Big Tax Breaks for Controversial DHS-Licensed School for Indian Migrants

By David North on March 10, 2016

Here are five different views of a single, controversial educational institution that majors in students from India — the Northwestern Polytechnic University of Fremont, Calif.:
 

  • The venerable Times of India calls it a "massive academic rip-off";
     
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  • Slightly more charitably, India's Foreign Minister, Sushma Swaraj, tweeted that NPU and another, somewhat similar institution, Silicon Valley University, "are not blacklisted, but they are not reputed either."
     
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  • Nameless immigration inspectors from one branch of DHS, Customs and Border Protection, have stopped dozens of would-be students (all Indians) from being admitted to the United States to attend NPU, apparently on the grounds that they really are not students and that their applications for admission were fraudulent.
     
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  • Another, sleepier DHS agency, the Student and Exchange Visitor Program (SEVP), continues to allow NPU to cause the admission of foreign students to the extent that NPU, according to BuzzFeed, has more students than Harvard University has undergraduates; and
     
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  • The Internal Revenue Service continues to regard this slight institution as a 501(c)(3) organization, thus giving it tens of millions of dollars in tax breaks (as we will show later) despite a $29 million profit in 2014 on a $40 million gross, and despite the fact that NPU's reports to the IRS (Form 990) for 2013 and 2014 show no cash contributions, no contributed services, and no government grants. (NPU apparently saved some money when it hired its accounting firm — the 990 for 2014 is replete with linguistic errors and manages to spell the name of the university in several different ways.) For the full 990 report, see here.

 

 

A bit of anecdotal evidence about the questionable quality of the school is the on-the-web confession of an admittedly marginal student from India about how, despite a terrible academic record and far-below average credentials he managed to be admitted to NPU and, after three failures, to secure an F-1 visa. Why this former resident of India, Mohan Rahul, would publish his record, and the fact that he lied to federal officials, all in broken English, is beyond understanding, as we as reported in an earlier blog post.

So here we have high-prestige Indian institutions, some of our immigration inspectors, and the investigative reporters from BuzzFeed, all looking at it from different angles, unanimously giving NPU devastating reviews, but one arm of our government (SEVP) allows it to expand explosively while another (IRS) ladles out tens of millions in tax breaks.

It represents a massive (and hugely profitable to the insiders) hole in our immigration and taxation systems.

The Tax Breaks. If the level of education is not outstanding, the financial picture certainly is, thanks to the DHS and IRS.

The institution's 990 report to IRS for CY 2014 shows gross income, almost all from tuition, as $40,109,184 and its total costs as $10,960,762 and thus an excess of $29,148,422. If these results were obtained by a corporation, it would be regarded as producing a profit equaling 73 percent of the gross — an Olympian achievement rarely seen outside the narcotics trade.

In 2015, according to BuzzFeed, there were more than 9,000 students; if all participated in all three of the four-month semesters, and all paid the graduate tuition of $4,050 per semester (it is higher for undergrads) that would produce a gross income of $109,350,000, and if the profit ratio were maintained, this would produce, in a single academic year, a profit of close to $80 million.

A corporation with a profit of that size, and using none of the numerous loopholes in the corporate tax system, would pay, at 35 percent, $28 million in taxes. For 2014, in which the entity has already reported $29,148,422 in profits, the corporate taxes would be over $10 million.

The IRS does not have (at least publicly) a policy on how large a reserve a charity can keep and still be regarded as a charity; websites offering advice on this point suggest that a reserve equal to more than two years' of expenses might start sounding questionable. The profit level for 2014 — a modest number compared to what it must be today — was 4.3 times the average cost level of the school for the prior three years.

NPU must be a dream case for an IRS agent, if the agency actually looks at it. The 990 already shows both a remarkable level of profit, and the fact that almost all of it has been retained, neatly, in a single Vanguard brokerage account. Go IRS!

Who's in Charge? NPU is another one of those Bay Area entities that are controlled by Chinese and feed off of a primarily Indian population. We have written in the past about Tri-Valley University and Herguan University, both of whose former presidents are now serving terms in federal penitentiaries for visa fraud and assorted other crimes. Each of these were, or are, for-profit entities and, in the case of Herguan, the parents of the convicted ex-president now own the institution.

There are some similarities to the case of NPU. In the last year or so its earlier president, George Hsieh was succeeded by his son, Peter Hsieh, just as family-owned firms are handed down from one generation to the next.

Further, both NPU and Herguan were accredited by an organization recognized by the U.S. Department of Education. That entity is the Accrediting Council for Independent Colleges and Schools (ACICS). ACICS also accredited the since-collapsed Everest College chain of campuses and one or more marginal institutions in Northern Virginia, which we will write about in the near future.

Finally, NPU and Herguan seem to have something else in common. Herguan's now jailed ex-president identified himself as Jerry Wang. In 2014, after Jerry Wang had been indicted, but before he pled guilty and went to jail, the NPU 990 noted among its key employees, with a salary of $105,000 (large for this entity) one Gerald Wang. NPU and Herguan are about 20 miles apart and are in the same business. Are Jerry Wang and Gerald Wang the same person?

A phone call to NPU failed to secure any information on this point.

India's Interest. John Kerry presumably does not send messages about the scholastic integrity of Indian colleges and universities, nor does the New York Times write about the subject, but their Indian counterparts do

The reason is that India is producing a lot more college graduates than its economy can absorb and so many Indians seek to emigrate, and where better than the United States? That some of these "students" are simply looking for a visa to come to the United States and then work in the underground economy is a fact that the Indian establishment refuses to acknowledge, so the crackdown on Tri-Valley took on the character of a civil rights issue in the Indian press, not that of a lawless enterprise being terminated.