cyber Charter School are doing. 

Agora is one of the largest in a portfolio of similar public schools across the country run by K12. Eight other for-profit companies also run online public elementary and high schools, enrolling about 39,000 of the more than 200,000 full-time cyberpupils in the United States. The pupils work from their homes and often never even meet their teacher. There is no cafeteria, no gym and no playground. Teachers communicate with students by phone or in simulated classrooms on the Web. 

Problem is, nearly 60 percent of Agora's students are behind grade level in math. Nearly 50 percent trail in reading. A third do not graduate on time. And hundreds of children, from kindergartners to seniors, withdraw within months after they enroll. In other words, if K-12,Inc. was to be evaluated under NCLB or Race To The Top standards, they not only would be failing to make AYP, they would be marked for closure and replaced by -- well, er, umm, charter schools. "Kids mean money," writes Saul.

Agora is expecting income of $72 million this school year, accounting for more than 10 percent of the total anticipated revenues of K12, the biggest player in the online-school business. The second-largest, Connections Education, with revenues estimated at $190 million, was bought this year by the education and publishing giant Pearson for $400 million.

Articles like Saul's as well as a forthcoming study by researchers at Western Michigan University and theNational Education Policy Center, which will show that only a third of K12’s schools achieved adequate yearly progress, the measurement mandated by NCLB, don't exactly instill investor confidence. Neither does the potential these largely unregulated companies have for corruption and cheating. The need lots to customers to maintain profitability and it seem they're not above keeping students in the fold with some grades hanky-panky.

“What we’re talking about here is the financialization of public education,” said Alex Molnar, a research professor at the University of Colorado Boulder School of Education who is affiliated with the education policy center. “These folks are fundamentally trying to do to public education what the banks did with home mortgages.”

But those like Rotherham and former Gates Foundation honcho Tom VanderArk, who are among the main salesmen for cyber learning and who benefit directly from its marketability, will no doubt try and ride to the rescue.

Writes AR: 

"I’m not a stock analyst and I don’t invest in education stocks because of other work I do, but K12 Inc.’s stock dropping 23 percent yesterday on that NYT story seems like an overreaction. Sure there is an enthusiasm bubble around ed tech and online right now but K12 is established and has a diverse revenue stream and operations (think language programs with Middlebury, AP tools, etc…) and online learning is here to stay in some form."

Another rescuer may be Chicago Mayor Rahm Emanuel who is getting ready to offer K12 another big contract. The Chicago Tribune reports that Rahm's hand-picked school board, "is considering awarding a share of a three-year, $1.9 million contract Wednesday to K-12 Virtual Schools LLC, a lucrative, publicly traded company that educators warn has a history of poor academic performance."

Arne Duncan, formerly the district's CEO, originally gave K-12 one of its first large no-bid contracts back in 2006. For those who don't remember, a year earlier former education secretary William Bennett, who founded the company in 1999, was forced to step down as board president after a series of racist remarks he made on the air and under the cloud of a GAO investigation. What he actually said, for those who missed it, was, " aborting black babies would result in a lower crime rate."

When Bennett was still with K-12, he let it be known that the company's curriculum had little respect for the dividing line between school and religion. In an online interview, Bennett explains:

We're centered in the Judeo-Christian tradition, we do not ignore faith and religion, we do not ignore the arguments against evolution, because there are some.

Such is the legacy of K-12 Inc. If it's stock price hits bottom, I don't mind.