{"id":1021923,"date":"2023-03-11T09:51:15","date_gmt":"2023-03-11T09:51:15","guid":{"rendered":"https:\/\/jacobin.com\/2023\/03\/public-pensions-private-equity-investment-child-labor-meatpacking\/"},"modified":"2023-03-11T09:51:15","modified_gmt":"2023-03-11T09:51:15","slug":"workers-pensions-are-backing-child-labor-through-private-equity-investments","status":"publish","type":"post","link":"https:\/\/radiofree.asia\/2023\/03\/11\/workers-pensions-are-backing-child-labor-through-private-equity-investments\/","title":{"rendered":"Workers\u2019 Pensions Are Backing Child Labor Through Private Equity Investments"},"content":{"rendered":"\n \n\n\n\n

Public officials have been using the retirement savings of unionized public employees to capitalize, through private equity investments, an outsourcing business that has used low-paid immigrants and even children for hazardous work in slaughterhouses.<\/h3>\n\n\n
\n \n
\n Activists gather near the Hearthside Foods packaging facility on March 6, 2023 in Bolingbrook, Illinois, protesting the employment of child workers at the facility. (Scott Olson \/ Getty Images)\n <\/figcaption> \n<\/figure>\n\n\n\n\n \n

Last month, the Biden administration announced<\/a> it fined a company for employing more than a hundred children to clean meatpacking plants \u2014 one of the most dangerous jobs possible, for one of the most dangerous employers in America.<\/p>\n

That company, a sanitation contractor called Packers Sanitation Services Inc., has been repeatedly bought and sold by private equity funds that manage retirement money for state and local public employees, according to our review.<\/p>\n

In other words, public officials have been using the retirement savings of unionized teachers, firefighters, and police officers to capitalize \u2014 and help Wall Street executives profit from \u2014 an outsourcing business that has used low-paid immigrants<\/a> and even children for hazardous work in slaughterhouses.<\/p>\n

At various points, private equity firms have loaded Packers up with debt in order to pay themselves big dividends. The company\u2019s current owner is the world\u2019s largest private equity firm, the Blackstone Group, whose Republican mega-donor<\/a> CEO collected $1.3 billion<\/a> in pay and dividends last year.<\/p>\n

What\u2019s more, the New York Times<\/em> recently reported<\/a> on a factory filled with young migrant workers at a giant food contract manufacturer that outsources production for major snack and cereal brands. That company, Hearthside Food Solutions, has also been owned by private equity funds managing public employees\u2019 retirement savings.<\/p>\n

Such stories are especially dark examples of what can happen when pension officials put public employees\u2019 retirement savings into opaque private equity investments. Workers\u2019 own money often gets used to finance<\/a> the war on workers, funding schemes to drive up housing costs, inflate health care bills, and keep wages low.<\/p>\n

In this case, the money has helped private equity executives enrich themselves through vulnerable workers risking life and limb, undermining a century\u2019s worth of efforts in the United States to prevent children from working dangerous factory jobs.<\/p>\n

These revelations are part of a broader trend. Child labor violations are rising sharply<\/a> in the United States, including in hazardous industries<\/a>, according to the Department of Labor. Republican lawmakers in several states are moving<\/a> to relax child labor laws<\/a> in order to help employers find more workers in a time of historically low unemployment<\/a>.<\/p>\n

\u201cPrivate equity firms need to be more proactive and be more serious about labor conditions in the companies they own,\u201d said Justin Flores, a senior campaign and research coordinator at the Private Equity Stakeholder Project, a financial industry watchdog group. \u201cAnd for the pension funds that are investing in these private equity funds, we think they also need to be more involved and more active in understanding and knowing what they\u2019re investing in and what management is doing at those companies.\u201d<\/p>\n\n \n\n \n \n \n

\u201cA Corporate-Wide Failure\u201d<\/h2>\n \n

Packers Sanitation Services Inc. says<\/a> it was founded in 1970 based on a \u201cvision of providing contract sanitation services using a non-unionized workforce.\u201d The Wisconsin-based company has about 16,500 employees.<\/p>\n

Many Packers employees work the graveyard shift cleaning meatpacking plants for major food conglomerates. It\u2019s a harrowing job, one that\u2019s often performed by undocumented immigrants. A 2017 Businessweek<\/em><\/a> story found that Packers topped the list of the most dangerous employers in America, based on its rate of dismemberment and other severe workplace injuries.<\/p>\n

Last month, the Labor Department announced<\/a> that Packers paid $1.5 million in fines \u2014 a paltry sum for a company that reportedly made $460 million<\/a> in 2021 \u2014 after an investigation found the company had employed at least 102 children on overnight sanitation crews at thirteen meat processing facilities, including those owned by industry giants JBS, Cargill, and Tyson Foods.<\/p>\n

According to news reports, children as young as thirteen were using dangerous chemicals to clean back saws<\/a>, head splitters, fat skinners<\/a>, and blood-soaked floors. NBC News<\/em> reported<\/a> that the kids were \u201clargely undocumented migrants.\u201d<\/p>\n

\u201cThe child labor violations in this case were systemic and reached across eight states, and clearly indicate a corporate-wide failure by Packers Sanitation Services at all levels,\u201d said<\/a> Labor Department official Jessica Looman.<\/p>\n

The Labor Department has called<\/a> on Congress to increase fines for child labor violations, noting that the current maximum penalty of just over $15,000 per child is \u201cnot high enough to be a deterrent for major profitable companies.\u201d<\/p>\n

A Blackstone spokesperson told us in a statement that Packers \u201chas an absolute zero-tolerance policy against employing anyone under the age of 18 and is fully committed to ensuring it is enforced all local plants,\u201d adding that the company \u201chas continued to enhance its already extensive procedures to prevent identity theft \u2014 including recent steps to conduct multiple additional audits and trainings, and hire further third-party compliance experts.\u201d<\/p>\n

A Packers spokesperson said that none of the underage workers identified by the Labor Department currently work for the company and that many of them left Packers \u201cmultiple years ago.\u201d<\/p>\n

She continued, \u201cAs parents and citizens, we don\u2019t want a single person under 18 working for [Packers], period \u2014 and take extensive steps to prevent individuals at the local level from circumventing our wide-ranging procedures.\u201d<\/p>\n\n \n \n \n

Capitalizing on \u201cPressure on Businesses to Outsource\u201d<\/h2>\n \n

Packers has gone through four private equity acquisitions since 2007. Those transactions all appear to have involved funds backed by public pension dollars, according to our review of financial documents.<\/p>\n

While investors in private equity funds can\u2019t know exactly how private equity funds will deploy their money, officials at the Pennsylvania Public School Employees\u2019 Retirement System (PSERS) knew when they invested with Blue Point Capital Partners that the Ohio-based private equity firm could target outsourcing companies.<\/p>\n

A March 2007 report<\/a> from PSERS staff recommending its board invest in Blue Point Capital Partners II said that the firm\u2019s criteria for portfolio companies included \u201coutsourcing and consolidation trends.\u201d<\/p>\n

\u201cBlue Point will continue to seek investments in companies that are in a market position to capitalize on the general pressure on businesses to outsource non-core operations or consolidate suppliers,\u201d officials wrote, noting the firm had invested in the \u201cindustrial outsourcing\u201d and \u201cspecialty chemicals\u201d sectors.<\/p>\n

The PSERS board soon committed<\/a> to invest up to $100 million \u201cin a side fund to Blue Point Capital Partners II.\u201d<\/p>\n

One month<\/a> later, Blue Point Capital Partners II acquired Packers<\/a> for a reported $90 million<\/a>. Other investors in the Blue Point fund included retirement systems in Ohio<\/a> and Boston<\/a>.<\/p>\n

In 2011, Blue Point sold Packers to Harvest Partners, a private equity firm based in New York, for a reported $540 million<\/a>.<\/p>\n

The purchase was made by Harvest Partners V<\/a> \u2014 a fund whose investors included state retirement systems in North Carolina<\/a> and Kentucky<\/a>.<\/p>\n

In 2014, Packers was sold for $1 billion<\/a> in part to Leonard Green & Partners. The Leonard Green fund involved, Green Equity Investors VI<\/a>, received investments from more than two dozen state and local public pension funds, according to the financial data service Preqin.<\/p>\n

The fund\u2019s investors included state retirement systems in Alaska<\/a>, Illinois<\/a>, Kentucky<\/a>, Michigan<\/a>, Minnesota<\/a>, Nebraska<\/a>, New Mexico<\/a>, New York<\/a>, Ohio<\/a>, South Carolina<\/a>, Texas<\/a>, and Washington<\/a>.<\/p>\n

Blackstone, based in New York, purchased Packers in 2018 at an undisclosed price. According to the Wall Street Journal<\/em><\/a>, Blackstone acquired Packers using Blackstone Core Equity Partners. That Blackstone fund has received investments from state retirement systems in California<\/a>, New York<\/a>, and North Carolina<\/a>.<\/p>\n

A spokesperson for the California State Teachers Retirement System, which invested $500 million with the Blackstone fund, told us, \u201cWe continually monitor our holdings, engage companies, and collaborate with general partners to monitor and address the risks in the portfolio and develop and implement action plans to mitigate them.\u201d<\/p>\n

According to research<\/a> from the Private Equity Stakeholder Project, Leonard Green and later Blackstone both loaded the Packers\u2019 balance sheet with debt in order to pay themselves hundreds of millions of dollars in dividends.<\/p>\n\n \n \n \n

\u201cOur Hearts Break\u201d<\/h2>\n \n

The Packers story shares many similarities with the story of Hearthside Food Solutions \u2014 the company at the heart of a recent New York Times<\/em> expos\u00e9<\/a> on young migrant workers laboring in dangerous factories.<\/p>\n

That story followed several children who entered the United States as unaccompanied minors and were placed with sponsors, only to end up working full-time at a Hearthside factory in Michigan. The Labor Department is now investigating<\/a> the company for potential child labor violations.<\/p>\n

Hearthside said in a statement<\/a> that it was \u201cappalled\u201d by the \u201cTimes<\/em> article alleging that the industry is employing underage individuals in unsafe conditions, and further suggesting that some of these issues may be taking place at one of our locations. Our hearts break for the young people whose stories are documented in the article.\u201d<\/p>\n

Like Packers, Hearthside is built around the premise of helping companies outsource labor. The company is the largest food contract manufacturer in the United States. Workers in its factories bake and package cereal and snacks for industry giants like General Mills, Quaker Oats, and Frito-Lay.<\/p>\n

Hearthside has a history of union busting<\/a>. In job<\/a> listings<\/a> for plant managers and directors, the company actively seeks out candidates with \u201cexperience in a non-union manufacturing environment and union avoidance.\u201d<\/p>\n

Since 2009, Hearthside has gone through a series of private equity transactions \u2014 at least some of which involved funds supported by public employees\u2019 retirement savings.<\/p>\n

Its first private equity buyer was Wind Point Partners, based in Chicago, with the investment reportedly coming<\/a> from Wind Point Partners VII. That fund\u2019s investors have included state pension systems in Maryland<\/a>, Michigan<\/a>, Missouri<\/a>, and Texas<\/a>.<\/p>\n

In 2018, Hearthside was acquired by Charlesbank Capital Partners, based in Boston, and the Swiss firm Partners Group for $2.4 billion<\/a>.<\/p>\n

According to Preqin, one of the funds involved was Charlesbank Equity Fund IX. State retirement systems in Florida<\/a>, Michigan<\/a>, Missouri<\/a>, and Tennessee<\/a> have invested in that Charlesbank fund.<\/p>\n

Partners Group Direct Equity 2016 was also involved<\/a> with the Hearthside acquisition. The San Bernardino County Employees\u2019 Retirement Association in California has invested<\/a> with that fund.<\/p>\n

Experts say that public pension officials who oversee government workers\u2019 retirement savings have an opportunity \u2014 and responsibility \u2014 to better police the behaviors of the private equity firms they are financing.<\/p>\n

\u201cPension funds have a lot of leverage \u2014 they have a lot of ability to shape how private equity works,\u201d said Flores, of the Private Equity Stakeholder Project. \u201cIf they take the high road approach, and say, \u2018We don\u2019t want to be invested in the exploitation of workers, or pricing people out of their homes, or abusing tenants\u2019 and things like that, we think we\u2019ll see a change in behavior of private equity.\u201d<\/p>\n\n \n \n \n\n \n \n

You can subscribe to David Sirota\u2019s investigative journalism project, the\u00a0Lever<\/i>,\u00a0here<\/a>.<\/p>\n\n\n\n

This post was originally published on Jacobin<\/a>. <\/p>","protected":false},"excerpt":{"rendered":"

Last month, the Biden administration announced it fined a company for employing more than a hundred children to clean meatpacking plants \u2014 one of the most dangerous jobs possible, for one of the most dangerous employers in America. That company, a sanitation contractor called Packers Sanitation Services Inc., has been repeatedly bought and sold by [\u2026]<\/p>\n","protected":false},"author":1649,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"_links":{"self":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/1021923"}],"collection":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/users\/1649"}],"replies":[{"embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/comments?post=1021923"}],"version-history":[{"count":1,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/1021923\/revisions"}],"predecessor-version":[{"id":1021924,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/1021923\/revisions\/1021924"}],"wp:attachment":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/media?parent=1021923"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/categories?post=1021923"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/tags?post=1021923"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}