Is it $168.5 million or $2.5 million?
On Friday, July 8, 2016, the Attorney General of California issued a press release announcing a $168.5 million settlement with K12.
On the same day, K12 issued a press release announcing a $2.5 million settlement with the State of California Attorney General's office.
Two days ago (after seeing the news report, not the press releases) I penned a blog about the settlement and mentioned we will need to see how K12 spins it.
After reading their release, my head is still spinning. Now, I personally know the K12 PR head and the Government Affairs team -- they are good people, and I really feel for them. However, this is one of the best spin attempts I have seen, and I spend my time with words (marketing and sales training). I will only touch on a few points below.
K12 classified it as a $2.5-million settlement, and a $6.0 million donation to the Attorney General's office to cover the costs of the investigation. They also adamantly stated that the "settlement with the state includes no finding or admission of liability or wrongdoing by K12 or by the public, non-profit California Virtual Academies (CAVA) managed under contracts by K12."
California Attorney General Kamala Harris, in her own words, seems to see it differently from her press release, "K12 and its schools mislead parents and the State of California by claiming taxpayer dollars for questionable student attendance, misstating student success and parent satisfaction, and loading nonprofit charities with debt."
The next point comes from the first statement by K12 CEO Stuart Udell. (Nate Davis seems to have disappeared on this one). Anyway, back to Stuart's quote.
"The Attorney General's claim of $168.5 million in today's announcement is flat wrong. Despite our full cooperation throughout the process, the Office of the Attorney General grossly mischaracterized the value of the settlement just as it did to the issues it investigated. There is no "debt relief" to the CAVA schools. The balance budget credits essentially act as subsidies to protect CAVA schools, its students, and teachers against financial uncertainties. CAVA schools have not paid that money to K12 and K12 never expected to receive it given California's funding environment."
What I find most interesting here is the CEO's first comments attack the dollar amount and then the characterization of the debt relief, instead saying it should have been classified as subsidies.
K12 investors -- were you listening? (They are because the stock is up almost 2% today)
Let's forget that what the Attorney General said about misleading parents, misstating student success and parent satisfaction, and questionable student attendance. No, we want to make crystal clear it is not "debt relief."
The other point I want to draw attention to is Udell's last quote in the K12 release.
"Opponents of K12 and skeptics of public online education have spent years making wild, attention-grabbing charges against us and our business," said Udell. "The State of California used the full authority and investigative resources of the Office of the Attorney General to investigate these charges over eight months. In the end, we demonstrated industry leading levels of service and compliance with regulations and benefits to families. There is a reason families keep coming to our programs and its because we are committed to deliver valuable educational services within the laws and rules of every state."
I actually think he believes that statement too.
By the way, CAVA schools collectively had a graduation rate of 36% as compared to the state average of 78%. Facts are neither opponents or skeptics.
Now, I won't pick apart the use of the words "wild" and "attention-grabbing" in order to characterize any comments made by people pointing out flaws with K12 and their schools. I won't even point out the fact that the charter school association in California agreed with the Attorney General in this settlement (and last I checked they were not opponents or skeptics).
What I will point out though is the weakness behind this ending statement. Any communication expert knows you open big and end big. You open strong and end strong. You open memorable and end memorable.
And yet, this is the best they have -- ". . . we demonstrated industry leading levels of service and compliance with regulations and benefits to families. There is a reason families keep coming to our programs and its because we are committed to deliver valuable educational services within the laws and rules of every state."
Industry leading -- if the ship is sinking does it matter how beautiful the deck chairs look?
Parents keep coming to our programs -- Oh, and lest I forget to remind you where the focus seems to be. K12 held an investor conference call today to discuss the settlement.
Where is the parent conference call?