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Rapacious LA Vulture Capitalist Firm: Ruins Job, Communities for Profit

Real live vultures literally scavenge old bits of food as they circle the old loading docks of the stripped down and abandoned Hufcor factory in Janesville, Wisconsin, the factory whose 160 workers were victimized by OpenGate, a “private equity” based in Los Angeles practicing “vulture capitalism.”

Hufcor is a perfect metaphor for this particularly rapacious form of corporate power. Led by aspiring celebrity CEO Andrew Nikou, OpenGate followed the now-familiar private equity game plan of buying a company, taking out as much profit as possible, and selling parts of the original company in difficulty, leaving workers and communities strained. out and set aside.

This scenario often ends up in bankruptcy court, where the CEOs of the private equity firm are absolved of any financial liability to workers and shareholders.

Last fall, OpenGate closed the Hufcor factory in Janesville, which for 120 years profitably produced folding doors. Accordion style doors are used by schools, convention halls and hotels, among others. The company was acquired by OpenGate in 2017.

Last fall, Opengate ended the Hufcor operation in Janesville despite its profitability. The shutdown vaporized 160 union jobs pay in range $20.92 per hour. Hufcor had been a staple in the community for 120 years,

Upon its closure, OpenGate began shipping work to a new, low-wage factory in Monterrey, Mexico.

But the geniuses at OpenGate who promoted the new factory in Mexico neglected to consider the severe disruption to supply chains so intertwined with the Janesville location. Other forms of mismanagement abounded in OpenGate’s hands.

The result: Less than a year after the Mexican shutdown and job transfer ended, Hufcor went to bankruptcy court in Rock County, Wisconsin. Hufcor owes its suppliers and customers about $44 million with just $5 million in assets.

If the usual scenario unfolds, Hufcor’s creditors will be paid pennies out of Hufcor’s meager assets. Under the legal rules under which private equity now operates, OpenGate and its major partners will walk away owed nothing to creditors, suppliers and workers. OpenGate and Nikou and its other CEOs take no hits. Instead, suppliers and customers will receive mere pennies on the dollar from the $5 million in assets and whatever remnants of the Hufcor spinoff may bring to market,

This is precisely how private equity firms, an increasingly important sector of the American economy, operate in American communities. The term “private equity” itself is a conscious rebrand of the “leveraged buyouts” that gained prominence – and wide infamy – for job destruction in the 1980s, Carter Dougherty noted, communications director of Americans for Financial Reform, a watchdog and advocacy group. “There are more private equity firms than listed companies. Private equity bought $1.2 trillion in 2021, and they have an additional $3 trillion in “dry powder” – capital they can use.

OpenGate, with its North American office based on the 30e floor of a glittering Century City office tower in Los Angeles, has a $5 billion portfolio. Clearly, an obvious source of pride for OpenGate is its European headquarters, centered in an elegant Parisian office displayed with love in the company’s webpage video. OpenGate states that its mission is to “create transformative value” in the companies it buys and then manages.

However, the “transformative value” has often been rather measured by the stops of its acquisitions as with Hufcor. Spokeswoman for OpenGate’s public relations firm, Meredith Bishop, insisted that moving Hufcor jobs to Mexico was vital “to ensure Hufcor’s long-term survival and viability.”

UIE-CWA Local 84811 (part of the Communication Workers Industrial Division) recognized that their own long-term survival was at stake given the scarcity of family support jobs in the Janesville area. . The union staged several months of high-level resistance, with rallies in Janesville and Los Angeles, picket lines, videos and electronic signs to raise awareness of the impact of the impending closure in Janesville to workers, the community and suppliers. The union has also won the support of many elected officials, including Wisconsin Governor Tony Evers and many city leaders. As the shutdown finally took place, the union’s warning left a permanent warning about private equity in the minds of many Wisconsin citizens.

At Hufcor and elsewhere, OpenGate’s self-proclaimed ‘human touch’, ‘trust’ and commitment to ‘transparency’ have proven to mean workers are kept in the dark until their jobs suddenly disappear. in a puff of smoke. In several cases, workers showed up for work only to find the operation closed and a printed notice that their employment had been terminated. Federal WARN Act requires 60 days notice when an operation is closed.

At the Golden Guernsey Dairy in Wisconsin, workers experienced an unannounced closure in 2013. It took eight years of dogged legal battles by the Teamsters union and finally the action of state Attorney General Josh Kaul for the workers receive the full back pay of $1.1 million that was owed to them.

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Former Hufcor workers face a difficult future due to an ongoing shortage of nearby family jobs. Janesville was already in a state of distress before Hufcor’s move, still reeling from the impact of a massive GM plant closure in 2008. an american story and Brad Lichtenstein’s PBS movie How is Janesville )

Michelle Hilzik, a member of Local 84811, spent 23 years at Hufcor, while her husband spent 37 years there. For them, finding a well-paying job anywhere near Hufcor level remains an ongoing struggle. After working three low-paying jobs in three months in a vain hope of getting something better, she explained, “I don’t want anyone going through what we have,” she said, her voice trailing off. slightly brittle. “We could have lost our house. What happened wasn’t fair or fun. We both work, but we don’t have health insurance.”

Hilzik found herself studying private equity firms when she returned to school thanks to business adjustment aid benefits the union won after the shutdown. ‘I felt like I was reading my own story over and over again,’ after reading many stories about workers facing job loss after private equity firms looted their businesses and then put them on the hook. unemployment.

OpenGate’s record, in addition to Hufcor and Golden Guernsey, would fit easily into a playbook on the most unscrupulous conduct of private equity firms that abandon workers and communities, while remaining immune to any liability:

  • The Pennysaver in Brea, California, where 678 workers lost their jobs without notice. Many workers’ final paychecks have bounced.
  • Hamilton Scientific in Reynosa, Mexico, Wisconsin and Texas. Lawsuits have been filed in Texas for violations of WARN. Operation Reynosa attracted media attention because it would have already been invaded by a Mexican drug cartel reportedly linked to “El Chapo” Guzman when OpenGate bought him.
  • Melting Paperboard in Connecticut. Fusion Paperboard was shut down by Opengate just months into a three-year union contract and failed to repay $2 million in Connecticut state grants.

But armed with the legal immunity afforded to private equity titans, the general partners of these Andrew Nikou ventures operate in a different universe.

Nicou frequents restricted circles such as the Innovation Board of the XPrize foundation, whose list of starred directors includes renowned CEOs. Elon Musk and Larry Page, co-founder of Google. Nikou, while depriving many one-off assets like Hufcor of the capital needed to survive, managed to create his own Andrew Nikou Foundation. This foundation even proclaimed itself at one point on its website, without the slightest irony, as a resource that “can improve the lives of disconnected and oppressed people” – obviously not referring to the disconnected victims of its maneuvers. Reflecting his apparent desire to network with big celebrities both in the boardroom and in Hollywood, Nikou uses the ANF at meet music and entertainment stars like star Pharell Williams, through the foundation supporting Williams’ YELLOW project for young people.

Until recently, Nikou also found a seat on the advisory board of the prestigious Hammer Foundation, whose roster is filled with some of LA’s biggest names. Nicou’s presence on the board outraged many Hammer staff, who saw a huge conflict between the foundation’s socially conscious mission and the social wreckage repeatedly caused by Nicou and his private equity firm. .

Despite the major players surrounding Nicou and the gleaming offices he occupies, operations like OpenGate are today generating significant movement. The forces of workers, consumers and other socially conscious groups are rallying behind the Stop Wall Street Looting Act to finally demand accountability from private equity firms that maximize profits while taking virtually no risk due to their immunity from any significant regulation.

The “Stop Wall Street Looting” measure would establish a strict set of protections for the public against private equity directors who bear no responsibility or liability for the debts incurred by the companies they own. Private equity directors are also lightly taxed due to the “carried interest loophole” (preserved in the insistence of Senator Kyrsten Sinemathe conservative Democrat from Arizona who benefits greatly from the financial sector).

The accountability of private equity firms is at the heart of the Stop Wall Street legislation. “We need to adjust liability laws and include the general partners of private equity firms so they can be held financially responsible for their actions.

Senator Elizabeth Warren, who was a key force behind the proposal, summed up the basic rationale for the law: “For too long, Washington has looked the other way while private equity firms have bought up companies, taken them into debt, stripped of their wealth and walked away unmolested, leaving workers, consumers and entire communities to pick up the pieces.

But given the enormous financial leverage enjoyed by the financial industry, ending debacles like Hufcor will depend on committed Democratic majorities in both chambers.