As a Chinese company continues the process of purchasing the Princeton-based Westminster Choir College from Rider University, more concerns — and one more lawsuit — have surfaced.
The choir college, renowned for its training of professional musicians since its founding in 1926, operated independently in Princeton until 1992, when it merged with Rider, based in Lawrenceville. Because of recent financial problems, Rider has sought to sell both the choir college and its valuable 23-acre campus. The Chinese company has offered $40 million for the school and its campus. One lawsuit opposing the sale was filed earlier this year by the Princeton Theological Seminary, which contends the sale would violate the terms of its 1934 donation of land on which Westminster’s campus was built.
The most recent lawsuit, the second filed by attorney Bruce Afran of Princeton, who represents a group of Westminster alumni and donors, seeks an injunction to block the choir college’s sale to Beijing Kaiwen Education. As reported on the Planet Princeton website, the suit charges that the Chinese purchaser has no experience operating a music training school such as Westminster and that the entity listed as the buyer is actually a subsidiary of a Chinese for-profit company.
Constance Fee, president of the Westminster Foundation, which was founded to support the choir college as an independent school, said that, if Rider’s sale goes through, “not only will Westminster come under the direct control of the Chinese government, but its endowment will be transferred to the books of Beijing Kaiwen, a violation of IRS regulations that require charitable endowments to be controlled by non-profit organizations.”
Fee continued: “Except for six months of partial management of a primary and middle school in Beijing, Kaiwen has no experience in higher education, which is hardly sufficient to qualify it to operate a world-renowned American professional school training singers, conductors, and music educators.”
According to the Planet Princeton account, Afran also claims the sale would give the Chinese government a base of operations in Princeton. “Now China, for the first time, will be seeking to directly control an American college, an irreversible threat to our traditional academic freedoms,” Afran said. “We know that members of Congress have been making inquiries about this transaction with the U.S. Department of Education.”
Similar concerns were raised in a September 5 press release issued by the Rider University chapter of the American Association of University Professors. In it Jeffrey Halpern of the AAUP contends that the for-profit Chinese corporation plans to take control of the $20 million Westminster Choir College endowment despite prohibitions imposed by state and federal law. In a recent filing with the Shenzhen Stock Exchange Beijing Kaiwen Dexin Education Technology Co. Ltd, the company revealed that “the endowment of Westminster Choir College, a non-profit corporation with tax deductible status, along with the campus and all College assets would become the property of a for-profit company. According to the federal tax code not-for profit corporations must not be organized or operated for the benefit of private interests.”
The release said that “all of these donations were made with the express and specific understanding that they were to a not-for-profit 501(c)(3) institution organized under New Jersey and federal charitable laws, their transfer to a for-profit commercial enterprise violates those regulations and the express wishes of the donors. This sale constitutes a raid on those assets and should be investigated by the appropriate governmental agencies.”
In addition, the AAUP release reports that Kaiwen Education “continues to put up disturbingly poor economic numbers as revealed in its 2018 semi-annual report,” filed August 7. “Kaiwen’s continuing pattern of net losses and very low cash to short term debt raises serious concern about its ability to sustain itself over even the midterm,” Halpern said.
The AAUP press release included a list of 18 claims made by the Chinese buyer and its representatives and paired each claim with a rebuttal statement that the AAUP labeled “reality.” For example, at a March 4 presentation representatives of Kaiwen Education claimed it “is a new company with no connection to its unsuccessful predecessor company, the Jiangsu Zhongtai Bridge Steel Structure Co. Ltd.” The AAUP said, in its reality check, that “Jiangsu Zhongtai Bridge Steel Structure was renamed Kaiwen Education in January, 2018. Kaiwen board chairman Xu Guangyu was also board chairman of the steel structure company. Four of the ten current members of Kaiwen Education’s board of directors were also board members at Jiangsu Zhongtai.”
The Rider AAUP release cited the “claim” that “the success of Kaiwen Education has been largely due to its strategic vision, business acumen, operational dynamics, and adaptation to a constantly changing marketplace, capital management, financial discipline, management, and execution.”
Its “reality” response was that “Kaiwen is in a precarious financial condition.” Its only recent profitable quarter was “not from operations but from a non-recurring event. It has a large debt burden and is dependent on outside funds to continue to operate. Kaiwen’s especially poor performance this year raises significant questions about company management, the soundness of its business model, and company viability. The respected financial site Morningstar has assessed the financial risks associated with Kaiwen Education from ‘high’ to ‘very high.’”