The economics of the Gulen cult's American charter schools

Why does the Gulenist cult of Turkey want to be the largest operator of taxpayer supported charter schools in America? What's in it for them?

One reason is because it allows the cult to build up a caste of Gulenist businesses at taxpayer expense by doing business largely with other Turkish Gulenist immigrants. They appear to be skimming somewhat, but not too much that they get in trouble. Instead they are playing a long game to use American taxpayer money as seed capital to build up Gulenist economic power in America. 

Think of it this way: banks are one of the big gatekeepers to deciding who grows and who fails in run of the mill businesses like construction and food service. Banks like to give loans to companies that have sizable government contracts, such as from schools, because the government's checks are less likely to bounce nor will the government suddenly vanish. So, firms that have cozy relationships with public schools can get loans to grow bigger.

A 2011 NYT article on the big Harmony chain of Gulenist charter schools in Texas more or less explained the strategy:

Other companies scrambling for work in a poor economy wondered: How had they qualified for such big jobs so fast?

The secret lay in the meteoric rise and financial clout of the Cosmos Foundation, a charter school operator founded a decade ago by a group of professors and businessmen from Turkey. Operating under the name Harmony Schools, Cosmos has moved quickly to become the largest charter school operator in Texas, with 33 schools receiving more than $100 million a year in taxpayer funds.

While educating schoolchildren across Texas, the group has also nurtured a close-knit network of businesses and organizations run by Turkish immigrants. The businesses include not just big contractors like TDM but also a growing assemblage of smaller vendors selling school lunches, uniforms, after-school programs, Web design, teacher training and even special education assessments.

Some of the schools’ operators and founders, and many of their suppliers, are followers of Fethullah Gulen, a charismatic Turkish preacher of a moderate brand of Islam whose devotees have built a worldwide religious, social and nationalistic movement in his name. Gulen followers have been involved in starting similar schools around the country — there are about 120 in all, mostly in urban centers in 25 states, one of the largest collections of charter schools in America. 

The growth of these “Turkish schools,” as they are often called, has come with a measure of backlash, not all of it untainted by xenophobia. 

Judging from the readers' comments, Brain Freeze set in for a lot of NYT readers at that point.

The schools, Dr. Tarim said, follow all competitive bidding rules, and do not play favorites in awarding contracts. In many cases, Turkish-owned companies have in fact been the low bidders. 

Even so, records show that virtually all recent construction and renovation work has been done by Turkish-owned contractors. Several established local companies said they had lost out even after bidding several hundred thousand dollars lower.... 

In response to questions, Harmony provided a list showing that local American contractors had been awarded 13 construction and renovation jobs over the years. But a review of contracts since January 2009 — 35 contracts and $82 million worth of work — found that all but 3 jobs totaling about $1.5 million went to Turkish-owned businesses. 

TDM, builder of the new San Antonio school, is one of several companies that stand out — for the size of their contracts, their seemingly overnight success or both. One of TDM’s owners, records and interviews show, is Kemal Oksuz, president of the Turquoise Council for Americans and Eurasians, an umbrella group over several foundations established by Gulen followers. Since TDM was formed in November 2009, its work has involved only Harmony Schools and a job at the Turquoise Council headquarters, according to a company accountant.
Another TDM principal is a civil engineer, Osman Ozguc. 

“Please don’t think that I’m a new guy, inexperienced in this area,” Mr. Ozguc said when asked about the San Antonio project, explaining that he had 26 years of construction experience, mostly on large projects in Turkey. “I provided all the requirements asked in the bid. And when we got the job, we delivered in a very short time period, and with a very economical result.” He did acknowledge that change orders had added about $1 million to the cost. 

Mr. Ozguc said he formed TDM after a split from Solidarity, another Houston company that has done major ground-up construction jobs for Harmony in the past two years. Records show that Solidarity is run by Levent Ulusal, a civil engineer with a prior connection to Harmony: he was a school business manager until March 2009, when he joined Solidarity. 

Since Texas charter schools do not get separate public money for facilities, Harmony’s construction program is financed by bonds that will be paid off over time using regular public payments to the schools, bond documents show. The group has issued more than $200 million in bonds since 2007, making it the state’s largest charter school bond issuer.

And about 98% of that $200 million in bonds appears to have gone to Gulenist cult businesses, plus a very large fraction of the $100 million or so in annual operating costs. And that's just one state!

With public money in play, Texas law requires charter schools to award contracts to the bidder that offers the “best value.” Lowest is not necessarily best, with the schools given leeway. But the criteria for choosing the best bidder must be clear. 

Last year, local contractors questioned the fairness of bidding on two Harmony renovation jobs in the Austin area. On one job, in the suburb of Pflugerville, the low bidder, at $1.17 million, was a well-known Texas company, Harvey-Cleary. The job went to Atlas Texas Construction and Trading, even though its bid was several hundred thousand dollars higher. Atlas, with offices in Texas and Turkey, shows up on a list of Gulen-affiliated companies in a 2006 cable from the American Consul General in Istanbul, Deborah K. Jones, that was released by WikiLeaks. 

A vice president of Harvey-Cleary said Harmony never explained its decision.
The same day Atlas won the Pflugerville contract, it got a job at another Austin-area Harmony school, even though four bidders came in lower. 

Harmony Schools asked two architects to analyze the disputed Austin jobs. Both architects had previously worked for Harmony Schools; both concluded that the jobs should have been awarded to Atlas. 

Atlas has an eclectic business portfolio: for several years, it has also supplied breakfast and lunch at many Harmony schools. The contract is worth hundreds of thousands of dollars. 

Two other bidders submitted formal catering proposals. One was Preferred Meal Systems, a national company that undercut Atlas’s price by 78 cents a day, a substantial margin given that the two meals are often supplied for about $4.

So, they are cheating some. But not so much that the buildings fall down. But the point is not just the difference between low bid and what the Turkish firms bid, it's that they get these government contracts at all, which can allow them to grow more via bank loans and buy more from other cult members using our money. Then the firms can et H-1B visas to bring in more cultists.

Taxpayer supported education is essentially a zero sum game fought out among those who wish to be compensated for supplying it. A Turkish takeover of taxpayer schools means less for Americans, both first order (salaries) and, especially, second order (contracting).

There are a lot of analogs to this within the U.S. For example, you probably don't want to be a local businessman in Utah who isn't a Mormon, because Mormon businessmen like to deal with other Mormon businessmen. Still, Mormons are Americans, and these Turkish cultists aren't. 

I've never heard of anybody who isn't Turkish or a Turkic-language speaker from a Central Asian country like Turkmenistan belonging to the cult: Turkic-ethnocentrism is a major component of the Gulen movement.

In general, immigrants tend to develop these you scratch my back and I'll scratch your back business networks that freeze out Americans. Of course, part of the best defense is a good offense strategy is to complain loudly about discrimination and xenophobia on the part of Americans. It seems very strange for Americans to subsidize this anti-American economic behavior with our taxes.

If you read the comments in the New York Times, you can see why America is such a big fat target for random cults and mafias from around the world: the most common reaction is that the real problem is the racist Christianist Texans. Another popular position is: Sounds better than the normal public schools ruined by unions. (Texas doesn't actually have real teachers unions with collective bargaining rights.)

It's Ibn Khaldun 101. The 13th Century North African sociologist developed a model for cycles of ethnic succession in which the highly solidaristic winner tribes who come out of the desert and conquer the fat lands morally degenerate as they enjoy their conquests, and after a few generations devote all their animus to backstabbing each other, never noticing the hungry eyes watching them from the fringes. 

Of course, the difference is that we invite them in and give them hundreds of millions of taxpayer dollars.