Beijing-Based Education Company Likely Cashing in on U.S. Border Crisis

A Bejing-based Chinese education company is likely to benefit from the ongoing immigration crisis at the U.S. Southern Border. Unaccompanied migrant children will be housed at The American Hebrew Academy (AHA) campus in Greensboro, North Carolina. The school, which is deeply indebted to the Chinese education company, has had a turbulent financial past since its inception and its subsequent closing.

In coordination between the U.S. Department of Health and Human Services (HHS), Administration for Children and Families (ACF), and the Office of Refugee Resettlement (OOR), undocumented children will be transported from the U.S. Southern border to the campus for transitional housing. Up to 800 children can be housed there temporarily while they wait to be placed with family or a “vetted sponsor.” 

The decision, which was announced on June 10th, was met with opposition, particularly from Republican lawmakers who questioned HHS Secretary Xavier Becerra last year as to whether the agency was considering the location for housing immigrant children. Secretary Becerra shut down those rumors by emphatically stating  “there is no plan we have to shelter children in North Carolina.”

As reported by Fox News, the announcement prompted representatives to inquire further into HHS’ decision. Rep. Richard Hudson (R) was joined by Reps. Virginia Foxx (R), Ted Budd (R), Patrick McHenry (R), Dan Bishop (R), David Rouzer (R), and Madison Cawthorn (R), in his letter addressed to Secretary Becerra.

The letter focuses on the Biden administration’s failure “to secure our Southern border” as well as the larger impact that failure may have on their state, and further inquires as to when communications regarding the use of AHA’s land and facilities began, if other locations in North Carolina were considered, and the extent of taxpayer burden.

According to AHA’s Board of Directors, HHS leased the property for a period of 5 years with an option to extend for an additional 5 years. It also announced that AHA “will be contracted to provide the educational programming” offered to the minor children. 

Major questions remain unanswered, including the cost of the lease and to whom those funds will ultimately be paid. There are growing concerns that the lease will financially benefit a Chinese corporation.

AHA underwent significant changes in recent years, most notably when it abruptly closed its doors in 2019 and rebranded itself after securing a $26 million loan from the Chinese education company, Puxin Limited. That loan is secured by AHA’s interest in its real estate property located in Greensboro, valued at least $86 million - the same property where the unaccompanied migrant children will be housed. 

Puxin Limited is reportedly the third-largest education and after-school programming company in Communist China. While it was incorporated in the Cayman Islands, it is headquartered in Beijing and virtually all of its business practice occurs in China. 

Puxin may have the most to gain in the deal between AHA and the Biden Administration. But this may not be the first time it’s benefited from U.S. taxpayer's dollars.

American Hebrew Academy Closes

AHA served as a Jewish college preparatory boarding school for nearly 20 years. On June 12, 2019, the community was blindsided when the school announced its closure via email, citing ongoing financial troubles. The closure left most employees laid off and the entire student body scrambling to enroll in alternative high schools.

Puxin Limited Steps In

Three months after AHA closed, Puxin Limited, a publicly traded company,  announced a $26 million loan to AHA on September 19, 2019.

According to the press release by Puxin, the loan “bears an interest rate of 18.0% per annum” and is secured by AHA's real estate interest in its campus.

Puxin’s business model is school acquisitions — that is the company takes over failing schools, provides guidance and oversees the student recruitment and marketing, curriculum and service offerings, teacher management, IT systems, and financial management of the acquired institution. 

American Hebrew Academy Becomes AHA International School 

After securing the loan from Puxin, AHA went through a similar restructuring and rebranding process. Ditching the religious aspect, it renamed itself AHA International School — a secular college preparatory high school geared toward international students. It announced its anticipated reopening for the 2020-21 year. 

A source familiar with the transition rebukes claims that Puxin’s role was strictly financial in nature. Puxin was deeply involved in the rebranding efforts and may have even pushed for the school to reserve 1/3 of its future student population for Chinese students.

Just as Puxin issued the loan, 8 AHA board members either stepped down or were removed.

Ni Zhang, Shong Gao, and Wei Yang stepped in to serve in the highest ranking roles.

The school’s registered agent on its business registration documents changed from former CEO Glenn Drew to a woman named Qinghua Zhao. 

Pay Day

The school's fate was arguably sealed by former-CEO Glenn Drew.  Drew, who controlled the school since its inception, has endured the accusations that he squandered school finances for years.

Despite declining school capital, Drew appeared to prioritize the AHA’s ostentatious aesthetic, while failing to expand existing programs to increase enrollment. The school never met its enrollment goals, and it was forced to take out multiple loans to keep its doors open.

Deteriorating finances did not seem to affect Drew's salary, which averaged almost $500,000 per year. Some have questioned whether his salary constituted excessive executive overcompensation for his role at the non-profit organization.

In fact, AHA’s 2019 tax returns also show that, in the year the school closed because of its insolvency, Drew made a salary of nearly $700,000. In addition to that hefty salary, his consulting company, JRSM Associates, LLC, was paid $1,465,090 for the management of the closure and financial crisis.

 

Drew stepped down as head of AHA in 2020. How much he or his consulting company made for that year is unknown, as tax records have not yet been made public.

COVID-19

Months into the rebranding efforts, the COVID-19 pandemic struck. AHA International School’s hopes for reopening in 2020 fell apart. 

According to records from the Small Business Administration, AHA took advantage of the Paycheck Protection Program (PPP). PPP loans were made available to small businesses struggling to pay their employees during the pandemic. Records show AHA received two PPP loans totaling $1,486,118, despite the school not being fully operational and serving no students.  

In determining a company’s eligibility for PPP funds, the SBA used payroll information from the previous tax year. A year prior to its loan application, the school was fully operational and employed a full staff of faculty, admissions officers, athletic coaches, residential staff, cooks, and more. Most of those employees had been laid off prior to the pandemic.

Although AHA’s first PPP loan reported 50 jobs saved with the funds, a source employed during that time advised that the true number of workers on campus was significantly less.

AHA was approved for a second PPP loan in February of 2021, despite acknowledging that plans to reopen ended one month prior. The second loan application reported 65 jobs would be saved with the funds it received.

Both loans were forgiven, and the school never reopened.

Taxpayer Funds to China?

The purpose of PPP loans was to protect American businesses and worker salary. However, it is estimated that hundreds of millions of dollars of PPP funds flowed to Chinese entities either owned or invested in.

Sen. Marco Rubio (R), who chaired the Senate Committee on Small Business and Entrepreneurship in 2020, introduced a bill that would have prohibited PPP loans from being issued to businesses like AHA. 

That bill deemed any business incorporated in China, had significant operations there, or businesses where a Chinese company held at least 20% direct or indirect economic interest - would be ineligible for PPP funds. It would have excluded businesses that have residents of the People's Republic of China on their boards. Similar bills were introduced in the House, but none ever came to fruition. 

While it is unknown whether AHA directly used the PPP loan to make loan repayments to Puxin, Puxin certainly benefited financially after they were administered. 

Puxin’s financial records to its shareholders indicate the company’s income from the interest-bearing loan increased drastically from 2018 to 2019 as well as from 2019 to 2020 and attributed the growth to AHA. 

2019 Financial Report:

2020 Financial Report:

These statements appear to reflect that AHA did make significant payments to Puxin in 2019 and 2020, despite operating in a limited capacity and receiving no student tuition.

Who Wins? Migrant Children or Chinese Business?

As the recent announcement of HHS' contract to lease the property made headlines, a major unaddressed question remains: who will be HHS' landlord? Property records show the parcel of land is owned by AHA. The current registered agent is Robert Landau - an individual who was reportedly brought on during the transition period to provide financial consulting and advisory services to the school. Landau assumed the role from Puxin's Quingua Zhao only a few months before rumors circulated that HHS was looking at AHA as a possible location to house migrant children. 

It is not clear whether the government fully understood AHA's history of financial troubles or Puxin's involvement with the school when it chose the location to house unaccompanied migrant children.

The Floridian spoke with Guilford County Commissioners Justin Conrad and James Upchurch who advised the commission was not involved in conversations or negotiations with HHS or AHA regarding the contract. Both commissioners expressed their surprise when the deal was announced.

William Scarborough, who oversees AHA's property and represents the board did not respond to requests for the names of current board members but did confirm Puxin refinanced the school's debt in 2019 when it was the verge of default. He also confirmed that Puxin remains a lender to the school.

HHS' 5 year lease of the property could mean taxpayers are now footing the bill for that loan, and that the Chinese corporation may be the biggest winner of all.

Disclaimer: The author of this article, Michelle Rosenberg, is a former student and graduate of the American Hebrew Academy. She attended the school from August 2008 through May 2011.