A recent post, Outcomes Analyses Suggest Concerns for Virtual Schools, presented evidence warranting concern for increasing access to full-time online schools. Among the top virtual school providers is K12 Inc., a for-profit organization. It appears, as documented below, that in addition to troublesome academic outcomes K12 Inc. faces class action lawsuits from their stockholders. Here’s a listing of the law firms alleging specific complaints on behalf of their clients.
A law firm, Lieff, Cabraser, Heimann & Bernstein LLP, announced on February 15 it filed a class-action lawsuit against K12 Inc. The complaint alleges,
… that during the Class Period, defendants misrepresented and omitted material information concerning K12’s operations, financial performance, and business prospects. On December 12, 2011, The New York Timesreported its findings from an investigation into K12 and its online schools. Based on a review of K12’s operations, the Times found that “a portrait emerges of a company that tries to squeeze profits from public school dollars by raising enrollment, increasing teacher workload and lowering standards.” The Times also found that K12 used high-pressure recruitment strategies to increase student enrollment at K12 schools, that K12 teachers were pressured to pass students despite poor academic performance, and that a significant number of K12 students failed to meet federal and state standards of academic achievement. Following the publication of the Timesarticle, the price of K12 common stock fell $6.79 per share, or approximately 23.5 percent, to close at $22.00 on December 13, 2011, on unusually high trading volume.
Law Offices of Howard G. Smith alleges a similar complaint against K12 Inc.
The Complaint alleges that defendants misrepresented or failed to disclose material adverse facts about the Company’s business, operations and prospects, including that: (i) the Company had engaged in improper and deceptive recruiting and sales strategies, aimed at enrolling students regardless of their ability to successfully complete the curriculum; (ii) the Company failed to disclose administrative pressure from upper management to pass students, despite poor or nonexistent academic performance, so as to maintain high enrollment levels and continued government payments; (iii) the Company failed to maintain its students’ math and reading performance at statewide grade-level performance; and (iv), as a result of the foregoing, defendants’ statements regarding the Company’s empirical academic performance, financial performance, and business and financial prospects were false and misleading and lacked a reasonable basis.