I am sorry to hear about this. From what I was told by other teachers if the contract that you sign with any school/company in China does not contain the stipulation that you cannot work elsewhere then so as long as you keep a low profile then it shouldn't be a problem. I wonder what it said on the contracts for those 2 expat teachers.

Being that it was at a public university there may not have been that stipulation that you cannot work elsewhere. I wonder if some jealous colleague caught wind of the extra money they were making and decided to cause trouble at the PSB with some petty exaggerations and lies thrown in for good mix. Vindictive folks both of local and foreign origins are things any teacher needs to look out for when working in China. Behind every smile you see there could be a veil for something more sinister underneath. Keep that extra thought to yourself sometimes even if you are hanging out with foreigners, you never know if it will get passed around and end up in the wrong person's ears.

But for the local government officials to do this is pretty freaking lame.