Wellesley confirmed that an admissions officer interviewed a Dipont student at the program. The student was accepted and now attends the college. Joy St. John, Wellesley’s dean of admission, said the employee didn’t accept a cash payment, because “we’re doing work that’s related to our profession,” but did accept business-class airfare.

St. John compared the transaction to accepting travel expense reimbursement from U.S. high schools that invite Wellesley to provide general admissions counseling. Such payments are permitted, according to Hirsh. St. John added that Wellesley decided last year not to participate in Dipont workshops because the company’s marketers filmed a Wellesley admissions officer without permission.

Dipont founder Zhang, the son of farmers, studied electrical engineering in college and earned a scholarship to do graduate work in Australia in the 1980s. The Tiananmen crackdown of 1989 stranded him abroad, and he says he had to drop his studies to earn a living. He launched Dipont as an emigration and visa consulting firm for Chinese students.

Today, Dipont is a major provider of services to Chinese applying to foreign universities. It operates a network of international programs in Chinese high schools with about 2,000 graduates each year. It also offers tutoring for the SAT, college counseling and other “enrichment” services. College counseling alone can cost up to about $32,500 a student. Dipont’s total annual revenue is about $30 million, according to Zhang.

The two Americans who set up CACE, the charity Dipont now uses to pay admissions officers, told Reuters they were employed at the time by Dipont as consultants. They said they created CACE to help the Chinese company gain access to elite U.S. colleges.

“We have felt that having our own non-profit gives us a certain credibility,” said Stephen Gessner, a former CACE director and ex-president of the school board of Shelter Island, New York. “It helped us to recruit colleges.”

Gessner said he and Thomas Benson, the other American consultant, turned over control of CACE to Dipont three or four years ago. Dipont says CACE is independent. All of CACE’s five directors are Dipont employees or consultants, including CEO Zhang, according to a December 2014 board meeting agenda seen by Reuters.

“VERIFIABLE CREDENTIALS”

One of Dipont’s projects is to assist and provide funding to USC’s Center for Enrollment Research, Policy, and Practice. The center is running a nascent program to create “verifiable credentials” for Chinese applicants to U.S. colleges. The program, known as the Admission Credentials and Counseling System, aims to build a way to verify transcripts and other documents from Chinese high school students, according to Jerome Lucido, the center’s executive director.

Lucido said that USC and at least 10 other schools have participated in exploratory meetings for the initiative, including Stanford, MIT, Duke and Columbia. The gatherings included a Dipont-subsidized trip to Beijing two years ago attended by eight schools. CACE covered the expenses for several meetings in the United States, Lucido said.

“Shame on the admissions people from these top schools who are doing this.” Philip G. Altbach, founding director of the Center for International Higher Education at Boston College

The credentials idea was proposed as a fraud-busting measure by a Dipont employee, Lucido said. He confirmed that Zhang has paid two of three installments on a $750,000 gift to the center via CACE. The gift, he said, “was carefully vetted through USC and found to be fully appropriate.”

Lucido responded to the 2014 warning email from ex-Dipont employee Bruce Hammond by seeking more details on the cheating allegations. Hammond replied, the email traffic shows, but didn’t offer specifics.

Dipont is “a reliable and valuable partner,” Lucido said in an interview. In a later email to Reuters, Lucido wrote, “My thinking is that you have statements from people that do not constitute actual evidence.”

MIT, Duke and Columbia had no comment.

Richard Shaw, Stanford’s dean of admission, said Dipont paid his costs to attend a three-day meeting in China to discuss the initiative, including business-class airfare. “I’m not going to pay $25,000 to cover the cost to go to Beijing,” he said.

Told of the former Dipont employees’ fraud allegations, Shaw said the members of the initiative were trying to establish a “secure system in which a number of American universities would work with Chinese partners” and have “something where we can trust the transcripts.”

The project is now on hold, Shaw said, because of the allegations Reuters has documented. “Our intentions were to bring a system that combats exactly what you’re describing,” he said.

Sarah K. Lee, who worked at Dipont as director of college counseling from 2010 to 2012, said she visited a Dipont counseling office in Chengdu in 2010.

“It was 60 people printing out essays. The counselors, not the students, were typing them,” she said. “I asked them directly: ‘Do you write these essays for these kids?’ They’d say, ‘We have to do whatever our boss tells us or we lose our job.’” Lee said she witnessed similar practices at Dipont offices in Beijing and other cities.

Obio Ntia, a former Dipont manager who helped oversee counselors, said he saw similar activity.

“Counselors went ahead and did everything for the student,” including writing their application essays, he said. He said he tried to train Dipont guidance counselors to help students come up with their own essay ideas, but struggled.

Some students were honest and diligent, Ntia said, but “there were shortcuts all around. It was so endemic that you felt like there’s nothing you could do about it.”

An American guidance counselor who worked at a Dipont high school in Shenzhen in the 2014-2015 school year said her supervisor ordered her to rewrite teacher recommendations. “I made up anecdotes about the students,” said the woman, who spoke on condition of anonymity.

A Chinese guidance counselor, who worked at a Dipont high school from 2011 to 2013, said her supervisors instructed her to write essays for weak students. She said she was directed to give a student with poor grades a copy of his high school transcript. That student later admitted to removing the bad grades from the transcript, but a manager told her not to alert a U.S. college that had accepted him, she said.

Hammond, the former employee who alerted the USC consortium to Dipont, declined to comment on his warning letter. He worked for Dipont in 2010 as director of college counseling. Dipont charged some students tens of thousands of dollars, he wrote. And tying the Dipont name to the brands of elite colleges was central to its business model.

“Dipont is able to charge these fees,” he wrote, “in part by creating the perception that they have special connections with admissions officers at leading U.S. institutions.”

Chinese-backed charity may be violating U.S. laws, tax specialists say A New York educational charity affiliated with a Chinese company may have violated rules governing tax-exempt organizations in the United States, tax specialists say. The Council for American Culture and Education Inc was set up in 2009 on behalf of Chinese for-profit school operator Dipont Education Management Group, according to the two consultants who created the charity. Thomas Benson and Stephen Gessner later ceded control of CACE to Dipont, according to Gessner. Dipont says CACE is independent. On a December 2014 board meeting agenda seen by Reuters, Dipont founder Zhang and three other Dipont employees are listed as directors on CACE’s five-member board. The fifth member listed is a Dipont consultant. Dipont’s close ties to CACE should have been disclosed in CACE’s tax filings, said Marcus Owens, former director of the tax-exempt organizations division of the Internal Revenue Service. That’s because the private Chinese company is benefiting from the charity’s activities. The only reference to Dipont in CACE’s application for tax-exempt status is a note that the two organizations collaborated on a college admissions seminar in China in 2009. Bruce R. Hopkins, a law professor at the University of Kansas, said the relationship should have been fully disclosed. “Being so closely tied to a for-profit and functioning to benefit it in so many ways – that could be a problem for them,” said Hopkins. “The consequences could be that they lose their tax-exempt status.” Owens also questioned the way in which Dipont founder Benson Zhang gave money to a research center at the University of Southern California. Zhang told Reuters he used CACE to make a $750,000 personal donation to USC because it is difficult to transfer money out of China. “I paid back the money to CACE from my personal accounts later,” he said. New York prohibits charities incorporated in the state – such as CACE – from lending to board members, Owens said. It makes no difference whether Zhang reimbursed the charity, he added. Owens said $750,000 “is a considerable amount of money. That alone should attract the attention of the (New York) attorney general and it should also attract the attention of the IRS.” Reuters outlined its findings about CACE’s activities to the New York Attorney General’s office. A spokesman for the attorney general said: “We will be reviewing the organization.” Reviews don’t necessarily lead to formal investigations. An IRS spokesman declined to comment. Another potential problem, said Owens, is the list of board members and officers that CACE has disclosed to tax authorities. Two people listed in federal tax returns as an officer or director of CACE say they don’t hold those positions. David Joiner, a former Dipont employee, told Reuters he left the company shortly after the charity was set up in 2009 and has had nothing to do with CACE since. But he was listed on its federal tax filings as its treasurer from 2010 through 2014, the most recent year disclosures are available. “They have been using my name without my permission,” he said. Jeff Zhu, CACE’s chief executive and a Dipont vice president, said the failure to remove Joiner’s name was probably “a clerical error.” CACE’s 2014 federal tax return also lists as a board member Robert Clagett, a Dipont consultant and former admissions dean at Middlebury College. Clagett told Reuters he didn’t know he was on CACE’s board. Owens, the former IRS executive, said falsely listing people as board members and officers may be viewed by the IRS as part of a pattern of behavior that could jeopardize CACE’s tax-exempt status. “It raises fiduciary duty questions for the board,” he said, “not to mention confusing the IRS.”

————— Cheat Sheet By Steve Stecklow, Renee Dudley, James Pomfret and Alexandra Harney Additional reporting by the Reuters Shanghai Newsroom Graphics: Troy Dunkley Edited by Michael Williams and Blake Morrison