How the founders of the American University of the Caribbean in Cupecoy got a very sweet deal “They gave nothing and took everything”

POSTED: 09/16/13 3:48 PM

St. Maarten / By Hilbert Haar – The departure of the American Associated Group NV – the former owner of the American University of the Caribbean in Cupecoy – has caused quite some controversy, not in the least because AAG seems to have left the island with an extremely favorable way to settle its fiscal obligations. Sources for this story talked to the Today Newspaper under guarantee of an anonymity, reason why we cross-referenced information with different sources. The information in this article has been independently confirmed by at least two and sometimes three sources.

The American University came to St. Maarten from Montserrat in 1996. It did not take long for the owners – founder Paul Tien and his son Yife – to get into a confrontation in court. In February 1998, the tax inspectorate issued assessments for turnover tax over three months in 1997 of 62,500 guilders each. Almost a year later, the university filed an objection that was subsequently denied by the tax inspectorate. In April 2000, the Council of Appeal for tax cases, the tax inspectorate submitted a written argument; the university did not show up for this hearing: it requested a hearing in November of that year.

When the case was finally handled, the university argued that no turnover tax was due over its activities. One of the arguments was that the university was a non-profit organization. The court dismissed this and declared that the university is subjected to paying turnover taxes.

The university also attempted to convince the court that it should be exempted from turnover tax because it considers itself a “non-commercial institution for general benefit” but the tax inspectorate argued that the university is a commercial institution, and the council followed this point of view. “Students pay substantial amounts for the education they receive. The plaintiff has to put forth facts and circumstances and when they are contested, has to make it plausible that the council should rule differently, but it has presented nothing concrete,” the council ruled. Apparently she refuses to open her books. That attitude confirms the correctness of the ruling.”

The 2000-ruling makes clear that the American University is a commercial institution that, just like any other business, is held to paying turnover tax. But while the university lost the battle in 2000, somewhere down the road it won the war, as the government has confirmed recently that the institution did not pay turnover tax.

Whatever the deal must have been – this newspaper will get more information about it in the near future – it sure has cost the government a considerable amount of money. If the university were judged on the 1997 additional turnover tax assessments of 62,500 guilders per month, it looks like the turnover tax liabilities per year were at least 750,000 guilders. Up to the sale to Devry Inc. in 2011, that would add up to 10.5 million guilders over fourteen years.

For years however, the American University happily flew under the tax-radar after its first unfortunate encounter with the Council of Appeal for tax cases. The reason for this, sources told Today, is that founder Paul Tien, a Chinese-born entrepreneur who fled from his country to Taiwan before moving to the United States, was rather generous with his support for local politicians. “He wrote checks for $5,000 to any candidate,” one source said.

In 2011 another peculiarity of the American University came to light. When a professor in Behavioral and Clinical Medicine contested her dismissal in court, it turned out that the university paid part of the faculty salaries from an entity in the Cayman Islands. This way, the taxable salaries in St. Maarten were lower and over the part that came from the Caymans, the university obviously did not pay wage taxes and premiums.

While this newspaper reported on its front page about this Cayman-construction, the government nor the tax inspectorate took action against it.

Sources confirm to this newspaper that employees were forbidden to report their Cayman-income for income tax in St. Maarten. In a memorandum that was written several years ago, the university promised its faculty that it would assist them if problems occurred.

The real trouble surrounding the American University of the Caribbean erupted only after the Tien-family had left the island – with $235 million in their pockets from the sale to the respected American education-company Devry Inc. The Tiens also sold a piece of pricey real estate in Pelican Key – Emerald Field Mansion on Topaz Road – reportedly for $32 million upon their departure.

“They could have easily given a million dollars to the Aids Foundation,” one source said with a bitter undertone. “But those Chinese never have enough. We had to beg every year for the funding for a local scholarship. They gave nothing and they took everything.”

Tomorrow: How the American Associated Group tricked the tax inspectorate into a bad deal.

 

 

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