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BusinessNovember 14, 2019

Crimson Education’s bills keep coming, even if your child isn’t going

Photo: Bounce/Getty)
Photo: Bounce/Getty)

It’s setting up a high school and John Key is an investor, but leaked documents show the $380m education startup locks parents into tough contracts worth tens of thousands of dollars.

A tutoring company with former prime minister John Key on its board is charging parents as much as $60,000 to chase the dream of getting their child into an elite offshore university, while signing them up to weighty contracts they can’t get out of.

Documents leaked by a concerned former employee of Crimson Education show the much-hyped startup locks families into contracts even if the child decides not to apply to an overseas school. They also show Crimson’s claim that families typically spend up to $15,000 on its services understates its costs – the company’s sales reps are instructed not to pursue “leads” that aren’t prepared to pay at least that amount, and are told parents willing to invest over $30,000 should be their primary target.

Launched in 2013, Crimson Education is now reputed to be worth $380 million and has just signed Sir John Key as a director and investor. His involvement follows that of his son, Max Key, who worked as a consultant for the company. The international tutoring and university admissions service is expanding rapidly, particularly into Asia, and recently raised another $31m in capital. Buoyed by the new funding, it is branching into high school education with the launch of the “highly selective” Crimson Global Academy. The online high school will open for business in February, with former Auckland Grammar headmaster John Morris as executive principal. It is initially targeting several hundred students studying towards Cambridge exams, New Zealand Scholarships or entry tests for American universities, all presaging ambitious international expansion. Meanwhile, Crimson has added ‘Best Emerging Business’ at the 2019 Westpac Auckland Business Awards to its crowded shelf of accolades.

Yet documents leaked to The Spinoff show there is another side to the startup with the impressive growth trajectory. Its service agreement reveals parents sign up to tight conditions, including being bound to pay fees until the end of the contract term even if there is a change in circumstances. So if, for example, the child decides not to pursue a place at an overseas institution, the family remains locked into paying what may amount to thousands of dollars.

The document says that any “discussions, proposals, marketing material or other information” do not form part of the agreement. AUT contract law expert Mike French says this is known as an ‘entire agreement clause’ and means that promises Crimson makes in the course of its publicity and marketing activity are not necessarily part of the deal. The contract also makes clear that Crimson “does not guarantee academic performance, results scholarship awards or offers of entry to universities”. Crimson claims that its students are up to four times more likely to gain entry into top schools such as Harvard and that it has achieved over 250 acceptances to Ivy League and Oxbridge universities since 2013.

French says he would counsel parents to look carefully at such a contract before signing it. “You need to be sure your child will actually want to pursue the application to the American university, [because] if they duck out it’s possible you will lose all your money, even if you’ve only just signed up.”

He’s not convinced the ‘entire agreement’ clause would stand up, however. “If you’re dealing with a consumer to business contract, the courts are more cautious about giving effect to that type of clause. If, for example, the business has made misrepresentations in inducing clients to enter into the contracts, the courts can decide whether or not the agreement represents the entire agreement.”

Harvard Business School students celebrate their graduation in Boston (Photo by Brooks Kraft LLC/Corbis via Getty Images)

The amounts parents are investing in Crimson’s extracurricular tutoring and mentoring services appear to be far greater than the company has previously acknowledged. As part of a recent profile, the consultancy was asked how much the average student spends with it. “Anything from $80 an hour to $15,000+ for multiple years of full service support,” it said.

A copy of Crimson’s sales playbook obtained by The Spinoff tells a very different story. Sales reps are told their primary targets are parents who are willing to buy more than $30,000 worth of its services, while families unlikely to spend over a $15,000 minimum are not pursued.

Crimson sales representatives are instructed to score potential client families on their “willingness (W), affluence (A), and candidacy (C)”. An affluence level of A1 is someone who is “able to afford $30K+ package”, with the “cost of program not primary concern”. Conversely, an A3 prospect is “unlikely to pay over $15K”. Prospective customers are similarly scored on how keen they are (willingness) and the academic results of their children (candidacy).

“The perfect lead would be a W1 A1 C1,” the playbook says. “You would not qualify a W3 A3 C3.” Its sales tactics are also insistent, with reps briefed to contact leads six to nine times in under a month.

Evelyn* spent about $20,000 with Crimson Education to boost her son’s chances of getting into a good university, but she knows people who pay much more.

“One of my friends, their kid got their service from Year 9. Maybe $50,000 or $60,000?” the Auckland Chinese mum says. “Of course Chinese people like to put kids’ education premium, of all the family issues. America is a place to look up to. That’s part of the thing, to guarantee the kids go [there].”

She cites the example of the family who admitted giving $6.5m US to a man at the centre of the US college admissions scandal after their daughter was accepted to Stanford. “Those Chinese families, it’s easy money.” In comparison, spending $60,000 with Crimson “is nothing.”

But in the end, the consultancy played little to no role in her child’s acceptance at a top 50 US university. “I found their ways very interesting,” Evelyn says. “They tried to guide my son to the school they think [he was] more guaranteed to [get into]. It’s not really my son’s need, or he really liked this kind of uni.”

Her son ended up doing his own university applications. He applied to a wide range of UK and US schools and received a number of offers, including from Edinburgh University and King’s College London. However, the lure of the US proved strong. Evelyn’s not sure it suits him but it was his choice, she says with a smile.

Crimson is well known in the Chinese community. It markets to wealthy mainland Chinese families who want to use New Zealand as a stepping stone to getting their children into US universities, Evelyn says. Those who start with the service from Year 9 are put on a “production line” of activities designed to attract college admission officials’ attention. There are even in-house competitions to bolster their achievement records. “Like they organise a student company: ‘This year you are the CEO, next year I am the CEO, next year he’s the CEO’, so you all can write something on the paper to impress the university.”

Evelyn finds Crimson’s marketing techniques aggressive. The firm approached her friend’s child who was a top academic student at an Auckland school and offered assistance at a good rate in order to gain him as a client. “Then they will tell others, you see, ‘this one go to Oxford, this one go to Cambridge’, because of our service.”

The Spinoff put these points and a set of other queries about the Crimson Global Academy and John Key’s appointment to Crimson. The company did not provide a response, and two days after our first approach the information was delivered in the New Zealand Herald complete with quotes from Crimson co-founder Jamie Beaton and executive principal John Morris. Our subsequent inquiries to the firm have gone unanswered.

Crimson Education founders Sharndre Kushor and Jamie Beaton (Supplied)

As Crimson branches out into offering a high school education that will cost parents up to $20,000 a year, questions remain over the benefits of its core tutoring and mentoring business. Leaders of top New Zealand schools have expressed bewilderment that families are spending thousands on university mentoring and advice services when they provide the same support to their students for free.

Auckland private girls’ school St Cuthbert’s networks proactively with the international university admissions sector, and liaison people from colleges such as the University of Pennsylvania, New York University (NYU) and the National University of Singapore are regular visitors. In turn, it collaborates and shares its knowledge with other New Zealand high schools. “Earlier this year I went to Avondale College to an event, Diocesan School for Girls (Dio) participates, I work strongly with Auckland Grammar,” head of careers Rhonda Vink says. “We try to keep very current around the requirements for all the different universities. The liaison officers like the students to connect directly with them to demonstrate an interest.”

Her counterpart at Dio, Grace Birdsall, says she’s had students accepted to colleges around the world including Brown, NYU, Harvard, Princeton and Berkley. “We’ve got comprehensive support for our students here at school. We work with like-minded schools on professional development in this area, so we all have a good understanding of what our students need to know and how to make their next steps.”

None of the schools The Spinoff spoke to work with Crimson. Various prestigious overseas universities we contacted also say they do not have an association with the consultancy. Cambridge in the UK and Ivy League college Brown in the US say they have no partnership with Crimson. Oxford University spokesperson Reuben Hunt says it has no official connection with the tutoring firm. “There is no way to tell from a student’s application alone if they have had the assistance of the Crimson service, as the applications are made through UCAS (Universities and Colleges Admissions Service) and the university system,” he adds.

* Name has been changed

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