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K12, Investors Reach Deal in Class-Action Securities Lawsuit

The for-profit education provider K12 Inc. has reached a tentative settlement in a class-action securities lawsuit brought by investors who said they were misled by the company's business and academic performance.

The online schools provider has agreed to pay $6.75 million to plaintiffs who have brought the suit, while company officials said they also continue to deny any claims of wrongdoing.

The agreement will settle allegations related to K12's disclosure of student retention and enrollment information, while other claims, focused on academic performance and school quality, will be voluntarily dismissed, according to a statement by the company. The agreement between the two sides still must be approved by a judge overseeing the case, which is being heard in a federal court in Alexandria, Va.

A lawyer representing the lead plaintiff in the lawsuit, Jonathan Gardner, declined to comment in detail on the settlement, except to confirm the basic parameters of the agreement.

The plaintiffs "are happy with the resolution of this action," Gardner told Education Week in an e-mail.

Nate Davis, the executive chairman of the Herndon, Va.-based company, said K12 was pleased with the outcome, calling it a "pragmatic resolution" for the organization.

"The plaintiff is representing before a court of law what K12 has always maintained," Davis said in a statement, "that the claims in this lawsuit regarding our academic standards, student-teacher ratios, grading and attendance policies—allegations unfairly echoed in the media and other forums—could not be supported on the merits."

The lawsuit filed against K12 alleged that the company misled shareholders by overstating its academic performance, and by not providing accurate information about student-to-teacher ratios and how students are recruited. The lead plaintiff currently listed in court documents is the Arkansas Teacher Retirement System. As a publicly traded company, K12 is required to answer to shareholders, as well as to the U.S. Securities and Exchange Commission.

More details on the agreement can be found in my post on the Marketplace K-12 blog.

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