Find the privatizers and profiteers at OutsourcingAmericaExposed.org.
When Wall Street collapsed the economy in 2008, one company eager to buy public assets from cash-strapped governments proclaimed, "Desperate governments are our best customer!” Across the country, for-profit companies are engaged in a hostile takeover of our schools, roads, prisons, drinking water, and even government itself. CMD's "Outsourcing America Exposed" project will give taxpayers the tools they need to identify these privatizers and profiteers, their eye-popping salaries, the "fine print follies" contained in their contracts that put taxpayers on the hook -- even for work not done -- and how taxpayers can take back control of public assets and public services.
NEW REPORT - Pay to Prey: Governors Facilitate the Predatory Outsourcing of America’s Public Services
Maggots, drug smuggling, sex with inmates. As if the news were not already bad enough, shocking new allegations of a murder-for-hire plot are emerging from Michigan as the media digs deeper into that state’s failed outsourcing of prison services. Michigan Governor Snyder continues to stand behind failed food contractor Aramrak, who spent $570,000 lobbying in recent years.
In Pennsylvania, Gov. Corbett outsourced millions of dollars in state legal contracts to outside law firms (including one that later defended his unconstitutional voter ID bill) that are among his biggest campaign contributors. He is attempting to privatize liquor sales in a move that would benefit another group of deep-pocketed contributors.
In Ohio, Gov. Kasich’s privatized economic development agency has failed to deliver promised jobs, but is receiving a huge stream of funds from Ohio liquor sales. Exempt from open records, JobsOhio has little oversight or accountability.
In Florida, Gov. Scott championed initiatives to drug test state employees and welfare recipients, benefiting his drug testing company. Now he is privatizing Medicaid services in Florida after his family’s 'blind trust,' run by an associate, loaded up on healthcare investments.
In Maine, Gov. LePage gave a $1 million contract to a consultant to assess the state’s Medicaid program and the possibilities of privatization. The contract was cancelled after the firm’s report touting the benefits of privatization was found to contain plagiarized passages and erroneous data, but already a half million in taxpayer dollars had gone out the door.
While large corporations are the winners, all too often taxpayers are the losers when transparency, accountability and the public interest are sold out to for-profit firms.
Pennsylvania’s Office of General Counsel “serves as the Governor’s in-house legal counsel,” providing the executive branch with “expert, responsive and cost-effective legal services … for the benefit of the public.” In addition to the 498 attorneys employed by the state, the handling of legal business is frequently outsourced to outside counsel. Last year, the total bill for private law firms – footed by the taxpayers – amounted to a whopping $32.7 million in 2013 and $100 million over three years, according to the Pittsburgh Tribune-Review.
Outside counsel, it has been pointed out, is an insider’s game. A comparison between the firms used as outside counsel last year and their contributions to Corbett’s gubernatorial campaign of 2010 makes for interesting reading.
There’s a lot of money at stake in Ohio charter schools, which as a group will receive almost $900 million in 2014. Charters get about $7,200 per student in taxpayer funding, compared to about $3,500 per student in traditional public schools.
On paper, Ohio’s charter schools are operated by non-profit organizations whose governing boards hire management companies to operate the schools. The boards are supposed to have a strong oversight role and have the power to fire charter operators if they don’t measure up.
When he was elected in 2010, Kansas Governor Sam Brownback began to slash core government services and privatize the rest. His austerity politics resulted in the state being downgraded by S&P in August 2014, and his privatization initiatives have also drawn criticism, causing one leading Republican to state, “I had hoped that it wouldn’t be as extreme as it’s been … what we didn’t know was that Sam would use this state as crash test dummies for his own fiscal experiments.”
Kids receiving child support payments from absent parents would be among Brownback’s first crash test dummies.
Around the world, private firms have been given “carte blanche rights to mine local groundwater supplies at the expense of local populations, say experts.” In 1997, Swiss food giant Nestlé signed a contract with the privately- owned water services provider in Fryeburg, Maine, to buy freshwater in bulk for its Poland Spring brand of bottled water. Fearing that large-scale commercial water exploitation would lead to groundwater depletion and the Saco River drying up, the town of Fryeburg enacted a Land Use Ordinance that required that any company pumping more than 10,000 gallons of water a day get approval from the planning board. With a constant stream of litigation and appeals, however, Fryeburg Water Co. was able to buy time while continuing its moneymaking sideline business without interruption.
Ideological slogans often trump facts when it comes to the outsourcing of public services. When independent studies are commissioned, the conclusions are often disregarded. In some cases, however, there seems to be solid research supporting the cost-efficiency of privatization. Such was the case in Michigan – at least at first glance.
Suffering from lung cancer? Here's a Tylenol and some warm compresses. Are your intestines escaping? Not to worry; here's some K-Y Jelly to shove them back in.
Between 2008 and 2013, Corizon Health -- the country's largest prison health care provider -- was sued 660 times for malpractice. But Governor Rick Scott's administration failed to take note of this history when it awarded Corizon a $1.2 billion contract in 2011.
Macquarie Group Limited is a publicly-traded (ASX:MQG) for-profit global investment bank that describes itself as “a global provider of banking, financial, advisory, investment and funds management services.” Part of the international business, Macquarie Infrastructure Company, LLC, is a Delaware, Maryland limited liability company that is publicly traded in the United States (NYSE: MIC). The investment banking service and its numerous subsidiaries are involved in privatization of government assets across the board, including: toll roads, airports and airport related infrastructure, bulk liquid storage, ports, communications, media, electricity and gas distribution, water utilities, renewable energy, and rail and ferry assets across 25 countries. The international group had revenues of $6.7 billion in the fiscal year ending March 31, 2013. The U.S. LLC had revenues of over $1 billion in the fiscal year ending December 31, 2012. On May 2, 2013, Macquarie Group announced a net profit of $846.8 million for ordinary shareholders, up 17 percent since March of 2012.
Transurban Group is a for profit, publicly traded (ASX: TCL) toll road owner/operator headquartered in Melbourne, Australia, with holdings in the United States and Australia.  Transurban Group had revenues of $1.1 billion and consolidated net profit of $58.3 million in the fiscal year ended June 30, 2012.Transurban USA, Inc. is the North American subsidiary of Transurban Group, with two current projects underway in the United States. Transurban USA is a corporate funder of the American Legislative Exchange Council (ALEC), a major force for the privatization of public services in the United States.
Transurban describes its role in the international infrastructure business as "developing pragmatic solutions to manage congestion and to do this in a disciplined, and ultimately sustainable way." Transurban CEO Scott Charlton urges governments to engage in "capital recycling," which is the selling of public assets to fund new infrastructure projects operated through public-private partnerships that place more risk on private companies, but also public control and accountability.
Waste Management, Inc. — Outsourced Waste Collection
Waste Management, Inc. (known as Waste Management or WM) is a publicly-traded (NYSE:WM) for-profit waste management company headquartered in Houston, Texas. It is the largest waste collection corporation in North America. It is in the business of waste collection and transfer, recycling and resource recovery, and waste disposal for residential, commercial, industrial and municipal customers in North America. In the United States, waste management services have traditionally been provided by municipalities and public employees, but starting in the 1980's the privatization of this sector accelerated. According to a 2007 survey of local governments, some 50 percent of solid waste management is now provided by major for-profit firms like Waste Management. WM has been a driving force in the privatization of these services. WM workers are paid significantly less than their public sector counterparts. The number of deaths in this dangerous industry was higher among workers at for-profit companies than among public sector workers from 2003 to 2009.
American Water Works Company, Inc., known as American Water, is a publicly traded (NYSE: AWK) water utilities and sewage treatment company headquartered in Voorhees, New Jersey. It is the largest for-profit provider of water and wastewater services in the United States where 86 percent of consumers receive their water services from public municipal water systems. According to American Water's 2012 Annual Report, it supplies "an estimated 14 million people with drinking water, wastewater and other water-related services in over 30 states and two Canadian provinces" and employs approximately 6,700 as of 2012. American Water has been a major force behind the privatization of water services and has come under fire from communities across the country for charging high rates and providing poor services. In 2012, American Water generated $2.9 billion in total operating revenue. CEO Jeffrey Sterba has made over $8 million in the three years he has headed up the company.
In 2011, Citigroup economist Willem Buiter predicted that "water as an asset class will, in my view, become eventually the single most important physical-commodity based asset class, dwarfing oil, copper, agricultural commodities and precious metals." But some American cities are fighting this commodification of precious water resources and have engaged in successful campaign to take back or "municipalize" public water utilities.
CH2M Hill is an "engineer-procure-construct" company offering a wide range of services to industries and governments. It is based in Englewood, Colorado and, according to the company's website, has locations in 122 countries and 28,000 employees. Although CH2M Hill promotes its image by advertising its government contracts in Iraq and in New Orleans after Hurricane Katrina, it is heavily focused on privatizing public infrastructure and waste systems for local and state governments. It has been criticized for its "contract cities" or "outsourced cities" and its expansive model of privatization of government services. For the 12 months ended December 31, 2012, the company's total revenue was $6.2 billion, and its net income was $93 million.
For more, see the full corporate rap sheet on the outsourcer CH2M Hill here.
MAXIMUS — Outsourced Human Services
MAXIMUS, Inc., based in Reston, Virginia, is a publicly-traded (NYSE:MMS) for-profit corporation that receives government contracts to provide "business process services" to government health and human services agencies in the United States, Australia, Canada, the United Kingdom, and Saudi Arabia. The company focuses primarily on operating government-sponsored programs for vulnerable populations, such as Children’s Health Insurance Program (CHIP), Medicaid, health insurance exchanges and other health care reform initiatives under the Affordable Care Act, Medicare, welfare-to-work, and child support services. The outsourcing of health and human services function to private for-profit firms raises significant concerns. According to non-profit research group In the Public Interest, a comprehensive resource center on privatization and responsible contracting, "many children and adults rely on government-provided health and human services. The ability of these programs to deliver services efficiently and appropriately often is a matter of life and death. Numerous state and local governmental entities are finding that turning over these programs to private contractors not only fails to achieve projected cost savings but also decreases access to these important services, hurting many vulnerable families. In many cases, the service quality declines dramatically and many sick or at-risk people are left with substandard care."
The services ACS markets include processing Medicaid claims, managing the electronic toll collection system E-ZPass, servicing student loans, processing child support payments, managing electronic payment card programs (such as Temporary Aid to Needy Families, Unemployment Insurance, Social Security Insurance), and processing parking tickets. ACS obtains contracts to perform functions as administration, including health care claims processing; finance and accounting; human resources; payment processing; sales, marketing, and customer care call centers; and supply chain management in both the public and private sector. As of August 2013, ACS has over 74,000 employees. Its parent company, Xerox, grossed $22.39 billion in revenues for the fiscal year 2012, with nearly $1.2 billion in total profits.
K12 Inc. is a publicly-traded (NYSE: LRN) for-profit, online education company headquartered in Herndon, Virginia. As K12 Inc. notes in its most recent annual report, "most of (its) revenues depend on per pupil funding amounts and payment formulas" from government contracts for virtual public charter schools and "blended schools" (combining online with traditional instruction) among other products. In 2013, K12 Inc. took in $848.2 million from its business, with $730.8 million coming from its "managed public schools" and thus the U.S. taxpayer.
The company's website says it provides "free" services since it does not charge students, but the services are far from free as they divert taxpayer dollars from the public school system to a private for-profit firm, Connections Education, that made an estimated $190 million in revenue in 2011.
Connections Academy contracts with public school districts and charter schools to provide online classes for K-12 students. Connections Academy had 21 schools and more than 27,000 students in the 2010-11 school year. But some of those schools are failing.
Sodexo is a multinational company based in France that provides food services to schools, college campuses, the U.S. military, and other government entities across the United States. With about $8.8 billion in annual revenues from operations in North America, Sodexo is a primary driver of outsourcing of food services in America.
But Sodexo has taken the low road to profitability.
Sodexo Group is the largest food services and facilities management company in the world, as of 2013. Sodexo contracts to provide food services to private corporations, government agencies, schools and universities, military bases, hospitals, clinics, senior residential facilities, and correctional facilities, and is a primary driver of the privatization and outsourcing of these services.
For more, see the full corporate rap sheet on the outsourcer Sodexo here.
Corrections Corporation of America — Privatized Prisons
Corrections Corporation of America (CCA) is the largest owner of for-profit prisons and immigration detention facilities in the United States. It is publicly traded (NYSE: CXW). In 2013, CCA was converted into a real estate investment trust (REIT), which will help the company avoid tens of millions of dollars in corporate taxes. CCA's revenue in 2012 exceeded $1.7 billion, and it had profits of $156.8 million, 100 percent of which came from taxpayers via government contracts.
The GEO Group, Inc. (GEO), formerly known as Wackenhut Corrections Corporation, "is the world's leading provider of correctional, detention, and community reentry services with 95 facilities, approximately 72,000 beds, and 18,000 employees around the globe," says the corporate website. It is the second-largest for-profit prison operator in the United States, behind CCA.
Since its founding nearly 30 years ago, GEO Group has profited from the same policies and dramatic rise in incarceration and detention in the United States as CCA has. Although it claims that it has not lobbied for bills that extend or increase sentences for prisoners, for many years GEO Group participated in the task force of the American Legislative Exchange Council (ALEC) that pushed bills that lengthened time in prison, such as so-called “truth-in-sentencing” and “three strikes” legislation, as models for states to adopt across the nation.