Gallup-McKinley County Schools File Fraud Complaint Against Stride, Inc. Alleging Profit-Driven Abuse of Minority-Majority Public School District

GALLUP, N.M., Sept. 10, 2025 /PRNewswire/ -- The Gallup-McKinley County Schools (GMCS) Board of Education has filed a verified complaint against Stride, Inc. (NYSE: LRN), charging the publicly traded for-profit virtual education provider with fraud, deceptive trade practices, systemic violations of law, and intentional and tortious misconduct designed to maximize profit margins at the expense of students and their education, in which a vast majority of students are Native American.

Allegations of Profit Before Students

The complaint, filed in New Mexico's 11th Judicial District Court, asserts that Stride executives knowingly:

• Inflated enrollment numbers by retaining "ghost students" on rolls to secure state funding per student.
  
  
• Cut staffing costs by assigning teachers' caseloads far beyond the required statutory limits, some exceeding 200 students each.
  
  
• Ignored compliance requirements, including background checks and licensure laws for its employees, and ignored federally mandated special education services to students.
  
  
• Suppressed whistleblowers who documented financial directives from Stride's leadership to delay hiring and deny services to preserve profit margins.

According to whistleblower testimony cited in the complaint, senior Stride finance executives explicitly rejected requests to hire additional teachers, even when warned that the company violated a New Mexico statute. Instead, executives ordered additional staff cuts to ensure profit targets were met. Stride continues to assert legal claims against the School District despite admissions from its corporate leadership to the misconduct and has relied on a disinformation strategy to distract from its misdeeds.

Financial and Reputational Risk

"This case is about a publicly traded corporation deliberately choosing Wall Street margins over the futures of our children," said GMCS Board President Chris Mortensen. "Stride's financial model came at the direct expense of Native American and rural students in our district. That is unconscionable, and it is fraudulent."

GMCS's lawsuit contends that Stride's practices, while boosting short-term profitability, came at enormous long-term cost: a 27.67% graduation rate in 2024 (down from 54% in 2023), substandard test scores in every subject, and widespread loss of public trust.

"Our district is majority Native American, and these students were treated as profit centers rather than children with a right to an education," said Board Member Kevin Mitchell, who is also a member of the Navajo Nation. "Stride diverted taxpayer dollars to inflate its stock value while systematically denying our kids the qualified teachers and special education support they were legally entitled to receive."

A Case with Broader Implications

The complaint calls for compensatory and punitive damages, triple damages under New Mexico's Unfair Trade Practices Act, and restitution of taxpayer funds. More broadly, the case highlights the inherent risks in publicly traded education models that tie shareholder value to cost-cutting in already under-resourced schools and school districts.

GMCS Lawsuit and other materials can be viewed at https://www.gmcs.org/page/stride-inc

SOURCE Gallup-McKinley County Schools