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Elite school in legal wrangle

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The swank new school at the centre of protracted legal wrangling. Photograph: Alistair Walsh

The International School of Siem Reap is embroiled in a $100,000 financial conflict between the co-owners and management which has led to a bitter dispute over control of the school.

Founders of the school, Henry and Theary Kernick, say their business partners, Chhun Phallin and Neville Turner, are trying to wrest control of the school from them.

Phallin and Turner have taken the Kernicks to court in two separate cases over discrepancies in the school’s accounts following a financial audit.

After a decision at the civil court case, court officials, police, Chhun Phallin's lawyer and Ministry of Education representatives went to the school on January 11 to enforce the court’s ruling to give temporary control of the school to Phallin and Turner.

In an email to parents, Henry Kernick attempted to reassure parents that the situation was under control.

“The reason behind all of this is only a financial disagreement between both partners in respect of the handling of the school accounts and expenses – nothing else,” the email reads.

Attached to the email is a document detailing his side of the conflict, and questioning the fairness of his hearing in court.

Phallin and Turner have accused the Kernicks of losing $100,000 from school accounts and not being able to account for various loan repayments.

Kernick says he was initially accused of misplacing $60,000 of school funds. He says an audit then found that figure to be $83,000, before it was then increased to $100,000.

In his email he writes that there are several other disputed expenses which were spent using the school funds, “such as a loan repayment to Ms. Phallin herself, a school loan repaid to a casino manager who had lent funds to the school back in 2008; and a loan repaid to a parent at school who had loaned funds to ISSR while we were too short of funds.”

The court ruling gave temporary control of the school to Phallin and Turner but the Kernicks say the decision is unfair, questioning the impartiality of the audit.

Signing off on the email letter though, Kernick does concede that there may have been some irregularities.

“We have never denied there are funds we need to replace on the school bank account and we are able to provide this in addition to agreeing on the expenses to balance the calculated cash on hand,” he writes.

“We accept responsibility for correcting the cash‐on‐hand to the extent for which we are responsible.

“Everything else  that is being interpreted to ‘suggest’ we have ‘stolen’ funds is attributed to expenses actually  paid in the course of running the school or has been our operational costs because we  cannot live and operate a private school from ‘fresh air’ alone.”

The court case continues but in the meantime parents are facing uncertainty as management of the school changes hands and accusations fly.

Some parents told The Insider that the educational quality of the school remains at an impeccable standard, and it is disappointing to see the disputes between management.

“It’s a real shame this happened. But it happens all the time with business partnerships here. It’s not like how it is back home. But because it’s a school there’s the added problem of having kids involved,” one parent says.

Phallin’s lawyer, Vang Hang, wouldn’t comment extensively on the case saying it was under court investigation.

“Phallin counted the money in the accounts and found that more than $100,000 is missing,” Vang Hang says.

He says the reason his clients were trying to wrest control from the school was because they were losing money.

“Phallin has to be careful and take control of the school,” Vang says.

“Henry has his own right to file a complaint to the court against the ruling, he shouldn’t just be saying that without filing a case. “If he thinks it’s unfair he’s better to take it to court.”

Henry and Theary founded the school in 2007 after buying out a school called Intergrade that they had been working for.

Henry told The Insider, “We funded it through friends who had money and loans which are all paid back, and also property which I let go in Germany in order to keep us afloat. It was tough in those early years but we kept it afloat with helpful and wealthy people, mainly parents.”

After starting with seven students in 2007 the school now has more than 190.

Chhun and Neville invested into the school in 2011 and later initiated a three month audit of the school which uncovered some of the discrepancies. They then filed court cases against the Kernicks.

Theary Kernick told The Insider, “This all just happened like an avalanche. It just came out of nowhere.”

Henry says he hopes the situation will be resolved soon.

“It needs sorting out as soon as possible so these things don’t get worse. All I can say is we have nothing to hide, and it be will sorted out within the near future.”

Disclosure: A Siem Reap Insider staffer is married to the school’s principal. She had no input to this story.

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