July 8, 2016

California announced that the Bureau of Children’s Justice and False Claims Unit of the California Department of Justice has reached 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 has 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, and provide teachers with sufficient information and training to prevent improper claiming of attendance dollars. CA

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