Home / General / The Rheeist Scam Goes Global, Part II

The Rheeist Scam Goes Global, Part II

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A few days ago, i talked about Rheeism going global, with Teach for America taking their privatization anti-union schemes around the world. But there’s another side of global Rheeism, which is global capital finding its way to U.S. to profit off of destroying public schools. That’s what is happening in North Carolina, with Chinese investors funding charter schools.

Chinese investors provided $3 million in startup money for Thunderbird Preparatory Academy, a Cornelius charter school that’s fighting for survival.

That’s one of the insights that emerged from last week’s state review of the school’s finances, governance and facilities.

Thunderbird’s network of investors and lenders left Charter School Advisory Board members shaking their heads and palming their faces. “A spider web,” one member dubbed it. “Exceedingly messy and complex,” said board Chair Alex Quigley.

But as North Carolina has opened itself to rapid charter school expansion, a growing number of startup schools are turning to charter-school finance companies to pay for facilities. Some also tap a network of companies and consultants to help them run the schools. That means tax money from North Carolina is flowing across the country and around the globe to repay debts and cover outsourced services.

It’s perfect. Since these charter schools receive public money, when they go under, it’s taxpayers left footing the bill. The article does a very good job at getting into the sketchy finances behind charter schools.

During the first school year, the relationship between Thunderbird and Banyan fell apart. Mojica declined to discuss details, saying the separation agreement prohibits it, and Banyan couldn’t be reached for comment. But the Thunderbird board ended up borrowing $450,000 to pay a penalty for breaking that contract.

It also switched landlords, with Vertex Nonprofit Organization, another Utah-based company that specializes in charter school finance, buying the Thunderbird building from American Charter Development. Vertex leases buildings to charter schools with an option for the school to eventually buy.

The Vertex website says the company charges lease payments that exceed the cost of capital, then returns the excess to the school based on faculty suggestions, “with a focus on maximizing the benefit to students.”

Vertex gave Thunderbird a short-term, no-interest loan of $150,000 to help pay the Banyan penalty, according to reports presented last week. American Charter Development, the former landlord, loaned another $150,000 at 9.5 percent interest.

The rest came from ALK Angel Holdings of Virginia, which gave Thunderbird a $250,000 line of credit, with interest-only payments of $4,167 a month, or $50,000 a year. That’s the one that really raised eyebrows among state officials.

“That just seems like a bad loan,” said Steven Walker, an advisory board member who is also general counsel to Lt. Gov. Dan Forest. Walker pressed Mojica for details about Angel Holdings, including whether any Thunderbird board members did business with general partner Alex Karakozoff.

Mojica said Karakozoff is a venture capitalist with whom he had done business in the past.

All three of the short-term loans were due June 30, the day the advisory board met to reconsider Thunderbird’s fate. Mojica brought letters from all three lenders saying the loans have been extended through June 2018. The Angel Holdings letter says Thunderbird owes $200,000 in principal as of June.

But hey, at least these schools aren’t infected by the evils of teachers’ unions!

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  • Jesus Christ. This makes me angry. Angrier than almost anything. Because its just so deliberate and so deliberately evil–and so totally unnecessary.

  • Brett

    That seems like a big oversight, that charter schools get funding for students/etc but don’t get any funding for renting out a building for education. Why is that?

  • No Longer Middle Aged Man

    Charter schools are a great idea. Many public schools are dreadful and if you can’t be bothered to examine why, much less to find solutions to the whys and invest the money necessary, then charter schools allow you to harness the magic of the market to fix the problem.

    Corporate charter schools are a horrible idea and in practice they are even worse. They have about as much to do with the magic of the market — even assuming that education has anything to do with magic and ignoring that there is zero evidence that real life markets for a service like K-12 education operate efficiently and also ignoring that a decent society offers decent public education to all rather than making a market in it for those who have the necessary resources to purchase in that market — as military contractors.

    I’m all for experimentation of new K-12 models, including vouchers. How about we give every kid a $50,000 annual voucher so her parents can send her to Sidwell Friends or Choate? Can’t get in? Then let the parents keep the money and home school her. Might not be worse from either an educational or financial perspective than corporate charter schools.

    • trollhattan

      I’m assuming this is elegant snark, given $50k would represent funding for ten students in a typical state. As to home-schooling….

      • trollhattan

        [Meant to write “five students.” I blame homes-schooling.]

      • DocAmazing

        “Magic of the market” is the giveaway.

    • Dilan Esper

      I don’t know enough about charter schools to opine on them, but this is certainly possible as it is essentially what is true about colleges- they can be public or private, but explicitly for profit colleges tend to be scams.

      And I don’t agree with you on home schooling, which is terrible and should be much more strictly regulated or prohibited for communitarian reasons.

      • The Dark God of Time

        Good luck with the last bit. If our country ever considered that children were more than semi-sentient chattel , a lot of things would change.

        • twbb

          I don’t know about that; our country probably fixates on our children more than almost any culture in history. The charter school business is driven largely by clueless citizens who are kept up at nights because of this amorphous and unsubtantiated belief that the precious children are being betrayed by the horrible public school system.

          Maybe thinking of children as semisentient chattel might be a beneficial corrective; look dispassionately at what causes the best educational, psychological, and health outcomes and make decisions about that, and not get drawn into emotion-driven decisions based on soap opera villain stereotypes of the teacher’s union.

  • Srsly Dad Y

    Thunderbird board Chairman Peter Mojica said Friday that the EB-5 loan and his other financial arrangements are “all standard products that are used by charter schools.” A software executive and self-described serial entrepreneur, Mojica said the state’s questions, spurred partly by parent complaints, created a “sense that we’re either taking money and going to Bermuda or we don’t know what we’re doing.”

    In the coming year, when state officials will subject Thunderbird to intensive financial scrutiny, “I will unravel the finances to make them digestible in plain English to the layperson,” he said.

    What a fucking tool.

    • DocAmazing

      “Serial entrepreneur” is a nice way of describing recurrent bankruptcies, and “software executive” is basically synonymous with “fucking tool”.

  • MartinAlexander

    Part of the issue of foreign investment is the EB-5 program which grants a green card to those foreign citizens that invest 500,000 in a business in the US.

  • Domino

    Funding to start a new, unaffiliated charter school is something that seems daunting.

    My brother works for one, that started 5 years ago. It has been successful because it has an insanely wealthy private charity group that was willing to pour tens of millions of dollars into the project.

    Not all of them are so blessed.

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