Tax-exempt foundation aids for-profit ventures
BOISE – Since 2007, Albertsons 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 store founder Joe Albertson’s grandson, isn’t staying on the sidelines. 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 online 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.
There are other providers, most of which have been showering the state’s Republican lawmakers, including Luna and Gov. 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 Wilforth, 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 Wilforth declined multiple requests for an interview.
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 actively 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 $242,500 grant in 2002 and another $100,000 in 2005. 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, 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.
Last year, the state of Idaho gave the academy $13 million.
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