Priorities USA Action ad: 'Romney's World View'
Infographic: Squeezed by SuperShuttle
Crossroads political machine funded mostly by secret donors
Sixty-two percent of funds raised by two conservative groups associated with former Bush adviser Karl Rove have come from mystery donors, a statistic that shows the increasingly important role being played by nonprofits in a post-Citizens United political world.
American Crossroads, a super PAC, and Crossroads Grassroots Policy Strategies, a nonprofit, were founded in 2010 by Rove and another former Bush adviser, Ed Gillespie. Together, they raised $123 million through the end of 2011, according to an iWatch News review of Federal Election Commission data and Internal Revenue Service filings.
Of that sum, $76.8 million, or 62 percent, went to Crossroads GPS, which is a nonprofit, “social welfare” group organized under section 501(c)(4) of the U.S. tax code. Like American Crossroads, Crossroads GPS can pay for advertising that attacks political opponents by name and urges viewers to vote against them.
But unlike the super PAC, GPS is prohibited from making politics its “primary purpose,” according to the IRS, a rule that these politically active nonprofits have interpreted to mean they can spend up to 49 percent of their funds on such advertising.
As a nonprofit, the group is not required to publicly name its donors, except if they give "for the purpose of furthering” a political advertisement. (GPS has told the FEC that it has not “solicited or received” contributions earmarked for such expenditures.)
Jonathan Collegio, the communications director of Crossroads GPS, said that the group’s unnamed donors, which number fewer than 100, are “individuals and businesses that support its vision of lower taxes and smaller government.”
Election law expert Rick Hasen, a professor at the University of California-Irvine law school, told iWatch News that he wasn’t surprised that more money was flowing into Crossroads’ “secret money option.”
“For every Bob Perry who craves the attention, there are many others, including corporations, who hope to influence politicians and policy without any public accountability,” he said.
Perry is a well-known donor to conservative causes, and he was one of the financiers behind the Swift Boat attacks in 2004 on former Democratic presidential candidate Sen. John Kerry of Massachusetts.
Both Crossroads groups are allowed to accept unlimited contributions from individuals, corporations and other groups for political advertisements, thanks to changes in the country’s campaign finance system in the wake of the U.S. Supreme Court’s Citizens United decision and a lower court ruling called SpeechNow.org.
American Crossroads is required to report its donors to the FEC and does not have the same limitations on spending as its sister organization.
American Crossroads, which was launched in March of 2010, quickly established itself as the biggest super PAC, raising $28 million by the end of 2010, according to records filed with the IRS and FEC. It pulled in another $18.4 million last year – with millions more flowing into its coffers this year.
Records show that Texas billionaire homebuilder Perry, along with fellow billionaire businessmen Harold Simmons and Robert Rowling, rank as the super PAC’s top donors, having collectively donated $24.5 million through the end of 2011, through their personal and corporate accounts.
Meanwhile, Crossroads GPS, which was created a few months after the super PAC, collected a total of $76.8 million between June 1, 2010, and Dec. 31, 2011, according to tax forms released by the group Tuesday.
Earlier this year, OpenSecrets Blog reported that the Republican Jewish Coalition gave Crossroads GPS $4 million, and iWatch News previously reported that casino executive Sheldon Adelson gave the group a seven-figure check for an unspecified amount.
Little is known about the group’s other donors.
The tax forms released by Crossroads GPS show 96 contributors, two dozen of which gave at least $1 million, including one for $10 million and one for $10.1 million.
The two Crossroads groups have a combined fundraising goal of at least $240 million for the 2012 election cycle, as iWatch News previously reported, and they are already spending heavily on negative ads targeting President Barack Obama, as well as Democrats in several top-tier U.S. Senate races.
Through the end of 2011, Crossroads GPS paid the Virginia-based Crossroads Media more than $38 million, according to the tax forms released by the group Tuesday – money that frequently went toward placing issue ads and ads that expressly advocated for or against federal candidates.
Crossroads Media, which describes itself as the “premier Republican media services firm,” was founded in 2001 by GOP political operative Michael Dubke.
According to Crossroads GPS’s tax filings, it has spent more than $17 million on “direct” political expenditures and more than $27 million on “grassroots issue advocacy” through the end of 2011. But only some of this spending was required to be reported to the government agency tasked with regulating federal elections.
According to the group’s FEC filings, it spent $16 million on ads expressly advocating for or against federal candidates in 2010 and another $1.1 million on issue ads mentioning a specific candidate ahead of high-profile elections in 2010 and 2011.
Its tax forms indicate that the big spending on “paid advertising, mailings, e-mails and web-based advocacy tools” is to “influence policymaking outcomes through grassroots mobilization.”
It also allotted nearly $16 million in grants to a total of 13 other conservative organizations.
That includes $4 million to anti-tax crusader Grover Norquist’s Americans for Tax Reform, $3.7 million to the National Federation of Independent Business, $2 million to the National Right to Life Committee, $600,000 to the lobbying arm of the National Rifle Association, $500,000 to the conservative nonprofit American Action Network and $250,000 to the Republican Jewish Coalition.
These grants are accompanied by a letter stating that “the funds are to be used only for exempt purposes, and not for political expenditures,” according to Crossroads GPS’s tax filings.
Steven Law, the president of both Crossroads organizations, worked 60 hours a week, split between the two groups – with more time being spent aiding Crossroads GPS during the second half of 2011.
For his work, Law – who served as President George W. Bush’s deputy secretary of Labor and later general counsel of the U.S. Chamber of Commerce – collected a combined $1.1 million in salary and other compensation for both groups, including $270,000 in bonuses.
“Crossroads is a serious organization,” Collegio told iWatch News. “Free market conservative donors know that hiring top CEO talent requires real compensation.”
New BBC documentary spotlights ICIJ probe into fish devastation
As aggressive, unregulated fishing continues in the South Pacific, BBC World News will broadcast this weekend a documentary that features the International Consortium of Investigative Journalists’ recent probe into the plundering of jack mackerel, once one of the world’s most abundant fish.
Jack mackerel might not be familiar at the supermarket fish counter, but you have probably eaten it unaware in bites of farmed salmon. Much of jack mackerel is reduced to feed for pigs and aquaculture. It can take more than 5 kilos of jack mackerel to raise a single kilo of salmon.
The ICIJ investigation revealed that greed, mismanagement and lack of regulation have devastated the fishery — it went from 30 million metric tons to 3 million in just two decades.
The world’s largest trawlers, after depleting other fisheries, headed south to scoop up their catch before regulations were passed. But it’s been seven years since efforts started to create a regional fisheries management organization, and key fishing nations still have not ratified the convention, notably Peru, Chile and China.
Without binding limits, industrial fleets bound only by voluntary restraints compete in what amounts to a free-for-all in no man’s water.
The documentary “Looting the Pacific” was produced by London-based tve for BBC World News.
"Looting the Pacific" will broadcast at the following times:
Saturday, April 21, at 9:30 a.m. and 9:30 p.m.
Sunday, April 22, at 2:30 am, 3:30 p.m. (all times GMT)
BBC World News broadcast times vary around the world. For details of transmissions in your region, check the BBC World News website.
Be sure to read a reporter’s notebook by project manager Mort Rosenblum, who talks about his experience reporting the story with a multi-country team.
Combined Crossroads' income, through 2011
Ajani Winston/iWatch News
Behind the story: Why I care about a bony fish with oddly shaped fins
I set off after the vanishing jack mackerel with trepidation. Who would care? It’s hard to love a bony fish with oddly shaped fins and oily flesh that swims in shoals far away in the southern Pacific. But as oceanographer Daniel Pauly told me, they are the last buffalo. Industrial fleets, moving southward, have hammered one fishery after another. When the jack mackerel are gone, Pauly said, everything will be gone because the expansion will be finished.
Ten months later, I wrapped up tve’s BBC documentary with this alarming but unavoidable conclusion:
“People keep saying we’ll find something else .. We’re at the point where there really is nothing else ... Once these fish stocks collapse, we won’t have them. The only solution is for us to get real, to understand the problem at whatever level and whatever way — to get it, to finally get it that this is not limitless. This is not limitless.”
This was the third and final part of “Looting the Seas,” by the International Consortium of Investigative Journalists. Earlier award-winning installments looked at the Mediterranean bluefin tuna and depredation around the world by Spanish fleets.
Mar Cabra, a Spanish-based ICIJ reporter, dug deeply in Europe and plumbed arcane databases. We relied heavily on two hard-nosed investigative reporting groups, CIPER in Chile and IDL-Reporteros in Peru. I spent a month in South America and then went to New Zealand. In Hong Kong and Holland, I talked to main players: heads of giant fishing companies. On tiny islands at extremes of the earth — above the Arctic Circle and off New Zealand, eccentric ex-sailors showed me how they track fleets that catch jack mackerel.
For the BBC documentary, ICIJ member Steve Bradshaw of tve went to Peru and then crashed a crucial session in Santiago of the regional management group that has tried in vain to protect jack mackerel. And then I returned to Chile with William Treharne-Jones, who managed to get a pencil-powered old street reporter to work on camera.
Disappearing fish, not surprisingly, can be hard to find. We flew south to the earthquake-shattered port of Talcahuano. Starting early and moving fast, we found a group of “gatos” — cats — old-style freebooters who tried to hide the crates of jack mackerel they had acquired from an arriving fleet. We filmed a reeking plant when the imperiled fish are reduced to meal for salmon farms.
At the Chilean Navy base in Talcahuano, helpful officers showed us their elaborate tracking system. They zeroed in on giant trawlers, including the world’s largest fish-factory ship, the Russian-flagged Lafayette owned by Pacific Andes in Hong Kong, working a thousand miles to the west.
After interviews with government officials, scientists, company executives, and artisan fishermen struggling to survive, a clear picture emerged. And at the University of Concepcion, marine biologist Eduardo Tarifeño drew a conclusion based on his years of close study. Jack mackerel have collapsed, first because of Chilean plunder and then by foreign fleets that overfish in what is essentially a free-for-all. Now, he said, only a moratorium can save them.
Duncan Currie, a New Zealand lawyer with the Deep Sea Conservation Coalition put this into global perspective. Jack mackerel swim in clearly defined waters, pursued by relatively few vessels from a small number of countries. If we can’t save them, he concluded, what can we save?
MoveOn.org ad: 'Fat Cats'
Infographic: Squeezed by SuperShuttle
BBC trailer: 'Looting the Pacific'
Video: 'Missing' fish in Peru simply not counted
More than half Crossroads' cash comes from three Texas tycoons
Three Texas tycoons are responsible for more than half the funds that conservative super PAC American Crossroads has raised since it was founded by top GOP strategists Karl Rove and Ed Gillespie in 2010.
Harold Simmons, Bob Perry and Robert Rowling have collectively donated $30.5 million, or just over 54 percent, to the high-profile super PAC either personally or through their corporate accounts, according to an iWatch News analysis of Internal Revenue Service and Federal Election Commission filings.
American Crossroads has raised $56 million, including a paltry $1.2 million in March. The top donor for the month was hedge fund executive Kenneth Griffin, who recently said that the ultrawealthy have “insufficient influence.” He gave the super PAC $700,000.
American Crossroads, the super PAC, and its sister nonprofit, Crossroads GPS, are set on defeating President Barack Obama and securing Republican majorities in both houses of Congress in November.
Thanks to court rulings, super PACs like American Crossroads can collect unlimited contributions from individuals, corporations and unions and spend the money on advertising urging voters to support or reject a candidate.
There are dozens of super PACs active this election, but none loom as large as Crossroads.
Simmons and Perry have long been financiers of conservative causes. Their beneficiaries have included the Swift Boat Veterans group that infamously attacked Democratic presidential candidate Massachusetts Sen. John Kerry in 2004 and helped keep President George W. Bush in the White House.
Rowling, too, has long been among the GOP’s premier moneymen. He was a “bundler” for Bush’s presidential campaigns in both 2000 and 2004, which means he solicited friends and business associates for contributions to Bush and was credited for raising a total greatly exceeding what he could personally give.
Simmons ranks as the No. 1 donor to American Crossroads since its inception in the wake of the U.S. Supreme Court’s Citizens United ruling that allowed corporate money to be used to expressly advocate for or against federal candidates.
He has donated $14 million to American Crossroads. His contributions include $10 million from his own checkbook and $4 million from corporate accounts that he controls — Contran Corp. ($2 million), Dixie Rice Agricultural Corp. ($1 million) and Southwest Louisiana Land, LLC ($1 million).
Of these donations, $12 million alone has come during the current election cycle, meaning he’s responsible for nearly 43 percent of the $28 million American Crossroads has raised for the 2012 elections.
Perry, meanwhile, ranks as the No. 2 all-time donor to Crossroads.
In 2010, Perry gave $7 million to the group — more than any other individual or company. He personally accounted for 25 percent of the $28 million that the super PAC raised ahead of the midterm elections.
So far this election cycle, he’s donated an additional $2.5 million to the pro-Republican group.
Rowling, the president, chairman and CEO of TRT Holdings — which owns the Omni hotel chain, Gold’s Gym and Tana Exploration Co. — has donated $7 million to American Crossroads, enough to rank him as its No. 3 all-time donor. His contributions have been split evenly between his own pocket and TRT’s corporate treasury.
Including money from Simmons and Rowlings’ companies, American Crossroads has raised about $14.6 million from corporations, according to an iWatch News analysis of data from the Center for Responsive Politics and the FEC. That’s about 26 percent of its overall take since its creation.
The prospect of a very small number of extremely wealthy donors having so much sway on the country’s elections and elected officials worries some political observers.
“Big super PAC donors will get access and influence that regular people can only dream of,” said Adam Smith, communications director of Public Campaign, which advocates for publicly financed elections.
“Our elections are turning into a parlor game for millionaires and billionaires,” he continued. “It skews the policymaking process and pushes regular people out of the political system.”
Conservative attorney Dan Backer, who has worked to loosen campaign finance regulations, however, thinks such concerns are overblown.
He says donors’ spending money in politics does not guarantee that their concerns will be addressed.
“Money provides access to opportunities to tell your story, and if your story is good, you’ll get results, and if it’s bad, you won’t,” he told iWatch News. “In a free society, we have a marketplace for ideas. If your ideas are good, they catch on, and money doesn’t have much to do with it.”
American Crossroads was largely quiet during the GOP presidential primary, but during the 2010 midterm election it spent more than any other super PAC on ads, according to the nonpartisan political money watchdog the Center for Responsive Politics – a feat the group could repeat this year.
As iWatch News has previously reported, American Crossroads and Crossroads GPS plan to raise more than $240 million this election cycle.
Notably, American Crossroads’ massive fundraising haul has been raised (at least mostly) in the sunlight.
Crossroads GPS, on the other hand, as a nonprofit organized under section 501(c)(4) of the U.S. tax code, is legally allowed to keep the names of its donors secret — a comfort that many donors appear to prefer. In 2010 and 2011, Crossroads GPS alone raised $77 million from unnamed sources, as iWatch News has reported.
Obama 'bundlers' hauled in more than $33 million last quarter
President Barack Obama’s campaign raised $33.6 million last quarter from "bundlers," supporters of the president who collect checks from friends, family and associates and deliver them to the campaign, according to a list released by the campaign Friday night.
A total of 90 new bundlers appeared on the list, bringing the total to 532 and the total amount of contributions to $106 million.
Among the new donors are Nicole Avant and her husband Ted Sarandos, who together reached the $500,000 level — the top tier for bundlers. Avant was Obama’s appointee as ambassador to the Bahamas until she resigned in November.
She was the subject of a critical inspector general’s report that concluded her ambassadorship was “an extended period of dysfunctional leadership and mismanagement, which has caused problems throughout the embassy.”
According to some news reports, since her return to Beverly Hills, Calif., Avant has acted as a key Hollywood conduit for contributions to the Obama campaign.
The campaign discloses its bundlers in four tiers: $50,000-100,000; $100,000-200,000; $200,000-500,000 and $500,000 or more. It is impossible to tell exactly how much each bundler raised, but it is possible to arrive at a minimum dollar amount.
There are 154 bundlers at the $50,000-$100,000 level; 120 at the $100,000-$200,000 range; 141 at the $200,000-$500,000 range and 117 at the $500,000-plus level. There was a big increase in the number of elite bundlers — only 61 were in the top tier three months ago.
Of the brand new bundlers, nine are in the top tier.
Of the individuals who were previously listed as bundlers, 115 raised enough cash to bump up to higher fundraising tiers, including 45 who advanced to the $500,000-and-up level. One of those, Mattie McFaddon-Lawson, was appointed to the President's Advisory Committee on the Arts for the Kennedy Center.
Four bundlers listed in the previous report were absent this quarter. Among them was Abake Assongba, who had collected $50,000-$100,000 this cycle. Earlier this month Assongba was accused of fraud by a Swiss businessman who claims Assongba scammed him by email and used the money to finance a multimillion-dollar home.
It’s not clear why the four names were dropped from the list.
Among the states, California is home to the most bundlers, with 108, followed by New York with 83 and Illinois with 49. Hawaii, Oklahoma, Indiana, Oregon and the Virgin Islands each are home to one bundler. There are nine foreign-based bundlers listed by the campaign: five in the United Kingdom, two in France, one in Switzerland and one in China.
Contributions from foreign nationals are against the law, but it is not unusual for U.S. citizens living outside the country to give to campaigns.
In 2008, major candidates from both parties released their bundler information. So far this cycle only the Obama campaign has followed that practice.
Bundling draws the ire of many public interest groups because it skirts individual contribution limits. Critics say that by pooling these donations, bundlers enhance their stature as financiers and they may seek political favors in return for their largesse.
The bundled cash goes to the “Obama Victory Fund,” a joint fundraising committee consisting of the campaign and the Democratic National Committee. It is not known how much of the total went to the campaign and how much went to the DNC.
The maximum contribution to the party is $30,800 per person. The maximum contribution to the campaign is $5,000 - $2,500 for the primary and $2,500 for the general election.
Obama has taken fire from Republicans for appointing megadonors to administration posts, some largely ceremonial and others advisory. But that criticism has done nothing to keep the administration from continuing the practice.
Earlier this year the Center reported that at least 68 Obama bundlers for the 2012 election or their spouses have served in the administration in some capacity; at least 250 of the bundlers visited the White House, and another 30 have ties to companies that conduct business with federal agencies or hope to do so in the future.
A 2011 Center investigation found nearly 200 of Obama’s 2008 campaign bundlers or their spouses, won White House appointments. Nearly 80 percent of those who raised $500,000 or more joined the administration in some role, often as ambassadors. Obama’s record of welcoming bundlers from his first campaign into his administration is about the same as former President George W. Bush’s, the investigation found.
Requests for comment left with the Obama campaign were not returned by the time this story was posted.
Get involved in Florida
Who bankrolled the super PACs in March? Tracking the monthly disclosures
Super PACs are required to report their donors on the 20th of each month unless they file quarterly. Engagement Editor Cole Goins used Storify to round up coverage of the most recent flood of reports.
Florida group uses State Integrity Investigation to push reform
Open government advocates in Florida are using results from the State Integrity Investigation to push for grassroots ethics reform. The Sunshine State received a C- on its corruption risk scorecard, ranking it 18th among the states.
Dan Krassner, executive director of Florida Integrity, said the project’s scorecards provide an easy roadmap for reform, with 330 specific policy questions and measurable outcomes.
“We looked at where our state scored the lowest,” said Krassner, who noted that Florida received its only F grade for ethics enforcement agencies.
Florida is one of about 30 states where the ethics commission is unable to self-start investigations; commissioners can only investigate citizens’ complaints. But Florida Integrity, a group that aims to promote accountability in government and expose corruption, is pushing for changes that would allow the commission to initiate its own probes.
“That is a direct response to the State Integrity Investigation,” Krassner said. “Our organization is following up with state-level research to pass that policy reform next legislative session.”
Florida Integrity, which launched in late March, aims to inspire reform by engaging with ethics organizations and government officials, while also producing reports on potential corruption risks in the state. A report to be released this week will highlight the lack of transparency at Florida’s economic development agency.
On Saturday, the group presented the Florida corruption risk scorecard to the local League of Women Voters chapter to highlight the state’s shortcomings. Krassner said Florida Integrity plans to replicate those meetings throughout the state.
In addition to the failing grade for ethics enforcement, Florida received D- grades for political financing, judicial accountability, and state civil service management, D’s for lobbying disclosure and pension fund management, and a D+ for public access to information. The state received two A grades — for internal auditing and redistricting.
The legislative session ended in March, but Florida Integrity plans to meet with elected officials and reform advocates throughout the summer to build a coalition of supporters.
Ex-GOP Gov. Crist's law firm donates to pro-Obama super PAC
Former Florida Gov. Charlie Crist made his name in the Republican Party, but his new employer — a personal injury law firm — leans the other way, as evidenced by a $50,000 donation it made to the pro-Obama super PAC, Priorities USA Action.
Orlando, Fla.-based law firm Morgan & Morgan, known for its slogan “representing the people, not the powerful” and its ubiquitous advertising, made the donation March 31. The gift was disclosed in documents filed Friday with the Federal Election Commission.
It is one of only a handful of companies to donate to the super PAC, which is allowed to accept unlimited amounts of money from individuals, unions and corporations thanks to legal changes in the wake of the U.S. Supreme Court’s Citizens United decision and a federal court ruling called SpeechNow.org.
Crist, a Republican who served as the Sunshine State’s moderate governor until January 2011, joined Morgan & Morgan after placing second in Florida’s 2010 U.S. Senate race. He works in the firm’s Tampa office handling class action lawsuits.
He was defeated by tea party favorite Marco Rubio, who is now Florida’s junior senator. As Crist’s standing in the polls sank, he opted to forgo a GOP primary race against Rubio and run as an independent. In the three-way contest that also featured Democrat Kendrick Meek, Rubio prevailed with 49 percent of the vote compared to Crist’s 30 percent and Meeks’ 20 percent.
Crist collected more than $98,000 from individual employees of Morgan & Morgan during his campaign, according to research by the Center for Responsive Politics — more than any other group.
Florida trial lawyer John Morgan heads the firm. Morgan himself is a longtime Democratic donor, and this election cycle, he has raised more than $500,000 from friends and associates for Obama and the Democratic National Committee.
Crist himself has not donated to any presidential candidate so far this year, although he has said that he might consider voting for Obama in November. On Friday on MSNBC, Crist spoke favorably about Obama, calling him a “centrist” who has been “continually trying to reach out” to the Republicans for help, although he stopped short of officially endorsing the president.
For its part, Priorities USA Action has raised $9 million, including $2.5 million in March. That’s a fraction of the $28 million that’s been raised by the pro-GOP American Crossroads super PAC and the $52 million collected by Restore Our Future, a super PAC backing presumptive Republican nominee Mitt Romney.
It hasn't raised much, but Prorities hasn't spent much either. It reported $5 million cash on hand through the end of March.
John Dunbar contributed to this report.
SLIDESHOW: A day in the life of a SuperShuttle driver
ANALYSIS: Shareholders raising ruckus about CEO pay
One of my responsibilities when I was head of corporate communications at Cigna was to help ensure that the company’s annual meeting of shareholders ran smoothly and, if at all possible, attracted no negative publicity.
I always dreaded the annual meeting because you really never knew if one or more disgruntled shareholders might show up and ask rude questions of the CEO. But during all of my years of helping plan those meetings, we had an unblemished string of non-events. We considered the meetings marathons if they lasted more than 15 minutes. Most of them were over long before then. Over the course of 10 years, I only recall two reporters who felt compelled to attend, and one of them got stuck in traffic and missed the whole thing.
Some of my peers at other health insurers were not that lucky, but relatively few of the big-profit insurers have had to cope with contentious shareholder meetings.
It is clear those days are over.
Some investors are now beginning to question how those companies make the billions of dollars in profits they report every year, especially with the ranks of the uninsured continuing to swell, how they spend policyholders’ money to influence public policy and whether their CEOs are truly worth all they are being paid.
Of the five biggest for-profit insurers, Cigna will lead off the annual meeting season this coming Wednesday in Hartford and it will not likely be the sleeper previous meetings have been.
That’s because earlier this month, one big shareholder — the Change to Win (CtW) Investment Group — sent a letter to other shareholders urging them to “send our board a clear message: Cigna’s executive pay structure is broken and open engagement needs to begin with concerned shareholders, immediately.”
CtW, which works with pension funds sponsored by several unions, decided to send the letter after seeing that Cigna CEO David Cordani was given a pay raise of more than 25 percent last year, bringing his total compensation to more than $20 million. That was “chiefly on the back of a poorly-utilized performance metric that put cash in (Cordani’s) pocket only because our customers cannot afford to go to the doctor,” CtW said in its letter.
Sources within the company have told me that many employees were as upset as CtW to see Cordani get such a huge increase in compensation when most of the rank and file have been lucky to get raises of 2 percent or 3 percent in recent years.
CtW is also taking aim at the multimillion-dollar severance packages the company has given to executives who left the company to, as we used to say, “pursue other opportunities” or to “spend more time with their families.”
“Over the past three years,” CtW wrote, “(Cigna) has awarded four separate departure packages for executive officers, including several with short tenures.” The letter cited as an example an executive who left in December 2011 with a “departure” package worth almost $4 million, even though he had been in the job for only about 18 months.
CtW’s letter and an April 4 Hartford Courant story based on it have inspired health care reform advocates to stage a protest outside of the Bushnell Performing Arts Center during Cigna’s annual meeting, which will begin at 3:30 p.m. on Wednesday. Among the protestors likely will be Juan Figueroa, president of the Universal Health Care Foundation of Connecticut.
Figueroa noted that Cigna is also a member of America’s Health Insurance Plans (AHIP), which he said has testified before the Connecticut legislature on behalf of Cigna and other insurers against a bill that would allow small businesses in Connecticut to buy insurance through the state employee plan.
Figueroa and other advocates have also been critical of a huge tax incentive package the state recently awarded Cigna. That package could be worth as much as $71 million if the company increases its workforce in the state over the next 10 years.
CtW and Figueroa are also still outraged that Cigna and other insurers gave AHIP $86 million that AHIP in turn funneled to the U.S. Chamber of Commerce to finance the Chamber’s 2010 advertising and PR campaign against health care reform. The specific target of the campaign was a proposal that would have permitted the federal government to establish a public insurance option to compete with private insurers.
Consumer advocates have also cited the use of policyholders’ premiums being used to fund the Chamber’s campaign as a reason why they are trying to get another big insurer, WellPoint, to disclose all of its corporate political and lobbying expenditures. A coalition of activist investor groups is even demanding the resignation of two WellPoint board members, including Susan Bayh, the wife of former Sen. Evan Bayh, D-Ind., because of “high risk political spending.”
Another group of activist investors, led by Dr. Robert Stone, will once again be attending the WellPoint annual meeting next month to encourage other shareholders to support his call for WellPoint’s Blue Cross plans to revert to their nonprofit status.
Insurance company CEOs in the past would have dismissed these challenges as mere annoyances, but no longer. Certainly not after Citigroup’s shareholders made front page headlines last week when they voted against the bank’s $15 million pay package for its CEO.
If shareholders of Citigroup, which with a market cap of almost $100 billion is more than seven times as big as Cigna, were upset with a $15 million CEO pay package, Cigna’s shareholders just might agree with CtW and Juan Figueroa that David Cordani might not deserve that 25 percent pay hike.
SuperShuttle: A job or a business?
Okieriete Enajekpo needs money.
It’s not that the Nigerian-born Maryland resident is unemployed.
But as a driver for the airport van service, SuperShuttle, he must pay the company upwards of $900 a week before he takes home any money of his own.
And going into his fourth day this week in January, Enajekpo is still more than $100 short of paying off his weekly debt and starting to earn cash for himself.
“People back home [in Nigeria] think, ‘Oh you’re in America so you must be doing well,’” he says. “They don’t understand.”
It wasn’t always like this.
Once, drivers of this ubiquitous blue-van airport shuttle service were full-fledged employees, earning a moderate (and dependable) salary. But over the past 13 years SuperShuttle has transformed its cadre of drivers into so-called franchisees — what the company calls independent business owners. In doing so, SuperShuttle has shifted, in its own words, “hard to manage variable costs from the company” to the drivers, making “gross profits more stable and predictable.”
“It was too expensive and, frankly, almost all of our businesses were losing money,” says Thomas LaVoy, chief financial officer of SuperShuttle.
Some drivers say the shift has allowed them greater flexibility and a chance to start their own business. But Enajekpo and hundreds of SuperShuttle drivers across the country say the changes have done more harm than good — and in a series of lawsuits claim the company doesn’t allow them independence and is cheating its drivers out of wages and benefits they should be entitled to as employees.
“It's really a big racket,” says Mack Green, a Minneapolis driver who is also suing SuperShuttle. “It's a good company for someone in the company. But the way they have it operating, they could never lose, because the driver is responsible for everything.”
SuperShuttle disagrees. “We offer an opportunity to independent business people who want to be in business for themselves a solid foundation, a good company, association and the means with which to be successful,” says Judy Robertson, head of franchising at SuperShuttle. “How a franchisee operates a business really is dependent on a franchisee, their drive. But I believe we offer a good arrangement.”
Challenges to the model
Good or bad, SuperShuttle is not alone in its business model. Franchising is a growing sector. It added jobs three-and-a-half times as fast as the overall economy from 2001 to 2005, according to the International Franchise Association. Though it has struggled since the recession, the association projects the business sector to return to pre-recession employment levels this year.
This transformation of employees into franchisees and independent contractors has been going on for decades. But it has led to a legal problem known as employee misclassification. That is when a company classifies its workers as contractors or franchisees without giving them the required independence. When that happens, the worker loses some labor protections, and the company is exempt from tax payments such as unemployment and workers compensation — a financial loss state and federal government are feeling in their tax coffers.
Yet defining the boundary between legal franchisee or contractor and employee isn’t entirely clear. There’s no single definition of employee, which means that various state and federal regulators, and even the courts, may allow different standards for one company.
That’s certainly been the case with SuperShuttle. Federal regulators have largely stayed out the fray, with the exception of the National Labor Relations Board. In 2010, the NLRB’s regional office in Denver found that SuperShuttle drivers were employees. That meant drivers were allowed to unionize, and they are now in the middle of contract negotiations.
But two other groups of SuperShuttle drivers that tried to unionize were rejected. In a case from Dallas, an NLRB official determined the drivers were independent contractors. In Enajekpo’s case in Baltimore, the regional office did not reach that issue, finding that even if the drivers were employees, they had supervisory responsibilities and therefore could not unionize. Both cases are now on appeal.
A few state regulators have made small efforts to clarify the relationship. Two unemployment agencies, in Maryland and California, found that SuperShuttle drivers were employees and therefore eligible for unemployment insurance. SuperShuttle has appealed both cases.
This lack of action is why drivers have turned to the federal courts, but even there they’ve had little clarity. Though separate class action suits have been filed in New York, California, Florida, Arizona, Minnesota and Maryland, most have stalled because of a clause in the franchise agreement requiring drivers individually arbitrate their cases with the company. Cases in Florida and Arizona have already settled. A proposed settlement in New York suggests that, while the company won’t admit any fault, it’s willing to compensate drivers the amount of their franchise by arranging to sell it.
SuperShuttle declined to comment on the litigation but in court filings vigorously denies that it misclassifies workers.
A long day’s work
It’s still dark outside when Enajekpo, a 44-year-old father known to his friends as Ola, emerges from his townhouse in a modern cul-de-sac development in Prince George’s County, Md., on a recent Friday morning.
Dressed in slacks, a blue jacket and shirt imprinted with the yellow SuperShuttle logo, Enajekpo begins his morning routine.
Maintenance inspection. Check. Vehicle clean-up. Check. Next up: find the morning’s first job.
Sitting inside his still-frigid van, Enajekpo turns on his Nextel monitor to see what jobs are available this morning. Already, 32 vans are lined up at the airport waiting for passengers. Enajekpo knows it will be a long wait so he hopes to find a group heading from his neighborhood to the airport.
There’s one job at 7:25 a.m. for $64, just minutes from his house. He tries to bid for it but the monitor won’t let him.
“There’s no reason this job shouldn’t be popping up,” he says. “But this happens all the time.”
He shuts down the system, and reboots it, hoping the gig won’t disappear by the time he logs in again. This morning, he’s in luck.
But after he accepts the job, he finds it comes with a slight hitch: one passenger had a coupon, bringing Enajekpo’s take down to $60 because drivers must take all company discounts.
Still, Enajekpo doesn’t complain too much. Any money will help, especially this week when he already owes SuperShuttle $1,054.36. There’s a $197.59 fee to pay down his franchise purchase, a $179.20 fee for his van lease, $144.31 to cover insurance and a weekly $500 system fee for using the SuperShuttle reservations and equipment. He also has $33.35 in other fees SuperShuttle charges him for customer discounts or additional booking fees the company incurs when passengers sign up through third-party websites like Expedia. Enajekpo also owes SuperShuttle $79 from last week, when he didn’t make enough money to cover his debt. On top of all this, he’ll have a couple hundred dollars to pay the company in revenue sharing fees — 10 percent of fares for runs to the airport and 27.5 percent for runs from the airport, which includes an additional fee paid to the airport.
A world of debt
That’s just this week. Enajekpo’s debt began the day he signed up for SuperShuttle in 2004 and bought a 10-year franchise.
It wasn’t difficult. But it wasn’t cheap either. A 10-year franchise costs drivers between $15,000 and $40,000, depending on location, SuperShuttle’s Robertson says. At Baltimore-Washington International Airport, it costs $25,000.
The problem: virtually no driver has the money to pay up front.
So SuperShuttle, owned by the European giant Veolia Transportation, offers a financing system, usually over a seven-year period. It’s this loan that keeps drivers indebted to the company. The interest rates are fixed at a relatively high rate — between 12 and 15 percent, depending on the market — which means drivers can end up paying the company upwards of $60,000 by the time they’re done. (Baltimore drivers pay 15 percent interest.)
Drivers have several other costs. The first is the van. Many do not own one and instead lease a van from a SuperShuttle affiliate, Blue Van Leasing, where interest on the lease can go to 15 percent. Even if drivers do have their own van, SuperShuttle requires them to get a new one about every five years. Green, the Minneapolis driver, says he’d just paid off his van and was finally making money when SuperShuttle forced him to get a new one. “But it was a good, running van and it passed all these inspections,” he says. “They are in the business of selling vans.”
Drivers then rack up a weekly debt for the all-encompassing system fee, which drivers must pay whether or not they work. (They don’t get sick days or vacation days, but they can hire a relief driver to drive for them.) In Baltimore, that means drivers with a 10-year franchise owe the company a minimum $19,500 per year for the system fee alone.
Robertson, of SuperShuttle, says the system fee is important because most airports require SuperShuttle to make a minimum payment to the airport regardless of how much the company earns — an amount she says ranges from $200,000 at small airports to $1.4 million at Los Angeles International Airport.
These fees from franchisees all add up to big bucks for SuperShuttle. In Maryland alone, the company made about half of its 2010 revenue ($4.9 million) from unit franchise sales. Nearly all the rest came from reservations ($5.2 million), according to franchise disclosure documents.
This model has allowed the company to expand from 20 airports in 1999 to 33 airports in 2012, says SuperShuttle’s LaVoy. He says franchising has helped with turnover, once at 185 percent among drivers and now around 10 to 15 percent.
A pro or a con?
For some drivers, the arrangement works well. Pat Alden, 62, lives in Baltimore County, Md., and has been driving a SuperShuttle van since 2004. Alden started off as a relief driver for another franchisee and soon got her own franchise.
“I’m here because I want to be self-employed,” she says. “I chose this because of the flexibility.”
That flexibility is particularly important for Alden, who has spent most of her life running a series of small businesses. As a single mother of three — two with special needs — she often has to help her now-grown children with errands. Just the other week she was able to log in at the airport to wait in line for a job and still make it to the mechanic to get her son’s car fixed.
“I wouldn’t have been able to do that if it was a short wait,” she says. “So, is that a pro or a con?”
Sitting in her van on a recent morning she points out that even though she’d logged in at 3 a.m., she’d gone home to sleep. And while she’s still waiting in her van near the airport at noon, she’s going over papers for her mother’s estate. “So, am I really working now or not?” she says.
Alden estimates that, after expenses, she takes home around $30,000 a year.
“Nobody promises you how much you’ll make when you’re self-employed,” she says. But, she adds: “I feel fortunate that I’m not looking for work. Many people with all sorts of good degrees are unemployed. It’s a tough environment.”
Michael Adenugba, 53, a Nigerian immigrant, agrees. He began driving a SuperShuttle van eight years ago, but since he paid off his franchise he has a driver working it full-time and is leasing a Cadillac taxi run by SuperShuttle that he now drives instead.
“This is not a job that can make you rich — but just for you to survive,” he says.
A laundry list of rules
But drivers like Enajakpo and others who’ve filed lawsuits argue that the company makes it impossible for them to make enough and be independent.
The job certainly comes with a lot of no-can-dos. Drivers can’t use their van to work for any other company. They can’t advertise their services. They can’t refuse a job when they’ve been waiting for hours at the airport and only get one passenger.
There are also a number of musts. They must pay for their own gas and maintenance.
They must keep their van clean and it must look a certain way inside and out. (Which includes painting it blue with the SuperShuttle logo and putting in a laundry list of signs including one saying they accept credit cards and one banning smoking.)
They must wear one of several uniforms. Among the items they can’t wear: a sweater or baseball cap without a SuperShuttle logo.
And they do get penalized. When former Baltimore driver Fred Tinsley was cited on Sept. 17, 2009, for wearing “non-uniform items” including a “white shirt without a tie, shirt tail out, brown sandal type shoes,” he was given three days to comply or lose his franchise.
Too many franchises?
Some drivers also say it’s much harder these days to get enough work. They say that’s because SuperShuttle has been increasing the number of drivers, which hurts their ability to make money.
In Maryland, SuperShuttle had 62 drivers at the end of 2006 and by 2010 had 84. But its revenue has hovered around $10 million for the past few years.
SuperShuttle attorneys wrote in a letter to state regulators that it “does not knowingly or intentionally increase the number of franchisee-drivers beyond the level that it believes can be reasonably sustained over time.”
SuperShuttle’s Robertson adds: “I personally don’t believe that there’s a system set up that requires franchisees to spend an exorbitant number of hours per day working.”
But Enajekpo says that he’s seen the amount of work he gets slowly erode since he first started. It’s 8:30 a.m. when he drops off the two passengers at the airport from his $64 bid. He logs into the system to line up for the next run from the airport. He’s number 36 in line. So Enajekpo pulls up his van to a nearby Shell station and begins to wait.
“It’s going to be a while,” he says, pointing to a row of vans lined up at the same gas station.
Several drivers are sleeping inside their vans. “Some of them have probably been here since 3 a.m.,” he says. (Enajekpo also keeps a blanket and pillow in his van.)
Soon a red car drives by, slowly surveying each of the vans. It’s the manager who comes around to inspect drivers’ vehicles and uniforms, Enajekpo says.
The clock ticks slowly. At 4:10p.m., he’s finally called to pick up passengers. He gets two, and it’s dark again by the time he arrives home at 7:15 p.m. He looks down at the day’s tally: $150 earned in fares and $75 spent on gas.
The long fight
This lack of work is part of why Enajekpo began asking management to limit the number of new franchises.
Drivers across the country were also complaining about this issue. And in 2008, Tom Vitale, chief operating officer for Veolia’s On-Demand Division, wrote drivers a letter responding: “The only way for the company to provide all of this support which is critical to the success of your business as well as ours is to charge fees whether fixed or variable in nature. … The bottom line, yours and ours, is not going to change.”
Then, in 2010, SuperShuttle got a new contract with BWI, which increased airport fees from 15 to 17.5 percent of outbound fares — a difference drivers would have to make up. “We realize this change will be more of a financial hardship for many of you,” the company wrote in a memo to drivers, adding that it needed to raise payments in order to get the contract.
Enajekpo knew that would be hard. Though the company paid him $75,787.18 in 2009, after all his expenses and paying a relief driver Enajekpo was left in the red; His 2009 tax returns showed his income as -$2,665.
At the end of 2010, Enajekpo and colleagues took their case to the NLRB, arguing that they were really employees and should be able to unionize. When they lost, they turned to regulators: the Maryland Aviation Administration, (which spoke to the company but says it wasn’t responsible for labor oversight), the Public Utilities Commission (which says it didn’t have jurisdiction), the state Department of Labor, Licensing and Regulation (where the unemployment claim remains on appeal), and of course, federal court, where he finally settled with the company earlier this year.
John Singleton, a lawyer who has represented the group of drivers before state agencies and the NLRB says: “You’ve got a real problem here because you have different agencies of the state of Maryland, all designed to protect certain groups of people, failing to do their job.”
Enajekpo put it more bluntly in a letter to U.S. Attorney General Eric Holder. The state’s inaction has given the company, he wrote, “carte blanche freedom to exploit minority workers trying to eke a living and fulfilling part of their American dream.”
IMPACT: Citizens sue Iowa plant over air pollution
In the Mississippi River town of Muscatine, Iowa, concerns about a corn processing plant that belches smoke and ash over the South End neighborhood have festered for years.
On Monday, those living in the plant’s shadow took a step that, until recently, would have seemed unlikely at best: They sued the plant’s owner, Grain Processing Corp. — a vital piece of the town’s economy and a political force in Iowa.
For years, the lawsuit alleges, residents have put up with constant pollution that has damaged their property and affected their health. The Center for Public Integrity detailed the persistent haze hanging over the community and the company’s long history of run-ins with regulators as part of its “Poisoned Places” series with NPR last year.
“We’ve reached a tipping point in Muscatine,” said Tony Buzbee, a Houston lawyer with a history of winning high-profile environmental cases who has agreed to represent the residents. “I think that you’re going to see hundreds and hundreds of people who have the courage to stand up and say, ‘We’re in the right, and we’re not going to take it anymore.’ ”
Buzbee joins Jim Larew, who was general counsel to former Gov. Chet Culver, and Des Moines lawyer Andrew Hope in representing the residents, who are seeking to make the case a class action that anyone living within three miles of the plant could join.
The petition filed Monday, Buzbee said, is “just the tip of the iceberg.” He plans to file hundreds more cases. “It’s going to cost a lot of money,” he said. “It’s going to be a big fight.”
Grain Processing Corp. spokesperson Janet Sichterman said the company, known as GPC, hadn’t received a copy of the lawsuit and had no comment on it.
Before filing suit, Buzbee commissioned tests of the air near the plant, which sits just across the street from the neighborhood known as the South End. Levels of one compound, acetaldehyde, were “dangerously high,” the petition alleges. The finding is crucial, Buzbee said, because, unlike some of the pollutants in Muscatine’s air, acetaldehyde could come from only one place: GPC.
As the Center documented, GPC reported releasing more acetaldehyde — a substance the Environmental Protection Agency considers a probable carcinogen — than almost any plant in the country in 2010. A state inspector has repeatedly noted a “blue haze” coming from some of the plant’s smokestacks that could indicate the presence of acetaldehyde. The state began studying these and other toxic emissions from GPC in 2010, but the effort has since been placed on hold.
The lawsuit says GPC “has used, and continues to use, worn machineries, outdated manufacturing technologies and outdated pollution-abating technologies while at the same time increasing production.” As the Center found, regulators have allowed GPC to avoid upgrading its pollution-control equipment, even as many of its competitors have modernized.
For example, a state inspector unsuccessfully pushed his bosses to make GPC install a baghouse — a large structure to house filters that would remove pollutants from smoke leaving a stack. The company already owned the device but, after regulations requiring it were vacated, refused to hook it up.
GPC also faces potential enforcement cases from both state and federal regulators. The day after the Center’s first story about Muscatine, the state filed a lawsuit, alleging that GPC had released more air pollution than allowed for at least the previous 18 months. The allegations relate to the same air pollution rules that the company had agreed not to violate as part of a settlement agreement with the state in 2006.
In March, the EPA sent GPC a notice of violation, accusing the company of repeatedly violating air pollution rules between 2007 and 2011 and failing to report episodes when pollution exceeded allowed limits. Though the agency would not elaborate on the allegations, the Center has reported that a state inspector began raising concerns as early as 2008 that GPC appeared to be misusing exemptions to conceal frequent violations.
GPC has announced that it plans to spend about $100 million to upgrade much of the plant, including some pollution control equipment. Some of the work is scheduled to be finished in 2014. But state regulators have said the improvements may not go far enough to ensure the area meets EPA standards designed to protect public health.