K12 Inc.: California Virtual Academies' operator exploits charter, charity laws for money, records show - EastBayTimes.com

K12 Inc.: California Virtual Academies' operator exploits charter, charity laws for money, records show - EastBayTimes.com:

K12 Inc.: California Virtual Academies' operator exploits charter, charity laws for money, records show

Frustrated with the quality of their neighborhood schools, parents, teachers and civic leaders have founded hundreds of California charter schools, combining locally sourced ingenuity with the public funding that state law allows them to command. California's largest network of online academies is different: Although the schools are set up like typical charters, records show they're established and run by Virginia-based K12 Inc., whose claims of parental involvement and independent oversight appear to be a veneer for the moneymaking enterprise. The company -- the subject of a two-part investigative series by this newspaper -- says the schools operate independently and are locally controlled.

 But the academies' contracts, tax records and other financial information suggest something entirely different: K12 calls the shots, operating the schools to make money by taking advantage of laws governing charter schools and nonprofit organizations. "What this company has done may make sense from a business perspective, but to me, it's a sham," said Renee Nash, a business and tax attorney and a member of the Eureka Union School District's Board of Trustees. "K12 is clearly taking advantage of the laws in California," she said, "and the Legislature needs to put a stop to it." California law is silent on whether for-profit firms are even allowed to run charter schools. So before applying 14 years ago to open the state's first online academies, K12 treaded cautiously into a new market, creating a series of nonprofit organizations whose names match those of the schools. That means each California Virtual Academy is considered by the IRS to be a charitable organization that need not pay taxes, even though K12 effectively controls the schools by providing them with all academic services. The structure, accounting experts say, makes it tough to tell where the nonprofit ends and where the company begins. Mike Kraft, K12's vice president for finance and communication, disputes that characterization. He said the nature of the relationship between the company and the schools is articulated clearly in documents. "The contracts between K12 and each (academy) outline the parties' obligations and expressly provide that the governing body of 

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