One of its first big investors was Michal Milken. That investment came a decade after he pled guilty to six felonies in the “biggest fraud case in the securities industry” ending his reign as the “junk bond king.” Milken was sentenced to ten years, served two, and was barred from ever securities investment. In 1996, he had established Knowledge Universe, an organization he created with his brother Lowell and Larry Elison, who both kicked in money for K12.
Packard was himself sued for misleading investors with overly positive public statements, and then selling 43% of his own K12 stock ahead of a bad news-fueled stock dip. Shortly thereafter, in 2014, he stepped down from leading K12 to start a new enterprise.
In 2016 K12 got in yet another round of trouble in California for lying about student enrollment, resulting in a $165 million settlement with then Attorney General Kamala Harris. K12 was repeatedly dropped in some states and cities for poor performance.
In 2020, they landed a big contract in Miami-Dade county (after a big lucrative contribution to an organization run by the superintendent); subsequently Wired magazine wrote a story about their "epic series of tech errors." K12 successfully defended itself from a lawsuit in Virginia based on charges they had greatly overstated their technological capabilities by arguing that such claims were simply advertising “puffery.”
In November of 2021, K12 announced that it would rebrand itself as Stride.
The New York Times had quoted Packard as calling lobbying a “core competency” of the company, and the company has spread plenty of money around doing just that. And despite all its troubles, Stride was still beloved on Wall Street for its ability to make money.
Q: Mr. Rhyu, are you a man of your word?
Rhyu: I’m not sure I understand that question.
Q: Do you do what you say you are going to do, sir?
Rhyu: Under what circumstances?
Q: Do you do what you say you are going to do, Mr. Rhyu?
Rhyu: That’s such a broad question. It’s hard for me to answer.
Is it hard to answer? Because I feel as if it's really easy to answer. It's one thing to offer the "correct" answer and not mean it, but it's a whole other level to pretend that you can't imagine what the correct answer might be.
So what happened in New Mexico?
Gallup-McKinley County Schools includes 4,957 square miles of territory, including some reservations. There are 12,518 students enrolled. 48% of the children in the district live below the poverty line.
So the district hired Stride to provide an online program, and that was not going well. According to the district's press release, the data was looking ugly:
* Graduation rates in GMCS's Stride-managed online program plunged from 55.79% in 2022 to just 27.67% in 2024.
* Student turnover reached an alarming 30%.
* New Mexico state math proficiency scores for Stride students dropped dramatically, falling to just 5.6%.
* Ghost enrollments and a lack of individualized instruction further compromised student learning.
At the special May 16 board meeting to terminate the contract, the board was feeling pretty cranky.
The district said that the company is failing to meet requirements outlined in their contract. “This is something we’ve literally been working on since the beginning of the year with stride, and we just finally had a belly full of it and we’re ready to make a change,” said Chris Mortensen, President of Gallup-McKinley Schools Board of Education.
The board voted unanimously not just to end the contract, but to seek damages. Stride filed a motion for a restraining order to keep the board from firing them. The court said no.
Mortenson has had plenty to say about the situation. From the district's press release:
GMCS School Board President Chris Mortensen stated, "Our students deserve educational providers that prioritize their academic success, not corporate profit margins. Putting profits above kids was damaging to our students, and we refuse to be complicit in that failure any longer."
Stride CEO James Rhyu has admitted to failing to meet New Mexico's legal requirements for teacher-student ratios, an issue that GMCS suspects was not isolated. "We have reason to believe that Stride has raised student-teacher ratios not just in New Mexico but nationwide," said Mortensen. "If true, this could have inflated Stride's annual profit margins by hundreds of millions of dollars. That would mean corporate revenues and stock prices benefited at the expense of students and in some cases, in defiance of the law."
"Gallup-McKinley County Schools students were used to prop up Stride's bottom line," said Mortensen. "This district, like many others, trusted Stride to deliver education. Instead, we got negligence cloaked in corporate branding."
The district is looking for another online school provider, and I wish them luck with that. Parents in the wide-ranging district liked the online option, and want something to replace Stride. But finding a cyber-school company that will provide the oversight, transparency and accountability that GMCS wants (not to mention the non-profiteering) is likely to be a challenge. Because if the high-capacity 800 pound gorilla of cyber-school has to cheat to make a buck in your district, who else is going to do any better?
Of course, that's the Stride business model, so maybe there's hope. Maybe. Stride, for its part, can be expected to just keep grinding away, unchastened and searching for the next district that hasn't done enough homework that they will fall for Stride's sales pitch.
