From the water you drink to the roads you drive to work, to the morning newspaper you read, Wall Street firms are playing an increasingly influential role in daily life. So says a compelling new article in The New York Times, “This Is Your Life, Brought to You by Private Equity.” For more, we speak with New York Times reporter Danielle Ivory, one of the contributors to the series as well as co-author of the recent article “When You Dial 911 and Wall Street Answers.”
This is a rush transcript. Copy may not be in its final form.
JUAN GONZÁLEZ: When you woke up this morning, chances are your morning routine was touched in some way by a private equity firm. From the water you drink to the roads you drive to work, to the morning newspaper you read, Wall Street firms are playing an increasingly influential role in daily life. So says a compelling new article in The New York Times, “This Is Your Life, Brought to You by Private Equity.” The multimedia infographic chronicles how, since the 2008 financial crisis, private equity firms have bought underperforming businesses and worked to maximize profits, only to sell them off.
AMY GOODMAN: Now Wall Street investors are controlling critical public services in municipalities across the country, including Fire and ambulance. According to the report, under the control of private equity firms, response times for fire and ambulance services have often increased, companies have fallen into bankruptcy, residents have been made to pay higher costs for poorer service. Well, for more, we’re joined by New York Times reporter Danielle Ivory, one of the contributors to the series, as well as co-author of the recent article, “When You Dial 911 and Wall Street Answers.” Welcome to Democracy Now!, Danielle.
DANIELLE IVORY: Thank you very much for having me on.
AMY GOODMAN: So why don’t we start there: When you call 911, Wall Street answers? What do you mean?
DANIELLE IVORY: Right. Well, my colleagues and I have been spending the last year looking at how private equity has increasingly crept into the lives of Americans, and especially into critical services, so emergency services, the fire department. So, what we looked at are companies that are taking over ambulance companies. They’ll—you know, if you dial 911 and the ambulance picks you up, you dial 911 because your house is on fire and the fire department shows up, but it’s actually controlled by a private equity company.
AMY GOODMAN: What do you mean?
DANIELLE IVORY: So, for example, we looked at two companies very, very deeply: Rural/Metro and TransCare. So, Rural/Metro is a company that was backed by Warburg Pincus, taken into bankruptcy and then taken out of bankruptcy by Oaktree Capital Management, among other investors. And this is a company that does ambulance services nationwide, and it also does fire services in three states—in Oregon, Arizona and Tennessee. And the two services are a little bit different, so it’s important to separate them. But Rural/Metro, when they pick you up in an ambulance, they may send you a large bill afterwards, they may go after you in court if you don’t pay that bill. And we also found that, on fire, you might think that you’re paying your fire department out of taxes, but, in fact, if you don’t subscribe to Rural/Metro service and you have a fire, Rural/Metro might show up, put out the fire, maybe your house burns down to the ground, and then you get a bill for multiple thousands of dollars. And we found numerous court cases where Rural/Metro had gone after people in court for bills that ranged up to—I think $59,000 was the highest bill that we found.
JUAN GONZÁLEZ: Now, why do you suspect this is occurring post the Great Recession? Is it basically private equity seeking out new markets and trying to carve out sections of government to privatize even further?
DANIELLE IVORY: Right. So, private equity saw this as a growth area. So, firms saw that towns were increasingly cash-strapped and looking to outsource some of these services. They’re expensive. You have to pay for pension plans. So, this was—this was really a bet. And also, we had the emergence of Obama’s healthcare reform. So, with—along with Obamacare, you have this possibility of adding more and more people to insurance rolls. In some ways, that might not have been the smartest bet. What private equity firms thought that they were going to see were more and more people added to insurance that would pay for these bills. But instead, more and more people were added to Medicaid, and Medicaid restricts the most aggressive billing collection practices.
AMY GOODMAN: What happens when these companies go bankrupt?
DANIELLE IVORY: Well, so, in the case of Rural/Metro, they went into bankruptcy, but they were taken out of bankruptcy. So, really, there wasn’t—although there were a lot of worries about the company failing and leaving towns, they stayed in those towns. Services may have gotten poorer. And as we saw in the major markets that we looked at, services did get poorer. For a company like TransCare, TransCare filed for bankruptcy right in our own backyard, in Brooklyn, in February. And that is a company that filed for Chapter 7 bankruptcy, so it closed its doors forever. And towns were left in the lurch. So you had towns that were literally like scrambling to find another company that could come in and perform their ambulance services, and sometimes paying more money for it because of that.
JUAN GONZÁLEZ: I want to turn to an interview that Lynn Tilton, the CEO of Patriarch Partners, did with The Wall Street Journal in 2014. Patriarch controlled TransCare EMS, an ambulance service, as you mentioned, which went bankrupt and closed its doors in February.
LYNN TILTON: One of the major facets of buying distressed companies is buying a brand name that people recognize. And MD Helicopters was the house that Howard Hughes built. I mean, the helicopters go back to the Vietnam era, the first real scout helicopter, the OH-6. And it has this great history and this great legacy, and it was going to disappear. … I buy companies at their deepest, darkest moment. Every company I buy would not be here but for the purchase. OK? So, I go as far down the food chain of the living. And so, that means that not everything is going to make it.
JUAN GONZÁLEZ: That was Lynn Tilton. She’s quoted in your article as saying TransCare, quote, “faced the obstacles inherent to its business model” and that its collapse was due to problems beyond Patriarch’s control. Talk about Tilton’s role in TransCare’s demise.
DANIELLE IVORY: Well, it’s a very interesting thing, because as we talked to Lynn Tilton and Patriarch Partners, they really tried to distance themselves from the company. And I think that’s reflected in the article. They really tried to emphasize that the fund that owned TransCare was solely owned by Lynn Tilton, not directly owned by Patriarch. And what we found is that Lynn Tilton was the sole member of the board for TransCare, which is basically unheard of in the corporate world—really, as one governance expert put it to us, a recipe for disaster. We also found, because we got hundreds of pages of internal emails and also executive meeting minutes from TransCare meetings, that Patriarch Partners executives, including Lynn Tilton, but not limited to Lynn Tilton, were very heavily involved in the company and, as far back as a year ago, were discussing in these meetings that the company might not make it through the weekend, because it didn’t have enough medical supplies.
JUAN GONZÁLEZ: Well, I can see the ambulance services, in terms of they have a regular cash flow in terms of insurance reimbursements or even government, if it’s Medicaid, but what about fire companies? How do these private equities get into fire companies? And how do they get their revenue there?
DANIELLE IVORY: So, fire is a really interesting thing. And I should say that it’s not something that was limited to the private equity ownership of Rural/Metro, but we just thought it was so unusual and interesting, that it would really be irresponsible not to report on it. What we found with this company is that—and they still do this now, and they are not owned by private equity anymore. They’re owned by a company called Envision. It’s a healthcare company that also used to be owned by private equity, is no longer owned by private equity. Rural/Metro has a subscription service that is based on your property size. So, you might pay an annual bill of a couple hundred dollars. And under that agreement, then Rural/Metro will show up, put out your fire, and you don’t pay a dime. But a lot of people don’t really understand that. I mean, you and I, when we pay our taxes, that covers the fire department. So, someone might have a fire, call 911, the fire department shows up, puts out the fire, and then, you know, a few weeks later, they get a bill for $10,000, $15,000. And people just don’t understand that. They don’t understand why they’re getting a bill from the fire department. And then they end up in court. And it really just ends up being this like very stressful situation for some people. And these are people that generally live kind of outside of urban areas; these are people that are living kind of off the grid. So, it’s a really scary thing to suddenly be getting a court summons because you owe, you know, $20,000 to your fire department.
AMY GOODMAN: And for people who don’t understand what private equity is, explain. And explain who is profiting here.
DANIELLE IVORY: Right. So these are companies that are based on Wall Street. And this is a little bit of a generalization, but sort of the basic concept is you have investors that are looking for distressed companies, that are looking for undervalued, underperforming companies. And they want to buy them and make them into better and overperforming companies, companies that are going to make a lot of money, and, in some cases, sell those companies for a lot of money.
AMY GOODMAN: I just wanted to read—I mean, you have this amazing multimedia display on this, and I’d like to talk about that for a moment. But there’s one part where it says, from the—let’s see. It says, “from the clock on your wall to the toilet paper in your bathroom. … Wall Street firms can also be found in your parking garage, where they collect your cash. … Private equity … helps oversee public golf courses in several states … it builds courthouses. … Now [that] you’ve made it to work, you might be sitting inside a building controlled by Blackstone, a huge private equity firm and one of the largest landlords in the country.” Talk about Blackstone. And talk about this every—the idea of this being every aspect of our lives.
DANIELLE IVORY: Well, it really is every aspect of our lives. And some of those aspects are not really critical to your life. I mean, if the clock on your wall has been—the company that makes the clock has been backed by private equity, that probably isn’t going to affect you very much at all. But in this case, Blackstone is one of the largest private landlords in the country and has kind of come in where banks have stepped back from mortgage practices. And what we’ve seen is that they’re making some of the same mistakes that the banks made during the financial crisis or in the up—in the run-up to the financial crisis.
JUAN GONZÁLEZ: And the key aspect of private equity is it’s not required to have a lot of the same transparency that a publicly traded company would have in terms of its regular reports and its trading and who’s investing what in it?
DANIELLE IVORY: That’s absolutely true. So, a public company would have to make more regular reports to the SEC. They also don’t face a lot of the same regulations as banks, as well. It’s just a newer concept, in some ways. And then, in the case of fire and ambulance, private equity companies are regulated, but as ambulance companies. So, something that we found very early on as we were looking at this is that ambulance companies, there just really isn’t—there isn’t a national database of ambulance response times, so it’s very, very difficult to compare ambulances from town to town, from company to company, even within one company from contract to contract. The contracts are all different, and they all ask for different things. So the oversight can be very patchy.
AMY GOODMAN: So, who ultimately is responsible?
DANIELLE IVORY: That is a very interesting question. So, on the topic of ambulances, usually it’s a local health department or the local government, whoever has the contract with the company. But like I said, they can be very, very different. So, for example, we looked at Aurora, Colorado. Aurora recently ended its contract with Rural/Metro, but when they were under contract, they asked for basically everything. They asked for ambulance response times. They were very strict about penalizing if there were any late response times. But very close by, there was another town called Edgewater, which also no longer has a contract with Rural/Metro. It has a contract with a neighboring town that uses Rural/Metro. And Edgewater’s contract had this very interesting thing where it said, I believe, that the ambulance company was required to arrive within five minutes, but then there were no actual reporting requirements, so the ambulance company didn’t have to actually tell them any of its response times. So there was no way that the town could even know if the ambulance companies were arriving within five minutes. With fire, it’s a very, very different thing. In the fire—with fire departments, there’s actually no contract. So, what you’re looking at is an area where the local fire department, the municipal fire department, simply just doesn’t serve that area, and Rural/Metro comes in to fill that gap. And what that means is that there just—there really isn’t an oversight entity at all.
AMY GOODMAN: And, of course, we’re not just talking about economics here, we’re talking about lives. You begin your piece, “A Tennessee woman slipped into a coma and died after an ambulance company took so long to assemble a crew that one worker had time for a cigarette break. Paramedics in New York had to covertly swipe medical supplies from a hospital to restock their depleted ambulances after emergency runs. [And a] man in the suburban South watched a chimney fire burn his house to the ground as he waited for the fire department, which billed him anyway [and] then sued him for $15,000 when he [did not] pay.”
DANIELLE IVORY: Right. I mean, we’re talking about companies that are really interacting with people at the most vulnerable moments of their life. So, even though this is actually a relatively small portion of the ambulance market, we thought it was important to look at, because these really are life-and-death services. In the case of TransCare, which, again, is like right here in New York—or used to be right here in New York—I had paramedics and EMTs going on the record saying that they felt pressure to go into emergency rooms and basically steal supplies, because they were worried that their ambulances were not going to be stocked with critical medications. Really kind of incredible, mind-blowing stuff.
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