UPDATE: RYB Will Take "Full Responsibility" in Child Abuse Scandal, Shares Plummet

The Beijing police have confirmed that China's RYB Education is under investigation for child abuse and sexual assault.

Selina Cheng
    Nov 25, 2017 2:19 PM  PT
UPDATE: RYB Will Take "Full Responsibility" in Child Abuse Scandal, Shares Plummet
author: Selina Cheng   

UPDATE: 

Beijing police confirmed that accusations regarding child molestation were false, and that some people were trying to frame the company. Ms Liu, the responsible party, is held accountable for defamation, and has been detained. 

The accusations regarding child abuse are still under investigation. The 22-year-old teacher involved in this matter has been detained by the Beijing police.

RYB Education just annouced that the kindergarden headmaster's employment with RYB Education is terminated, effective immediately.


On Thanksgiving Day, a holiday supposed to be filled with love and happiness, this mother cannot be more furious.

The mother found needle marks on the arms of her 3-year-old daughter, Tong Tong, according to a video interview posted yesterday on Tencent's news portal Caiyueni. The mother had already filed a police report and said that "it's more than just needle marks." Her child told her that one time an adult male was naked while conducting body checks on children in the class. The children were also unclothed.

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Just like Tong Tong's mother, many other angry parents gathered outside the RYB kindergarten to demand answers from the management on Thursday. A total of eight children were reported to have needle marks, according to financial news outlet Caixin. 

The Beijing police have confirmed that China's RYB Education Institution (NYSE: RYB), the first Chinese early childhood education company to be listed on the New York Stock Exchange, is under investigation for child abuse and sexual assault.

The police investigation has not been concluded, however, authorities who examined the children confirmed the needle marks were genuine.

The official Xinhua news agency said yesterday that police were checking parents' allegations regarding sexually molestation, piercing children with needles, and feeding students unidentified white pills.

"We deeply apologize for the serious anxiety this matter has brought to parents and society," RYB said in a statement. "We are currently working with the police to provide relevant surveillance materials and equipment; the teachers in question have been suspended and we are co-operating with the police investigation."

News of the investigation into the Beijing kindergarten triggered a wave of outcries on social media.  According to a calculation by Reuters, more than 76 million WeChat messages mentioned "RYB" on Thursday.  People even drew a picture to show the disappointment, combining the three-color red, yellow, and blue, the first letters of each word used to create the name: RYB. When these three colors put together, it turns into black, symbolizing a black-hearted school.  Parents wrote on social media that "the people who committed the heinous crimes deserve the harshest punishment."

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Investor conference call

"I am a mother myself and I am angry too," said Yanlai Shi, founder and CEO of RYB, said in a conference call. "RYB immediately provided the security monitoring content and surveillance devices to police authorities, suspended the staff who allegedly were involved, and will continue to take all other necessary measures to promptly cooperate with police and other authorities on the investigation."

"RYB is fully committed to the safety of each and every child who is enrolled in RYB kindergartens," Shi added. "RYB has established a special task force under the leadership of independent directors of the Company to conduct a thorough self-inspection across all teaching facilities."

"RYB will take full responsibility for this incident but there will be no change to our business strategy," said Ping Wei, CFO of RYB Education.

 

This is not the first time

This is not the first time that RYB Education has been accused of such incidents. In 2015, cases of child abuse by needle insertion were reported in one of RYB kindergartens.

A video footage that depicts child abuse by a teacher at one of the RYB kindergartens it operated was released online in April 2017. It soon led to broad distribution.

Additionally, according to the People's Daily, in December 2015, nearly 30 children in one of RYB's branches in northeastern Jilin province were found with needle marks. Staff at the school on "multiple occasions used needles and intimidation tactics to abuse many of the children under their care," according to the court ruling. Four teachers from the branch were sentenced to prison.

 

Company's reputation in question

In the company prospectus, the company highlighted several times regarding the importance of brand name and reputation. It said"our business depends on the market recognition of our brand. If we are not able to maintain our reputation and enhance our brand recognition, our business and operating results may be materially and adversely affected."

Teachers and facility principals are critical to the quality of school's reputation as teachers are the ones who interact directly with children. RYB claims that the company provides continuous training of teachers as well as close supervision on a daily basis. The prospectus also mentioned rigorous standards for selecting its franchisees. The investigated kindergarten, however, is not one of the franchise teaching facilities as it is school directly operated by RYB Education.

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Share rephrase program

To counteract the hit to its stock price, RYB just announced a share repurchase program whereby the company will buy back up to $50 million during the next 12 months. The company expects to fund the repurchase out of its existing cash balance. The stock plummeted during the holiday-shortened trading day on Friday in New York, closing at $16.45 per share, down $10.26, or 38 percent.

RYB Education is a leading early childhood education service provider in China. The company began trading on the New York Stock Exchange this year on Sept. 27, under the symbol "RYB." 


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