Today we submit written testimony in support of the “Stop Wall Street Looting Act,” which would address the problems currently being created by private equity firms and hedge funds while preventing these problems in the future. This is an urgent issue for low-income communities and communities of color organizing in our network, who are directly impacted by Wall Street’s predatory and risky financial practices. Every day, people are faced with the harsh realities of corporations that exert more and more power in our economy and their lives. From the moment they wake up, people are increasingly subject to the whims of unregulated corporate power that determines where people live, how they work, and even their ability to access live-saving healthcare.
If you look at our economy only from 30,000 feet, it’s easy to believe that we’re living in boom times. But if you get closer to the ground, where too many good jobs are being replaced by precarious ones, where large-scale employers waver at the brink of going under, and where profits overwhelmingly go to the wealthy, you can see a practice escalating across the economy, a practice that has already had disastrous effects on workers generally and that has the potential to take down hundreds of thousands more jobs and put investors and consumers alike in jeopardy. That practice is the unchecked and reckless overuse of heavy burdens of debt, and then of bankruptcy laws, by some PE firms and hedge funds to the overwhelming detriment of employees and retirees.
We are pleased to endorse the Stop Wall Street Looting Act (the “SWLSA”) (H.R. 3848) that was introduced by Representatives Pocan, Jayapal, García, Grijalva, Khanna, Lee, Pressley, Schakowsky, and Tlaib earlier this year. If enacted, the SWSLA will shut down a series of loopholes in the securities, bankruptcy and tax laws that allow a handful of Wall Street millionaires and billionaires to profit at the expense of working people.
I want to testify here on the role of private equity in the news industry. In particular, I want to discuss one newspaper chain, MediaNews Group (MNG) which is also known as Digital First Media. This is a newspaper company with such venerable titles as the Boston Herald, the Denver Post, the Detroit News, the Orange County Register, the San Jose Mercury News, and the St. Paul Pioneer Press. MNG is controlled by the Alden Global Capital which is both a private equity firm and a hedge fund. The NewsGuild-CWA represents 500 workers at 13 MNG papers.
Alden has played a particularly destructive role in local journalism. Since it has controlled MNG, it has slashed staff and sold real estate to extract cash from the news organizations without regard to the role news organizations play in communities. Alden has depleted newsrooms, eliminated beats, and made it virtually impossible for local papers to fully tell the stories of their communities.1 Alden has also extracted hundreds of millions of dollars in profits from its newspaper holdings to invest in unrelated businesses, some of whom have gone belly-up.
WGAW would like to contribute to the Committee’s record with a report on the corrupting influence of private equity on Hollywood talent representation. “Agencies For Sale: Private Equity Investment and Soaring Agency Valuations” details the harmful effects of private equity investment on talent agency representation in Hollywood. While talent agencies are fiduciaries, legally required to act solely in the benefit of their clients, the billions in private equity capital invested in Hollywood’s largest talent agencies has driven these agencies to engage in practices that leverage their clients for the agencies’ financial benefit and violate the law. Most recently, this private equity investment has facilitated talent agency expansion into content ownership and production, effectively making agencies the employers of their own clients. The last time a talent agency expanded into content production, the Department of Justice filed an antitrust lawsuit that caused the breakup of MCA-Universal in 1962.
I moved into my manufactured home community so I could have an affordable life. My neighbors are mostly low-income seniors who survive on fixed incomes, like my friend who gets just $800 a month from disability. I, along with 150+ families that call this community home, loved the stability and community closeness Swartz Creek Estates provided. Our hopes of living in an affordable, decent home in a healthy, vibrant community were dashed when a real estate investment company named Havenpark Capital bought our community. In one year, they increased the rent we pay for the land our homes sit on by 30%. Havenpark also increased the fees that we have to pay out for garbage pickup and sewage and water services almost another 10%.
Across industries, private equity has drawn much criticism for the unscrupulous ways it maximizes returns. Within the prison industry, private equity firms have quietly but aggressively consolidated market players and used the resulting corporate nesting dolls to exploit disenfranchised communities with dangerously poor service quality and predatory pricing practices. Private equity-backed corporations have driven families into debt over the cost to maintain contact,3 killed patients under their care,4 served maggot-contaminated food,5 and generally stripped incarcerated people and their families of their dignity. Just a handful of private equity firms own the majority of the largest prison service corporations with little oversight. We have highlighted these private equity firms, their holdings, and their problematic practices in the prison service industry below.
Safeway, one of the many grocery chains our local union represents, was purchased by Albertsons in 2013. Albertsons is controlled by an investment group led by Cerberus Capital Management, a private equity firm. Albertsons is the second largest grocery chain in the country and is now the largest private-equity owned company in the United States, employing 275,000 people. As you can read in the attached report, we should all be concerned that a private equity firm now controls Safeway. Private equity’s track record is one of preying on companies, their workers, and retirees. Its typical model is to buy up corporations by borrowing money, then sell off the company’s assets to pay off debtors and earn profits, all the while cashing in through management fees. Often, the massive debt incurred to make these purchases causes the company to file for bankruptcy, but even there, the private equity firm walks away with profits, leaving everyone else-especially workers, communities, retirees, and lenders-holding the bag.
The Private Equity Stakeholder Project is a nonprofit organization that seeks to understand the impacts of private equity and other private funds investments on workers, communities, consumers and other stakeholders and lift up the voices of those stakeholders in pursuit of more just outcomes. While there are a variety of issues to raise regarding private funds investments, today we wish to focus on two specific issues: (1) the growing impact of private funds investments on the environment and climate change, and (2) the fluctuating numbers of jobs at private equity-backed companies cited by private equity industry groups.