Hmong charter school superintendent offers to quit amid fallout from $4.3M loss in hedge fund investment

·4 min read

Oct. 24—The founder and superintendent of St. Paul's largest charter school has offered to resign after losing $4.3 million of the school's money with an illegal investment.

The school board told Hmong College Prep Academy families on Thursday that it had received a letter from Christianna Hang "communicating her intent to step down from the role of superintendent."

That message came three days after the Office of the State Auditor released an investigative report finding that the school's $5 million investment with a hedge fund violated both state law and the school's own investment policy.

The board will consider accepting Hang's resignation during a special meeting Monday.

Also on the agenda is an update from attorney Jeanette Bazis, who the school board hired to investigate the investment, as well as an update on Hang's request that the board reimburse any of her legal fees related to the investment.

Bethel University, the school's authorizer, directed the school board in August to follow a corrective action plan in the wake of the $4.3 million loss. The steps included turning the roles of superintendent and chief financial officer into separate jobs.

Bethel also recommended the board fire Hang but did not make that a requirement.

Even as they hired an attorney to investigate Hang, at least three of the school's five board members had indicated in recent meetings that they wanted her to stay on as superintendent.

Bethel, which has been authorizing charter schools since 1999, separately announced in August that it no longer would serve as an authorizer for the school as of June 2023. The Hmong College Prep board has appointed a transition team to search for a new authorizer by June 2022.

LAWSUIT

The school in July sued U.K.-based Woodstock Capital in hopes of recovering the $4.3 million, saying the hedge fund failed to abide by their agreement to invest in safer, more liquid investments.

The hedge fund denies such a deal existed and says the money was lost as investments tanked during the global financial crisis caused by the coronavirus pandemic.

Hang made the investment in September 2019 in order to help pay for a new middle school, which is nearly complete.

Despite the loss, the school's contracted auditors have said the school remains in good financial condition and has enough money to pay back bonds it sold to fund the majority of the construction project.

'NOT LIKE VANGUARD'

According to public records, Hang was referred to Woodstock through a friend, Kay Yang, who was ordered by Wisconsin regulators last year to return $17 million to investors after making unlicensed trades.

Hang's comments during a June call with the school's bond investors suggested she didn't understand what she was investing in or how a hedge fund operates.

She told them Woodstock was supposed to invest in "U.S. Treasuries and bonds" and that the hedge fund "agreed we were going to get a good return on investment a year, anywhere from 8-10 percent."

She also described Woodstock as "like Vanguard," and said she thinks they also "do retirement plans like 401(k) or things like that."

"Woodstock is not like Vanguard; this is a very small institution that nobody knows that you've invested with," Richard Schwam of Alliance Bernstein responded. "What we'd like to hear is that you're not trying to do anything crazy with the rest of your money, that you have them with reputable money managers."

Hang also explained that the school previously invested in a fund that pools the assets of Minnesota school districts in order to maximize return while preserving liquidity and capital.

"We thought this was exactly like that, and that's why we thought it was safe to invest," she said.

"The HCPA is actively managing and resolving a number of administrative and governance issues with our authorizer Bethel University," a school spokesman said Sunday. "We are also managing the leadership of the school community. The board has received a resignation letter from HCPA Superintendent Dr. Hang. The board will meet Monday to discuss the topic and next steps forward."

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