Very much a slippery slope. If you decide to terminate make sure that you state VERY clearly in writing the cause of termination. Make duplicates. You don't want the parents coming back at you with the accusation that they're being asked to leave because you're covering anything or because they're right in their assumptions. I wonder if the parents are maybe asking leading questions of the child at home, looking for problems, and because the child is bright enough to realize that accusing others is getting them attention, they continue it themselves.