In the last couple of weeks, a number of legislators, journalists and I have written about what the rapid rise of private equity investments means to Americans. I welcome the introduction of the ‘Stop Wall Street Looting Act of 2019,’ because we need to analyze seriously what the positive and negative effects are of private equity to ordinary Americans. Earlier this week, I highlighted balanced, as well as pro and con points about private equity. Since the Federal Reserve is likely to cut rates this coming week, I believe that the chase for yield will only intensify. Private equity will continue to look for deals, and private equity executives will have an easier time loading up companies with debt from both banks and non-banks.
For Representative Jesús “Chuy” García (IL-04), one of the sponsors of the bill, private equity investments are personal, because they have adversely affected his constituents “In recent years, we have seen private equity firms and hedge funds drive longstanding Chicago institutions like the Chicago Tribune and Sears into bankruptcy by loading them up with debt. While Wall Street billionaires reap huge profits from this financial engineering, workers suffer from the layoffs that result from their looting.” García is sponsoring the Stop Wall Street Looting Act because it “requires investment firms to have skin in the game, sharing responsibility for debt that they put on the books for companies they acquire.”
Private equity investments are significant not only in the media and retail sector, but they are also in every sector of the economy including Trump’s rapidly growing detention centers for youth refugees from Central America. Private equity firm DC Capital Partners, led by Thomas Campbell, owns an investment in military and youth detention center conglomerate, Caliburn International Corporation, According to a number of very detailed articles by journalist Deniz Cam, DC Capital Partners bought Comprehensive Health Services (CHS), a Caliburn subsidiary for an undisclosed sum in 2018. CHS runs Homestead, the only for profit detention center in the US, is “the biggest shelter for unaccompanied minors in the country and also the only temporary influx center for migrant children.” Forbes estimates that DC Capital earns millions of dollars a year from government contractors it owns. “That includes CHS, which pays DC Capital an annual management fee of $1 million, based on a 2018 agreement between the two firms signed by Campbell on behalf of both entities. CHS, DC Capital and Caliburn all declined to respond to questions from Forbes.” CHS is benefitting significantly from Trump’s children separation policies. Just in 2018,“the federal government paid CHS more than $210 million for its shelter work, according to federal filings.”
DC Capital Partners’ investment is enabling CHS to profit even more off Central American minors fleeing poverty and gang violence. Last summer, CHS secured three licenses for facilities in Texas, totaling 500 beds, and in December, the Homestead, Florida facility began expanding capacity over 150%, from 1,250 beds to 3,200.
DC Capital Partners, Calliburn and CHS benefit greatly from Trump’s anti-immigration obsession and strong political ties at the highest levels in Washington. In May 2019, CBS News’ Graham Kates reported that Former White House Chief of Staff John Kelly, joined Caliburn’s board of directors; previous to joining the Trump administration, Kelly had been on the board of DC Capital Partners.
Given that DC Capital Partners contributes more to Democratic legislators’ political campaigns than to Republic ones, perhaps Democratic legislators could go talk to DC Capital Partners about how to invest in other sectors of the economy.
DC Capital Partners is not the only private equity firm whose partners are enriching themselves at the expense of human misery. The Private Equity Stakeholder Project is keeping track of private equity firms that invest in companies running private prisons and services to prisons. One of the most cited private equity firms with extensive investments in operations profiting from the private prison system is HIG Capital.
It is important for legislators and regulators to investigate whether private equity firms, which invest in in private prison’s and youth detention centers are violating the principles espoused by their own industry advocate, the American Investment Council. The Guidelines for Responsible Investing cover environmental, health, safety, labor, governance and social issues. I fail to see how private equity firms’ investments in detention centers and for profit prisons are conforming with guideline 7, “Respect the human rights of those affected by their investment activities and seek to confirm that their investments do not flow to companies that utilize child or forced labor or maintain discriminatory policies.”
AIC members and a group of the world’s major institutional investors, have worked with the United Nations-backed Principles for Responsible Investment (PRI). I wrote the UN group responsible for PRI because I was wondering whether the UN in any way back investments in for profit prisons and detention centers. Unfortunately, the only response I received to my question, “Does Principles for Responsible Investing have guidelines about private equity firms, hedge funds, or other investors investing in for profit prisons or youth immigration detention centers?” was “I do not believe this is something that any of my colleagues are focusing on at the moment.”
According to Charles Khan of the not-for-profit Center For Popular Democracy and Hedge Clippers, "The Stop Wall Street Looting Act would create strong new rules for private equity and hedge funds centered on economic fairness and community needs, not billionaire greed. Our communities are fed up with Wall Street destroying our jobs, caging children and families for profit, pillaging our neighborhoods, and corrupting our government. This bill will make a real difference for Black, Brown and White working people across the country."
