Albertson’s heir made millions on K12 Inc., promotes it to Idaho schools

Click below for a full report from AP reporter John Miller on how Albertson's heir Joseph B. Scott, Joe Albertson's grandson, has made millions on Virginia-based for-profit online education company K12 Inc., and his family foundation has promoted it by giving Idaho schools grants to contract with the firm. The Albertson's Foundation ran full-page ads in newspapers across Idaho, including the Spokesman-Review, promoting state schools Supt. Tom Luna's school reform plan, which would require every high school student to take four online courses and equip every high-schooler with a laptop.

APNewsBreak: Store heir mixes foundation, business
By JOHN MILLER, Associated Press

BOISE, Idaho (AP) — Since 2007, Albertson's supermarket heir Joseph B. Scott has had a golden touch with one of his investments, a company that sells online education courses and other services to public schools.

Scott's investment company, Alscott Inc., has brought in more than $15 million by selling part of its stake in Virginia-based K12 Inc., which was founded in 1999 by former U.S. Education Secretary William Bennett.

But it isn't just luck on Scott's side. His family's tax-exempt foundation has helped develop customers for K12. And Idaho's taxpayers have been paying for it.

Here's how: For nearly a decade, the J.A. and Kathryn Albertson Foundation has chipped in millions to lay the foundation for Idaho's online public education system. One of those online schools, the Idaho Virtual Academy, has, in turn, directed tens of millions of public dollars into K12's company coffers, for services ranging from curriculum to administration.

With debate over expanding Idaho's Internet-based education system now dominating the 2011 Legislature, Scott, who is Joe Albertson's grandson, and an avid skier with his own helicopter, isn't staying on the sidelines, either. The Albertson Foundation, which he chairs, has backed public schools chief Tom Luna's plan to require the state's students to take at least four online classes before they graduate.

“Fear of technology and on-line learning will cripple access and innovation,” according to the foundation's Jan. 30 full-page newspaper ad. “We can't afford to leave these tools untapped.”

Melissa McGrath, Luna's spokeswoman, said Friday that Luna's plan — it's still under consideration in the Senate — doesn't direct local school districts to use a specific content provider like K12.

“Local school districts, not the state or state superintendent, will determine which courses are delivered online and how they are delivered online,” McGrath said. “All these decisions are left to the local level, and they have many options.”

There are other providers, most of which have been showering the state's Republican lawmakers including Luna and Gov. C.L. “Butch” Otter with campaign contributions since at least 2008.

Still, the ties that bind Scott, his family's foundation, K12 and Luna's vision for Idaho's education system of the future are deep.

For instance, Alscott and the Albertson Foundation share the same Boise address. The phone number is the same.

Bennett, K12's ebullient founder who is now a Republican regular on national political talk shows, was an Albertson Foundation board member in 2002 and 2003.

And Thomas Wilford Scott's business partner at Alscott as well as the foundation's chief executive officer, was on K12's board of directors until just December.

Scott and Wilford declined multiple requests for an interview through Chris Latter, an Albertson Foundation spokeswoman.

Back in 2002, Securities and Exchange Commission documents indicate K12 told federal regulators that a single Idaho-based investor had purchased a $5 million stake in the company. At the time, K12 was a privately held company and didn't disclose the name of the investor.

Five years later, however, when K12 sold shares to the public, it told the SEC that Alscott was the largest of “other selling stockholders,” with 3.8 percent stake, or nearly 826,000 shares, valued at about $14 million.

All the while, Scott's family's education foundation was active promoting Idaho's fledgling online education programs — something Luna has made a centerpiece of his reforms.

The J.A. and Kathryn Albertson Foundation, with some $544 million in assets, gave the Idaho Virtual Academy a $1 million grant to help it get off the ground in 2002. The academy, a web-based public charter school that gets state taxpayer funding for its operations, is run by K12. The company provides not only the academy's curriculum but its business support, too.

Scott's foundation helped others, too: From 2004 to 2007, it gave the Boise School District more than $1.6 million — so it could work with K12, too.

So far, these enterprises have been lucrative for K12. The Boise School District paid K12 nearly $1 million over three years.

But doing business with the Idaho Virtual Academy, which has grown to about 2,300 students across Idaho, has been even better.

The academy paid at least $33.7 million to K12 between 2002 and 2008 for “business management,” according to 990 tax forms the school must file annually. That figure doesn't include money the academy has also paid K12 for instructional services. That amount couldn't be determined from filings.

Last year, the state of Idaho gave the academy $13 million.

A phone message left Friday for Idaho Virtual Academy school head Desiree Laughlin wasn't immediately returned.

Jeff Kwitowski, a spokesman for K12 in Herndon, Va., said Friday that he was unable to reach officials at K12 to comment.

The Boise School District said it wasn't aware of ties between Joe Scott and K12 when it accepted money from his family's foundation starting in 2004.

It no longer has a contract with K12, said Dan Hollar, district spokesman.

“The grant ran out,” Hollar said.

Luna's public education reforms could benefit companies like K12 by providing a whole new group of students who must take online courses or risk not graduating.

And the Albertson Foundation, under Scott's leadership, has also given $3 million to the state to develop the Idaho Education Network, a broadband superhighway that will connect every public high school in Idaho by 2012 — and provide an expanded delivery system for products from K12 and other online education providers.

Not surprisingly, national online education companies looking to do more business in Idaho have been active on the political financing front.

Since 2008, K12 has given Republican lawmakers about $30,000 for their campaigns, including nearly $6,000 to Luna and another $5,000 to Otter, who favors Luna's plan. Last year, K12 also gave $25,000 to a group calling itself Idahoans for Choice in Education, which supported Luna.

Apangea Learning, based in Pittsburgh, gave $8,000 in 2010, including $3,000 to Luna. Education Networks of America, from Nashville, gave some $20,000 to lawmakers. Apollo Group Inc., the Arizona-based owner of the University of Phoenix, chipped in about $18,000 to all candidates, including $4,500 to Luna and $6,000 to Otter, according to the Idaho secretary of State.

Democratic State Rep. Shirley Ringo, a math teacher in Moscow, Idaho for 35 years, opposes Luna's plan because it foresees cutting 770 teaching positions and boosting class sizes to help pay for the reforms. All this campaign money, from K12 and others, makes her wary.

“When you see something and you question the logic, people say, 'Follow the money,' ” Ringo said Friday. “We have some relationships here that make one wonder if money is driving this more than solid education.”

Copyright 2011 The Associated Press.