AMERICAN SCHOOL IN TUNIS: UPDATE AND REQUEST FOR

C O N F I D E N T I A L TUNIS 000203

SIPDIS

DEPT FOR NEA/FO - HUDSON; NEA/MAG; NEA/SCA/EX
DEPT ALSO FOR A/OPR/OS - CAMERON
TREASURY FOR IA/MDB - MORRIS

E.O. 12958: DECL: 04/02/2019
TAGS: ASCH OFDP ODIP PREL PGOV TS
SUBJECT: AMERICAN SCHOOL IN TUNIS: UPDATE AND REQUEST FOR
DEMARCHE

REF: A. TUNIS 191

B. TUNIS 182 AND PREVIOUS

Classified By: Ambassador Robert F. Godec for reasons 1.5 (b) and (d)


1. (C) Summary and action request: The Ambassador continues
to press senior GOT officials to change course on the
American Cooperative School of Tunis (ACST),but still awaits
an appointment with Minister of State Ben Dhia. AFDB
President Kaberuka confirmed he will seek an appointment with
President Ben Ali to raise concerns about GOT actions and the
possible closure of the school. The Ambassador met again
with the British, German, Canadian and European Union
Ambassadors. They will lobby the GOT, but asked that
Washington send a request to their capitals (see para 5) to
encourage their senior officials to press the GOT. The
school proceeds with contingency planning to finish the
academic year and preserve its records. PNC Bank appears
ready to decrease its freeze of funds so as to permit the
school to complete the academic year. We have new evidence
suggesting the current situation is an effort to put ACST out
of business by well connected Tunisians who back the new
International School of Carthage. End Summary and action
request.

Diplomatic Front
--------------


2. (C) African Development Bank: AfDB President Kaberuka has
said he will seek a meeting with President Ben Ali on the
school. Kaberuka is in London for the G-20 meeting, but will
be back April 3. We anticipate he will request the meeting
soon, but it is unclear how quickly it might be granted.


3. (C) Ambassador's discussions with GOT officials: The
Ambassador spoke April 1 with Minister of Education Hatem Ben
Salem and External Communications Director Oussama Romdhani
about ACST. The Ambassador went over the situation in detail
with both, following the points set out in our non-paper.
The Ambassador underscored that there will be serious
consequences in our relations and provided a copy of the
non-paper to Romdhani. Both said they would immediately
follow up, but as of COB April 2 have not contacted us. The
Ambassador also spoke the same day with former ACST board
member and GOT Senator Roger Bismuth, who may also be able to
assist.


4. (C) Ben Dhia meeting: We requested the meeting for the
Ambassador with Minister of State Ben Dhia on April 1. No
response so far, but we believe Romdhani will make Ben Dhia
aware of the issue.


5. (C) Chief of Mission meetings: The Ambassador met April 2
with the British, German, Canadian and EU ambassadors. They
expressed their great concern about the situation and offered
to do everything they can to help by reaching out to GOT
officials and influential members of Tunisian society. For
their part, the primary message would be the impact on their
respective communities, their missions and the international
business community. They said they would welcome an effort
to organize a joint demarche on the Ministry of Foreign
Affairs, and we will seek to do so. They added that a
message from Washington to their capitals requesting
intervention from senior officials to appropriate GOT
interlocutors would be useful. We are scheduling further
meetings with the French and Italian Ambassadors.

School Front
--------------


6. (SBU) The US bank situation: After a 90-minute conference
call April 1 between representatives of PNC Bank, OPIC, the
school's insurance company, the school's attorney and key
school personnel, it now appears that PNC will revise their
initial $2 million hold to a lesser amount (likely under $1
million) under a forbearance agreement still to be worked
out. All parties seemed to be willing to make an appropriate
arrangement to allow the school to weather the storm at least
long enough to remain solvent for the rest of the academic
year. Such an agreement would not, however, leave anywhere
near enough funds to pay the tax imposed by the GOT.


7. (SBU) School Board meeting: The evening of March 31, the
school board held an abbreviated general session during which
the teacher representative and others mentioned that rumors
are rampant about the situation. Participants seemed to
accept the argument, however, that one key to resolving the
tax dispute was to allow room for the GOT to change direction
without losing face, therefore the issues and actions should
remain confidential for now.


8. (SBU) In the executive session, which included the
director, embassy representative, the school principals and
the business and finance managers, board members were
certainly alarmed by the situation but supported steps that
had been taken so far. Board members focused on the need for
detailed contingency planning, both short term (finish the
year) and long-term (safeguard records and assets); the need
to be informed much as possible; the need to inform parents
in advance of any potential drastic action by the GOT; and
concerns about any personal liability of board members. The
director, principals, business and finance managers and
school security and IT managers will be the core planning
group which will make and carry out contingency planning with
the support of the embassy representative and the board as
needed.


9. (SBU) ACST legal strategy: ACST officials met today with
the school's attorneys and financial advisors to discuss the
legal options available to the school. Discussions focused
on the two, separate legal actions available to the school.
First, ACST and its legal team decided not to post a 20
percent bond required to defer the non-penalty tax amount
before the 60 day deadline. There is little point as the
Ministry of Finance has determined that almost half of what
ACST owes cannot be deferred and that amount alone is
sufficient to bankrupt the school. Second, ACST continues to
prepare to appeal the tax decree to the courts but will do so
only at the last minute in order to allow time for the
political process to play out. Filing at the last minute
will have no affect on the case itself.


10. (SBU) Contingency planning: ACST continues to develop
contingency plans for completing the school year under
adverse circumstances and for closing the school. On advice
of the attorneys and legal advisors, the school will seek to
resolve as many debts as possible, including prepaying
salaries through the summer, in order to pay down all
accounts in Tunisia to the minimum level in case the Tunisian
authorities decide to seize their accounts. The school will
also be approaching the Embassy for potential assistance in
transferring funds to pay bills and salaries if needed. The
school as already approached the Embassy about plans for
safekeeping of essential and confidential paper and
electronic records if necessary.


11. (SBU) Note on land lease issue: The school's business
manager informed the board that the terms of the lease
agreement negotiated in the 1990s specifically noted that
government's assessor had determined the actual value of the
land leased to be far above the amount to be paid by the
school, but "in light of the educational role of the
institution" the amount would not be raised. This is in
stark contrast to the communication received this week
stating that the lease must be amended to the current
commercial rate.

Why?
--------------


12. (C) We have new information supporting the theory that
the International School of Carthage (ISC) is behind the
action against ACST. Beatrice Cameron of the Office of
Overseas Schools reported to us that Waleed Abu Shaker, an
Egyptian-American businessman and private school
investor/manager, came to Tunisia in 2008 and met with
"highly placed Tunisians". Abu Shaker was told of plans "to
bring the full weight of the GOT to bear on the ACST in order
to get all of the AfDB kids and perhaps others away from ACST
and into ISC." Abu Shaker declined to get involved, but this
offers new evidence to support the theory that the ISC is
looking for students.


13. (C) In the past, the GOT has provided substantial

financial support to the ISC and has forced at least one
competitor, a private French school, to shut its doors.
Piecing together the evidence, we believe one possible
scenario the ISC's backers may envision is the following: A)
ACST goes bankrupt as the result of the GOT's tax bill, B)
the GOT seizes the assets of the ACST and gives them to the
ISC and C) the ISC opens a "new" satellite English-language
school on the old ACST campus. This is, we emphasize, only a
hypothetical scenario, but it fits with the information and
evidence we have.


14. (C) Finally, we have forwarded to NEA, by e-mail, a list
of possible US Government responses to the GOT's action.
Godec