Minnesota scrutinizes its pension investments amid child labor probe
Updated 10 a.m.
The Minnesota state agency that oversees public employee retirement funds is a multibillion-dollar investor in a private equity firm that owns a company accused of employing children to clean slaughterhouses, including two plants in Minnesota.
The State Board of Investment has pension money in more than two dozen funds that the Blackstone Group manages. While the fund that controls the company accused of child labor violations is not on the state’s list of investments, Minnesota officials say they are reviewing their positions in Blackstone amid those ethical concerns.
After MPR News asked the board to comment on the state’s investments, the board sent a statement saying in part: “[W]e immediately reached out to Blackstone. In our discussions, we conveyed how seriously we take our role as stewards of capital and reiterated our expectations regarding business and ethical standards. Blackstone conveyed to us that they are aggressively investigating these allegations and take this matter very seriously, on both a legal and human level.”
The child labor accusations surfaced earlier this month when the U.S. Labor Department alleged in a civil suit that Packers Sanitation Services Inc. of Wisconsin, known as PSSI, hired at least 31 minors for overnight cleaning shifts at three meat processing plants, including one in Worthington and another in Marshall in southwestern Minnesota.
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A limited partnership formed by the Blackstone Group purchased PSSI for an undisclosed amount in 2018, according to a report from the Private Equity Stakeholder Project, a financial industry watchdog.
The Minnesota State Board of Investment, which oversees public employee pensions and other state assets, has contributed $2.3 billion to Blackstone funds, according to minutes from the agency’s Aug. 24 meeting, and has committed $3.65 billion overall to those funds.
‘Zero tolerance for any violation’
PSSI’s workplace problems have been on the radar of federal investigators for several years.
Federal Occupational Safety and Health Administration officials conducted multiple investigations after PSSI workers were injured or killed on the job, said Jim Baker, executive director of the Private Equity Stakeholder Project.
Among its findings, OSHA in 2019 discovered that a PSSI employee working at a poultry processing plant in Teachey, N.C., was killed after getting trapped in a piece of equipment. Five months later, a PSSI worker at a plant in Eufaula, Ala., was decapitated while cleaning a chiller.
Private equity firms are known for sharply cutting costs at the companies that they acquire to maximize the return on their investments.
“We’re concerned that some of that cost cutting could be directly impacting worker safety,” Baker said in an interview with MPR News.
The watchdog group cites a 2017 report from the National Employment Law Project, a nonprofit worker advocacy group, which found that from January 2015 to September 2016, PSSI reported 24 severe injuries to OSHA among its 17,000 employees. By comparison AT&T, which had 280,000 workers, reported 28 severe injuries.
In recent years the Minnesota State Board of Investment has highlighted efforts to adhere to industry ethics standards. Gov. Tim Walz, Attorney General Keith Ellison, Secretary of State Steve Simon and State Auditor Julie Blaha all serve as board members of the pension investment agency.
In 2019, the agency agreed to the Principles of Responsible Investment, which urges signatories “to understand the investment implications of environmental, social and governance (ESG) factors.” The following year, Walz and the state’s other three constitutional officers signed a resolution reinforcing the state’s commitment to those guidelines.
In a statement, Blackstone said it's "committed to cooperating with the Department of Labor" and that any violations of the company's "zero tolerance compliance policies" are “completely unacceptable.”
PSSI said in a statement it “has an absolute company-wide prohibition against the employment of anyone under the age of 18 and zero tolerance for any violation of that policy — period" and that it uses the U.S. government’s E-verify system for new hires.
While “rogue individuals could of course seek to engage in fraud or identity theft, we are confident in our company's strict compliance policies and will defend ourselves vigorously against these claims.”
In a later statement to MPR News, a company spokesperson said, "We care deeply about our PSSI family and grieve any tragic accident involving our employees," and that in the incidents cited "unfortunately existing PSSI safety protocols were not followed" and "we have taken action to further strengthen and enhance our safety procedures to protect employees."
In a separate statement disputing the findings of the Private Equity Stakeholder Project report, Blackstone said that “worker safety at PSSI has been the highest priority since day one of our 2018 investment,” and PSSI has seen a “nearly 60 percent reduction in its OSHA recordable injury rate” after “more than tripling the number of full-time safety personnel.”
While state officials say no pension money is invested in the Blackstone fund that owns PSSI, Baker said major ethical concerns remain.
“Saying ‘we’re not in this specific fund’ misses the point of the question. How is the state ensuring that its money is being responsibly invested in companies that ensure adequate labor standards that follow the law?”
In a temporary restraining order issued last week, U.S. District Judge John Gerrard said PSSI “shall immediately cease and refrain from employing oppressive child labor.”
PSSI has filed court documents indicating that it plans to challenge the Labor Department’s request for an preliminary injunction, which would extend the restraining order.
Gerrard set a hearing for Nov. 23 to give PSSI an opportunity to respond to the allegations, but rescheduled the hearing for Dec. 7 at PSSI’s request.