When Whitney Tilson of Kase Capital presented his short thesis on K12 Inc. at last year’s Value Investing Congress, he warned that the online education program was targeting at-risk youth with little chance of succeeding with the programs it offered, putting up terrible results as a result, and coming under increased regulatory scrutiny as a result. It turns out that this scrutiny includes a large SEC investigation that generated more than 160,000 pages worth of records, all of which the company claims are ‘confidential’.

K12 claims all 55 boxes of documents are confidential

“We first learned of the formal probe and related records in response to requests we filed in 2014.  That’s how we now know K12 was involved in a formal SEC investigation in 2012-2013,” writes Probes Reporter. “The investigation of K12 was of such scale that it generated an estimated 166,663 pages of records produced by the company and submitted to the SEC between Feb-2012 and Mar-2013.  The SEC says this, “… equates to approximately 55 boxes of records that are responsive to [our] request’.”

K12

The only thing that we know for sure, thanks to Probes Reporter’s FOIA request, is that K12 was accused of making materially false statements or omissions about the effectiveness of its program going back as far as January 2011. According to Probes Reporter, which specializes in using FOIA requests as an investigative tool, companies can make sweeping claims of confidentiality – as K12 Inc. (NYSE:LRN) has done – without having to give cause, but once those claims are challenged in courts the standards for maintaining that confidentiality is high.

Probes Reporter pushing for release of confidential docs

When Tilson made his presentation at VIC, K12 was already sliding from a high of $38 to the low $30s, but it fell off a cliff a few days later on lowered earnings guidance. It’s been around $12 for the last few months after sliding for the first half of the year, but it could have even further to fall, although Tilson recently closed his short for a nice profit.

Even though the SEC investigation has ended without charges being brought against K12, the 166,663 pages of currently confidential information probably aren’t flattering. Probes Reporter is pushing for their release, though it says the process can take as long as two years. In the meantime, Tilson’s short thesis (at this year’s VIC he said that the company is still overvalued) keeps looking better and better.