ProPublica

DOJ Investigating Texas’ Operation Lone Star for Alleged Civil Rights Violations

7 hours 20 minutes ago

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The Department of Justice is investigating alleged civil rights violations under Operation Lone Star, a multibillion-dollar border initiative announced last year by Texas Gov. Greg Abbott, according to state records obtained by ProPublica and The Texas Tribune.

The Legislature last year directed more than $3 billion to border measures over the next two years, a bulk of which has gone to Operation Lone Star. Under the initiative, which Abbott said he launched to combat human and drug smuggling, the state has deployed more than 10,000 National Guard members and Department of Public Safety troopers to the border with Mexico and built some fencing. Thousands of immigrant men seeking to enter the country have been arrested for trespassing onto private property, and some have been kept in jail for weeks without charges being filed.

Since the operation’s launch, a number of news organizations, including ProPublica and the Tribune, have outlined a series of problems with state leaders’ claims of success, the treatment of National Guard members and alleged civil rights violations.

An investigation by the Tribune, ProPublica and The Marshall Project found that in touting the operation’s accomplishments, state officials included arrests with no connection to the border and statewide drug seizures. The news organizations also revealed that trespassing cases represented the largest share of the operation’s arrests. DPS stopped counting some charges, including cockfighting, sexual assault and stalking, after the publications began asking questions about their connections to border security.

Another investigation by the Tribune and Army Times detailed troubles with the National Guard deployment, including reports of delayed payments to soldiers, a shortage of critical equipment and poor living conditions. Previous reporting by the Army Times also traced suicides by soldiers tied to the operation.

Angela Dodge, a DOJ spokesperson, said she could not “comment on the existence or lack thereof of any potential investigation or case on any matter not otherwise a part of the public court record.”

“Generally, cases are brought to us by a variety of law enforcement agencies — federal, state and local — for possible prosecutorial consideration following their investigation into a suspected violation of federal law,” Dodge wrote in an email. “We consider each such case based on the evidence and what can be proven beyond a reasonable doubt in a federal court of law.”

But at least two Texas agencies involved in carrying out the border initiative have pointed to a DOJ investigation in records obtained by ProPublica and the Tribune through the Texas Public Information Act.

In an internal email in May, DPS officials said that the DOJ was seeking to review whether Operation Lone Star violated Title VI of the Civil Rights Act of 1964, which bars discrimination on the basis of race, color or national origin by institutions receiving federal funding.

According to the emails, the federal government requested documents that include implementation plans, agreements with landowners and training information for states that have supported Operation Lone Star by sending law enforcement officers and National Guard members to Texas.

“If you are not already aware, the Civil Rights Division of the DOJ is investigating Operation Lone Star,” Kaylyn Betts, a DPS assistant general counsel, wrote in a May 23 email to a department official. She added that the agency should respond in a timely and complete manner.

In a letter sent Friday to the state’s attorney general, the Texas Department of Criminal Justice also cited a “formal investigation” of Operation Lone Star by the DOJ. The agency, which manages the state’s prison system, pointed to the investigation while fighting the release of public records sought by the news organizations.

In the letter, the department’s deputy general counsel wrote that the DOJ is investigating whether the state agency is subjecting people who are arrested as part of the border operation to “differential and unlawful conditions of confinement based on their perceived or actual race or national origin.”

None of the agencies have publicly released information related to the DOJ’s requests.

Neither DPS nor the Texas office of the attorney general, which is representing the state, responded to requests for comment. Amanda Hernandez, a spokesperson for the Texas Department of Criminal Justice, said in an email that her agency provided the DOJ the requested information.

“The agency has and continues to follow all state and federal laws as the state of Texas responds to the ongoing crises at the border,” she wrote in an email to the news organizations.

State and federal lawmakers as well as civil rights and immigrant groups have repeatedly called for investigations into Operation Lone Star. In the letters to the DOJ and the Department of Homeland Security, the groups have cited reporting from the Tribune that shows some immigrants were illegally detained or kept in jail too long due to delays by prosecutors, in violation of state law.

“It is critically urgent that the Biden administration not only investigate but hold agencies accountable for violations of Title VI to protect the civil rights of people in South Texas,” said Kate Huddleston, staff attorney for the American Civil Liberties Union. The nonprofit, along with more than 100 other groups, filed a 50-page Title VI complaint in December with the DOJ asking it to investigate alleged civil rights violations.

Operation Lone Star, Huddleston added, “is targeting individuals for enhanced punishment and subjecting them to a separate state criminal system that is created specifically for this purpose that is riddled with civil rights violations.”

Abbott’s office has said the arrests and prosecutions under the operation “are fully constitutional.”

Lexi Churchill contributed reporting.

by Perla Trevizo

How Foreign Private Equity Hooked New England’s Fishing Industry

8 hours 20 minutes ago

Before dawn, Jerry Leeman churned through inky black waters, clutching the wheel of the fishing vessel Harmony.

The 85-foot trawler, deep green and speckled with rust, was returning from a grueling fishing trip deep into the Atlantic swells. Leeman and his crew of four had worked 10 consecutive days, 20 hours a day, to haul in more than 50,000 pounds of fish: pollock, haddock and ocean perch, a trio known as groundfish in the industry and as whitefish in the freezer aisle.

As sunrise broke over New Bedford harbor, the fish were offloaded in plastic crates onto the asphalt dock of Blue Harvest Fisheries, one of the largest fishing companies on the East Coast. About 390 million pounds of seafood move each year through New Bedford’s waterfront, the top-earning commercial fishing port in the nation.

Leeman and his crew are barely sharing in the bounty. On deck, Leeman held a one-page “settlement sheet,” the fishing industry’s version of a pay stub. Blue Harvest charges Leeman and his crew for fuel, gear, leasing of fishing rights, and maintenance on the company-owned vessel. Across six trips in the past 14 months, Leeman netted about 14 cents a pound, and the crew, about 7 cents each — a small fraction of the $2.28 per pound that a species like haddock typically fetches at auction.

On his return to New Bedford, Jerry Leeman maneuvers equipment to unload fish onto the dock. (Tony Luong, special to ProPublica)

“It’s a nickel-and-dime game,” said the 40-year-old Leeman, who wore a flannel shirt beneath foul weather gear and a necklace strung with a compass, a cross, and three pieces of jade — one piece for each of his three children. “Tell me how I can catch 50,000 pounds of fish yet I don’t know what my kids are going to have for dinner.”

Leeman’s lament is a familiar one in New Bedford, an industrial city tucked below Cape Cod on the south coast of Massachusetts. In recent years, the port of New Bedford has thrived, generating $11.1 billion in business revenue, jobs, taxes and personal income in 2018, according to one study. But a quiet shift is remaking the city and the industry that sustains it, realizing local fishermen’s deepest fears of losing control over their livelihood.

Blue Harvest and other companies linked to private equity firms and foreign investors have taken over much of New England’s fishing industry. As already harsh working conditions have deteriorated, the new group of owners has depressed income by pushing expenses onto fishermen, an investigation by ProPublica and The New Bedford Light has found. Blue Harvest has also benefited from lax antitrust rules governing how much fish it can catch.

Since it was founded in 2015, Blue Harvest has been acquiring vessels, fishing permits and processing facilities up and down the East Coast. It started with the self-proclaimed goal of “dominance” over the scallop industry. It has expanded into groundfish, tuna and swordfish, as well as becoming a government contractor, winning a $16.6 million contract from the U.S. Department of Agriculture this past February to supply food assistance programs.

The acquisitions are backed by $600 million in capital from Bregal Partners, a Manhattan-based private equity firm. Bregal is an arm of a firm owned by a Dutch billionaire family, who are best known for their multinational clothing company, which maintains a steady track record of environmental philanthropy and low-wage labor around the globe.

Bregal, its parent company and Blue Harvest President Chip Wilson did not respond to questions. Wilson said in an email that he has been “fighting a handful of fires” and that “speaking with the press has been low on my priority list of late.” He is more concerned “about moving our strategy forward so that the 200+ folks who work for Blue Harvest can be confident about their future,” he said.

“New Bedford is an interesting community, particularly in this ‘colorful’ sector, and the rumor mill is particularly vicious,” he added. “I cannot tell you how many times I have listened to employees scared to the core for themselves and their families due to unsubstantiated rumors about our company.”

In the first half of 2021, private equity firms, which often invest in privately held companies with the goal of ultimately selling them for a profit, accounted for 34% of mergers and acquisitions in the fishing industry, nearly double the 2017 percentage, according to trade publication Undercurrent News. Last fall, one such firm, ACON Investments, purchased three seafood processing companies, including one with a 38,000-square-foot plant in New Bedford. Another private equity company — Solamere Capital, which boasts as partners former Speaker of the House Paul Ryan and Taggart Romney, son of former Massachusetts Gov. and current Utah Sen. Mitt Romney — also acquired processing plants.

“What we’re seeing is a fundamental transformation of the fishing industry,” said Seth Macinko, a former fisherman who’s now an associate professor of marine affairs at the University of Rhode Island. “Labor is getting squeezed and coastal communities are paying the price.”

(Tony Luong, special to ProPublica)

To be sure, private equity can inject capital to buy new equipment or renovate a processing facility. Boosters say that consolidation can improve efficiency and make U.S. seafood more competitive against cheaper fish imported from foreign countries that subsidize their fleets.

Still, private equity’s gain has largely been small fishermen’s loss. Known for seeking profits by slashing costs in retail sectors such as toys and shoes, private equity investors have taken a similar approach to the fishing industry, which offered an opportunity to make a significant return on investment through economies of scale.

The number of employers in New Bedford’s fishing industry has dropped by more than 30% in the past decade, according to Bureau of Labor Statistics data. Fishermen are working much longer hours — 45% of fishermen reported working 18 hours or more per day in a federal survey published last year, up from 32% in 2012.

Leeman’s crew hauls fish from below deck. (Tony Luong, special to ProPublica)

Almost all fishermen in New Bedford are paid a share of the earnings from their catch. It’s an arrangement with origins in the 19th century, when whale oil made New Bedford the Dubai of its day. Whaling captains built the city’s historic mansions; the whale ships’ investors built churches and hospitals.

But today, companies like Blue Harvest take advantage of this pay structure to shift costs onto fishermen, reducing their income. Under the private equity takeover, regional economies like New Bedford’s are keeping less of the industry’s profits while a cut of the owners’ share is shuttled to skyscrapers in Manhattan and, in some cases, overseas. Despite rising consumer prices for New Bedford’s fish, the poverty rate in the city has been double the state average for the past decade.

“Without question, there is an increase in costs that are being passed down to crew,” said Matthew Cutler, who studies socioeconomic trends among fishermen for the regional arm of the National Oceanic and Atmospheric Administration. NOAA, which is part of the Department of Commerce, governs the fishing industry.

So far, private equity mainly dominates New England’s groundfish, which constitutes roughly 11% of all seafood caught off the region’s coast by weight. But a proposal being considered by federal regulators could expand private equity’s control over scallops — the most lucrative seafood for New Bedford fishermen. The proposal has roiled New Bedford, where more than 100 fishermen signed a petition against it. It also worries New Bedford Mayor Jon Mitchell.

“Private equity owns a piece of the waterfront now,” he said. “Remote ownership is always going to be driven by dollars and cents. Without any loyalty to the place, business decisions can become cold and harsh.”

Hundreds of vessels line the harbor in New Bedford, the top-earning commercial fishing port in the U.S. (Tony Luong, special to ProPublica)

Owning his own vessel was Jerry Leeman’s goal when he first started fishing with his grandfather at the age of 12. He climbed the ranks from deckhand to mate and finally to captain. He hoped to go into business for himself.

But an overhaul of federal rules adopted in 2010 halted Leeman’s ascent and that of thousands of other fishermen in the northeast. Promoted by an alliance of conservation groups and some of the largest seafood distributors, the new framework sought to end decades of overfishing that had devastated species like the Atlantic cod while also helping American businesses compete with cheaper, imported fish by making the domestic supply more predictable.

Under “catch shares,” as the system is called, regulators cap how much of each species can be fished and require permits to catch them. Federal scientists set a “total allowable catch,” determining the amount of each kind of fish that can be sustainably hauled from regional waters each year. Based on a decade of their catch history, individual fishermen and companies were granted rights to a percentage of the annual total allowable catch — in perpetuity — free to fish it, sell it or lease it to others.

The catch shares system has proven to be an effective tool to reduce overfishing. Overall, New England waters have “shown slow recovery since the major declines,” a 2021 study noted. But the change hurt small fishermen. Their shares were based on their historical percentages of the catch for a given species. As the total allowable catch for some species was reduced to avoid overfishing, the same percentages translated into fewer pounds of those fish. Many fishermen sold their permits to bigger companies that had been granted larger shares and rushed to expand. New England’s fleet of vessels actively catching groundfish was reduced from 596 in 2007 to 269 in 2015, according to a NOAA study.

“This is the door closing on an entire generation of fishermen,” said Brett Tolley, who comes from a family of Cape Cod fishermen. After a series of reductions, he said the catch allocated to his family — about one-third of 1% of pollock and haddock — was too small to make a living. They sold their permit a year ago to a midsize local company.

While consolidation started before catch shares, the new system accelerated the process. It “turned the privilege to catch a pound of fish into a commodity that could be bought or sold without owning a boat,” Macinko said. “It opened the door to private equity.”

Recognizing the potential for consolidation, the Pacific Coast branch of NOAA built in controls prohibiting any individual from owning more than 2.7% of groundfish permits, limiting the inroads that private equity could make. Accommodating business interests, the New England office initially set a much higher cap of 20% before reducing it to 15.5% in 2017.

“You have to limit entry in order to have a profitable fishery,” said Chad Demarest, an economist with the Northeast Fisheries Science Center under NOAA. “The goal is to create some profit in the industry that is shared by the owners.”

Because Leeman was a hired hand when catch shares were adopted, he wasn’t allocated any permits. And as the price of a single permit climbed to as much as $500,000 for groundfish, he couldn’t afford to buy in. His dream of captaining a fishing boat that he owned was dashed.

Rights to fish “were free 30 years ago,” he said. “But then came the conservation groups. Then there was consolidation. Then there was big money.”

Leeman on the Teresa Marie IV, the Blue Harvest boat he captains. (Tony Luong, special to ProPublica)

In the early years of catch shares, many smaller fishermen sold out to the same New Bedford fishing magnate: Carlos Rafael, often referred to as “the Codfather.” A first-generation immigrant from the Azores, a chain of Portuguese islands, Rafael arrived in New Bedford as a teenager. He started as a fish cutter, and over four decades he built one of the largest groundfish operations in the country, running more than 40 vessels.

A charismatic rogue who liked to describe himself as a modern-day pirate, Rafael was openly opposed to the catch shares system at first, believing it would eventually mean only one company would be left fishing on the East Coast. Yet as New England transitioned to the system, he was granted about 9% of the region’s total groundfish permits, one of the largest initial allocations. He decided that if only one company would be left standing, it would be his.

“So he [a smaller fisherman] doesn’t have the money to buy a fucking quota,” he said. “So he’s fucked either way. He’s hanging by his shoestrings. So this is a matter of fucking time for me to pick the rest of these fuckers and just get them all out of the picture….I always had the ambition to get fucking control of the whole fucking thing.”

According to court documents, Rafael made that statement to undercover IRS agents posing as Russian mobsters. He also divulged to them an illegal scheme he called “the dance.” On a February morning in 2016, the green-and-white panels of the Carlos Seafood building were reflecting red and blue as a team of federal agents raided the waterfront facility. He pleaded guilty in 2017 to 27 counts of fraud and tax evasion related to mislabeling almost 800,000 pounds of fish; he was sentenced to 46 months in prison.

At the time of Rafael’s downfall, Bregal Partners was rapidly tightening its grip on the fishing industry. It took its first plunges in 2015. It invested in Seattle-based American Seafoods, which Bregal has described as “the largest harvester of fish for human consumption in the US.” It also founded Blue Harvest, which quickly acquired four fishing operations on the East Coast.

A New Bedford fisherman mends a net on shore. (Tony Luong, special to ProPublica)

It first bought a large scallop fleet in Virginia, then a midsize company in New Bedford. In 2018, it added Maine-based Atlantic Trawlers. (Leeman, who had been working for Atlantic Trawlers, stayed on the same boat, now owned by Blue Harvest.) It capped off its buying spree with its biggest prize.

As part of a settlement with NOAA, Rafael had agreed to sell his empire, estimated to encompass a quarter of New England’s groundfish industry, to the highest bidder. Rafael had tried to sell his company to the undercover agents for $175 million. In 2020, Blue Harvest acquired a portion of Rafael’s holdings — 12 groundfishing vessels and 27 permits — for $25 million.

Along the way, Blue Harvest bought and expanded processing facilities off Herman Melville Boulevard, named after the “Moby-Dick” author, who sailed out of New Bedford on a whaling voyage in 1841. The goal, the then-chief executive said in 2020, was to establish the “first vertically integrated groundfish company on the East Coast” — folding a large slice of the waterfront into one streamlined operation: vessels, permits, processing and distribution.

The Blue Harvest processing facility on Herman Melville Boulevard (Tony Luong, special to ProPublica)

Controlling the supply chain enables Blue Harvest to reduce costs and compete with imports shipped frozen into the U.S. from Icelandic or Norwegian companies fishing in the North Atlantic. It also means that the company doesn’t have to pay its fishermen the market price for their catch.

Independent fishermen sell their catch at public auctions or to whichever wholesaler offers the best price. But Blue Harvest fishermen generally don’t have that opportunity. They must sell their fish to the company — sometimes at prices lower than they could get otherwise. Blue Harvest did not respond to questions about its payments to fishermen.

As it cast an ever-larger shadow over the port, Blue Harvest set a lofty goal: “transforming commercial fishing into an industry that is defined by sustainability, governed by transparency, and bound to the promise of delivering excellence to every plate.”

Leeman has never heard of the billionaire Brenninkmeijer family, but he’s working for them. Blue Harvest’s trail of global ownership winds from New Bedford’s industrial waterfront to Bregal Partners’ office in a sleek, 50-story skyscraper on Manhattan’s Park Avenue and then on to a Swiss company, Cofra Holding AG. Cofra, in turn, is wholly owned by the Brenninkmeijers, a Dutch family described by a former retail analyst at Morgan Stanley as both “highly secretive” and a “global powerhouse” in the retail industry. One member married into the Dutch royal family. Several have lived in a moated, five-story medieval castle on the River Rhine.

The family’s holding company has a wide-ranging portfolio. It has focused on renewable energies like solar and offshore wind, as well as on fossil fuel projects such as natural gas drilling and exploration in Appalachia’s Marcellus Shale. Its investments include shopping plazas in Spain, Belgium and the U.K. and commodities such as dairy, coffee, timber and, now, fish. Its sprawling supply chains encompass more than one million workers, from New Bedford to Bangladesh.

The family’s vast wealth originated in clothing. In 1841, brothers Clemens and August Brenninkmeijer began peddling textiles in a small region that now spans Germany and the Netherlands. In an era when most European clothing manufacturers catered mainly to affluent families, the brothers’ company, now called C&A, specialized in ready-to-wear clothing for the middle and working classes.

Under the Nazi regime, the company took advantage of opportunities afforded by “Aryanization” to take over stores owned by Jews fleeing persecution, according to a 2016 book by Mark Spoerer, an economic historian at the University of Regensburg, who was commissioned by the family to examine the company’s past. The German branch of C&A used forced labor in the Lodz Ghetto to manufacture clothing, Spoerer found. Soon after the war, C&A retail locations expanded around the world.

“It was opportunism,” acknowledged Maurice Brenninkmeijer, then chairman of Cofra Holding, in a 2016 interview with German newspaper Die Zeit. “I suspect that my relatives were solely focused on business, and in doing so they lost sight of our values.” He added, “I wish it had been different.”

In rare interviews, family members portray themselves as major donors to environmental initiatives. Their philanthropic arm, the Laudes Foundation, promotes sustainable usage of raw materials used in C&A clothing to address what it calls “the dual crisis of inequality and climate change.”

Yet C&A has come under fire for contracting with companies that have allegedly exploited workers. While it produces its own line of clothes, it also acts as an intermediary between Western companies and hundreds of garment factories in East Asia and South America. It’s most active in Bangladesh, where labor costs are among the lowest in the world.

In 2012, a fire swept through a Bangladesh factory producing clothes for C&A, killing at least 112 workers. The company agreed to pay compensation to victims and to assess safety conditions. Last year, a German human-rights organization filed a criminal complaint against C&A, among others, for sourcing cotton made with the forced labor of Uyghur Muslims in China. Cofra and C&A did not respond to requests for comment.

“Given the scale at which C&A operates, they could literally lift millions of garment workers out of abject poverty,” said Ben Vanpeperstraete, senior legal adviser with the European Center for Constitutional and Human Rights, who helped negotiate compensation for victims of the 2012 Bangladesh factory fire.

“In the end, they put profits first.”

A member of Leeman’s crew works below deck. (Tony Luong, special to ProPublica)

One July day in 2017, Joseph Drago woke up in a loud, dark cabin below deck of a scallop vessel owned by Blue Harvest. He had a splitting headache and couldn’t catch his breath. He stumbled onto the deck and asked the crew what was happening.

It was fumes, one replied in Spanish. An exhaust leak from the engine had been pouring into the sleeping quarters. Soon after, the engine blew out, leaving the vessel bobbing in swells 80 miles off the coast. It had to be towed into port.

Blue Harvest boats have had a number of mishaps. Last year, one Blue Harvest vessel burned at sea; another ran aground, which can be attributable to human error or weather conditions. Leeman had to cut a fishing trip short in January when the boat’s engine malfunctioned.

Current and former workers said that several vessels that Blue Harvest regularly operates were already past their prime when the company bought them. “Their next stop should have been the scrapyard,” said the former Blue Harvest mechanic, who requested anonymity out of concern for his career. “The boats had been worked like dogs.” Blue Harvest did not respond to questions about the condition of its fleet.

Captains and crew on Blue Harvest boats pay for maintenance, according to settlement sheets and fishermen. The company has also imposed other charges that fishermen say they haven’t encountered elsewhere in the industry, including a 3% “electronics fee” and a $400 “wharfage fee” for pulling up at the company dock to unload fish.

“The price stays the same but all our expenses just keep going up,” said Drago. “Every trip they’re taking more and more out of the crew’s share.”

Drago, like Leeman, aspired to buy his own boat. But with nerve damage in his hand from years working at sea, the 35-year-old plans to leave the industry as soon as he can find another job.

“You can no longer work your way up from the deck, become a captain and buy your own boat and permit. That was always the arrangement,” he said. “You’ll never make enough. They made it unattainable to do anything but work for them.”

Left: A member of Leeman’s crew fixes gear. Right: Haddock are tossed into a crate. (Tony Luong, special to ProPublica)

As Blue Harvest snapped up fleets, it also acquired their permits. Today, it is approaching the antitrust limit of 15.5% ownership of permits for groundfish caught off New England.

Blue Harvest owns 12% of the permitted catch overall, including 21% of haddock, 19% of winter flounder, 16% of ocean perch and 15% of cod. It stays below the aggregate cap by owning smaller shares of other species, like 2% of a certain northern flounder. The company’s groundfish permit holdings total about 46 million pounds.

But those figures underestimate Blue Harvest’s market share. In addition to owning permits, it also leases fishing rights from other permit owners. At the beginning of the year, the company will lease a “bucket of fish,” one Blue Harvest manager said. “If we’re short on something, we’ll buy it” for the year. The manager said that this practice addresses a weakness in the catch shares system, which allows individuals and organizations to hold permits and passively earn a profit through leasing rather than fishing themselves. About 40% of all groundfish permits are not used by their owners and are available only on the leasing market, records show.

Leasing provides a small but steady revenue stream for those owners, and it helps to ensure that enough seafood reaches the market to satisfy demand. The practice also enables the expansion of larger companies. That’s because NOAA’s antitrust rules apply only to ownership. “There is no restriction on leasing,” said NOAA’s Demarest. “It would be a very illiberal idea to try to cap the amount that each corporation can land.”Theoretically, Blue Harvest or any other major player can legally circumvent the 15.5% cap by leasing the rights to catch more fish. Because of leasing, the cap “does not really prevent consolidation at all,” said Mary Hudson, a manager at a Maine cooperative that makes permits available to independent fishermen at discount prices. “Private equity backing can come in, set [leasing] prices and still buy it all.” Instead of fishing, some small fishermen have taken to leasing out their rights, she added: “They just don’t have the capital to compete.”

Crates of fish below deck (Tony Luong, special to ProPublica)

The news organizations’ analysis could not determine how much quota — the industry term for the number of pounds of fish someone is allowed to catch — Blue Harvest is leasing, or from whom. That’s because groundfish permits belonging to individual fishermen, organizations and large corporations are generally pooled and managed in groups known as sectors. The sectors act as a black box — fish quotas can be seen flowing in and out, but who exactly is leasing them is hidden. NOAA tracks and publishes the weight of fish leased between sectors, but those transactions do not identify the specific lessor or lessee. Even the U.S. government doesn’t track that information.

“It’s not legally traceable,” Demarest said. “The government can’t get involved in what happens within sectors.”

In Blue Harvest’s case, most of the company’s permits are held in two sectors that have leased the rights to catch more than 14 million pounds of groundfish since 2018. But there are other permit owners in those sectors as well. “This sector acquires quota from just about every sector out there,” said Hank Soule, who manages both sectors where Blue Harvest operates. He declined to say which owners within the sector were leasing the most quota.

How Blue Harvest Stays Under the Antitrust Cap for Groundfish

Blue Harvest’s allotted quota for certain kinds of fish, like haddock, exceeds the federal 15.5% cap for groundfish. It stays under the aggregate cap by having rights to catch less than 15.5% of other types of fish, like pollock. (It also catches more groundfish through leasing arrangements that don’t count toward the cap.)

(Illustrations by Anuj Shrestha, special to ProPublica)

Blue Harvest boats “are the ones that are fishing, day and night,” said John Pappalardo, a member of NOAA’s regional council. “Nobody else is fishing at the level they are. Obviously, they are going to be the ones setting the price and moving the market.” The Cape Cod Commercial Fishermen’s Alliance, a cooperative headed by Pappalardo, originally opposed catch shares, fearing the system would gut the local industry. But when he realized that the new system was inevitable, he voted to adopt it. Today, he’s stoic about the entry of private equity into the fishing industry. “If not them, then who?” he said. “I don’t think you’re going to see a lot of independent vessels or communities get into the fishery again.”

Since Leeman doesn’t own permits, he isn’t eligible to lease them himself — that’s a perk afforded only to permit holders. But he ends up paying for it anyway. Blue Harvest passes the cost of leasing permits on to its fishermen, the same way it does for fuel, fishing gear or vessel maintenance, the manager and workers said. In November 2021, a settlement sheet shows, Blue Harvest deducted a $3,329.90 leasing charge from the pay for Leeman and his crew.

Left: Leeman’s crew sorts haddock on deck. Right: Crates of haddock await processing in Blue Harvest’s facility. (Tony Luong, special to ProPublica)

There’s a long history of foreign fishing in U.S. waters. In the 1970s, trawlers from Russia and elsewhere depleted East Coast fish populations, spurring a 1976 federal law pushing foreign fleets at least 200 miles offshore. In 1998, a cap was added, limiting a foreign entity to owning 25% of a U.S. fishing vessel.

In recent years, foreign companies have reentered U.S. fishing grounds through a different route: investing in local operations. They include Canada-based Cooke Seafood, which recently acquired a one-fourth interest in scallop fleets in New Bedford and North Carolina, and Profand, a Spanish company that did the same with Seafreeze Ltd., the largest squid and mackerel operation on the East Coast. According to Undercurrent News, Profand’s majority shareholder is Enrique García Chillón, who is known in his home country as “el emperador del pulpo,” or the emperor of octopus.

Federal enforcement of the 25% cap largely relies on companies’ own assurances that they are in compliance. The Coast Guard lacks the resources to vet businesses’ paperwork, a former official said, and is required by law to “minimize the administrative burden” on owners and operators of vessels.

“There should be more transparency in ownership. But there isn’t. It’s basically an honor system,” said Charlie Papavizas, a Washington, D.C., attorney specializing in maritime law. “As a result, there is a big gray area in what is permissible.”

In a 2015 press release, Bregal Partners acknowledged that, “as an arm of German-Dutch Brenninkmeijer Group,” it was limited by law to “a 25 percent ownership in any quota-holding fishing company.” Ownership forms for four of Blue Harvest’s vessels from 2018 and 2019 — submitted to NOAA and obtained through a public records request — listed four owners for each of the boats. One was Jeff Davis, who served as Blue Harvest’s CEO before retiring from the company in 2018. Another was Chris Lischewski, who was then chief executive of Bumble Bee Seafoods, known for its canned tuna. The others were Mark Thierfelder, a lawyer who has represented Bregal Partners, and Michael Arougheti, chief executive of a finance company that has advised Bregal on acquisitions in the fishing industry.

Davis and Thierfelder could not be reached for comment. A spokesperson for Arougheti declined to comment. Lischewski stepped down as CEO of Bumble Bee after he was indicted for conspiring to fix canned tuna prices. He was found guilty in 2019 and sentenced to 40 months in prison. NOAA lacks the regulatory authority to require investors to disclose the percentage of their stake in a vessel or permit, said Ted Hawes, chief of NOAA’s regional permitting office.

Blue Harvest said in a statement that the Coast Guard had approved its “capital and ownership structure” in advance and that the company has “continued to submit all required notices and reporting materials” to regulatory authorities. “At no time has Blue Harvest been owned 100% by Bregal,” it added.

On May 11, more than 160 scallop fishermen, business owners, marine scientists, attorneys and vessel owners crowded into the New Bedford Whaling Museum for a rowdy meeting. Attendance was especially high because the seas were stormy and many fishermen stayed in port. To loud applause, more than a dozen people denounced a proposal, backed by Blue Harvest and other large companies, that independent local fishermen fear would enable private equity to storm their last stronghold — scallops.

Leasing scallop permits is currently prohibited, but the proposal would allow it. The biggest companies in the market, which are running up against a cap on permit ownership, are advocating for the change.

New Bedford fishermen object to allowing scallop permits to be leased. They say the proposal would accelerate consolidation in their industry. (Tony Luong, special to ProPublica)

Current scallop regulations allow one permit per boat, up to a total of 17 vessels. One local company, Eastern Fisheries, has reached the limit, according to a letter it sent to NOAA in 2021. In its own letter, Blue Harvest listed 15 scallop vessels.

“This is going to hurt the fishermen and the local economy,” said Tyler Miranda, a third-generation fisherman from New Bedford and captain of two scallop vessels who is leading the opposition. “The only people to benefit are the owners of the largest companies. How much do the biggest owners need to take out of our wages and bring into theirs? How much is enough?”

One of the few speakers in favor of the proposal was George LaPointe, a policy consultant to Blue Harvest and a former commissioner of Maine’s Department of Marine Resources. “We believe that we can improve flexibility,” said LaPointe, who was there to represent large scallopers, including Blue Harvest. As he returned to his seat, many fishermen booed.

New Bedford fishermen had a strong union until the mid-1980s, when the union was broken in the heat of a strike. Now, with private equity setting its sights on scallops as well as groundfish, talk of a union is beginning to stir again.

Leeman said he would welcome a union to fight for fair pay. On his own, he spends his days on land making calls to check how the rate that Blue Harvest paid compares to the market price.

Last year, after a 10-day fishing trip, he took a look at his settlement sheet and burst into the management office, demanding fair pay for him and his crew. “I said, ‘Until we get this straight, I’m not leaving the dock,’” he recalled.

And with the weight of a multibillion-dollar industry resting on the labor of a few hundred New Bedford fishermen, the company relented and paid him what he said was the market rate. “If I didn’t say anything, they’d still be paying us half of what that fish was worth.”

About the Data: How We Tracked Blue Harvest’s Fishing Permits

After hearing from local fishermen that Blue Harvest Fisheries is dominating New Bedford’s fishing industry, we set out to document how much of the total allowable catch the company is pulling in.

A first step was to find out how many permits the company owns. The National Oceanic and Atmospheric Administration provided a database breaking down the permit holdings in the groundfish industry for the 2022 fishing year. Each permit has a unique identification number and represents a certain percentage of the total allowable catch of a species of groundfish. Blue Harvest holds permits in the names of limited liability companies. Most of these companies have “BHF” as part of their corporate name, and we confirmed that they were linked to Blue Harvest through their corporate filings, which list Blue Harvest’s executives. Our analysis was limited to permits that could be clearly linked to Blue Harvest through these records. It is possible that Blue Harvest holds additional permits.

We measured Blue Harvest’s share of permits as a percentage of the total quota by weight. When aggregating across different kinds of groundfish, these percentages were averaged, consistent with how NOAA calculates its 15.5% cap. We found that Blue Harvest owns permits for 12% of groundfish quota — the industry’s term for the total pounds a permit-holder is allowed to catch — in the current fishing year.

In addition to owning permits outright, companies can also lease permits. However, company-level lease agreements are not made public. Instead, NOAA posts leasing transactions at a more summary level.

Permits are managed in groups of permit holders known as “sectors.” If one permit holder leases to another in its own sector, NOAA does not publish the transaction. If a holder leases to a party in another sector, that transaction is recorded publicly, but only the sectors are identified, not the specific lessor or lessee.

Most of Blue Harvest’s permits are kept in two of the 18 sectors. NOAA’s leasing records through May of this year show that more than 14 million pounds’ worth of fishing quota have flowed from other sectors into those two sectors since 2018.Interviews with individual fishermen and others in the industry indicate that Blue Harvest has a significant leasing operation; however, lack of precise data from NOAA makes it impossible to determine the exact extent of the company’s leasing.

Alex Mierjeski contributed reporting, and Joel Jacobs contributed data reporting.

by Will Sennott, The New Bedford Light

The Supreme Court’s EPA Decision Could Hamper Regulators’ Ability to Protect the Public

19 hours 55 minutes ago

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The Supreme Court decision to limit the Environmental Protection Agency’s ability to regulate greenhouse gases from power plants set off widespread worries that federal agencies won’t be able to protect Americans from harm.

The 6-3 ruling, announced last week, triggered immediate questions at ProPublica, which had spent more than a year reporting on where Americans are exposed to dangerous levels of hazardous air pollutants regulated by the Clean Air Act, the same law at the heart of the Supreme Court case. In a 2021 series, ProPublica showed how industrial polluters have turned neighborhoods into “sacrifice zones” where some 250,000 Americans breathe in carcinogens that expose them to cancer risks the EPA has deemed unacceptable. A lack of air monitoring and enforcement left communities ill informed about the risks they faced, ProPublica found. In the wake of our reporting, the agency stepped up its enforcement and pledged to do more. Did this ruling put those reforms at risk?

To understand the implications of this historic court decision on both the EPA and other federal regulators that hold corporations accountable, ProPublica spoke to two environmental law experts: Patricia Ross McCubbin, a Clean Air Act expert and law professor at Southern Illinois University, and Victor Flatt, a University of Houston law professor and faculty co-director of the Environment, Energy & Natural Resources Center.

At issue in the case, West Virginia v. Environmental Protection Agency, is a 2015 rule issued under President Barack Obama’s administration that was aimed at slashing greenhouse gas emissions from coal power plants, in part by shifting electricity production to cleaner energy types. Lawyers in the case made their arguments before the Supreme Court on Feb. 28, the same day the United Nations released a crucial report warning that climate change kills people and that the world will need to drastically slash emissions in order to avoid the most catastrophic consequences of a warming planet.

Both experts said the Supreme Court decision hinges on a basic question: Did Congress give the EPA, as part of the agency’s mission to reduce pollution, the authority to reduce power plant emissions in the manner the agency proposed in that 2015 rule? The majority on the court said Congress hadn’t granted the agency that power. The ruling relied on what’s called the “major questions doctrine,” which requires that Congress explicitly define what power an agency has to regulate matters that have national significance. This decision, the experts said, could force agencies to tread carefully. However, Flatt and McCubbin said it likely won’t impact the EPA’s regulation of the type of pollutants ProPublica spotlighted in the “Sacrifice Zones” series because Congress has spelled out, in detail, how the EPA should oversee those industrial chemicals.

In her dissent, Justice Elena Kagan wrote that Congress provides overall policy outlines but relies on federal agencies with expertise to figure out the best ways to accomplish those goals. The court itself has no such expertise, she wrote: “Whatever else this Court may know about, it does not have a clue about how to address climate change. And let’s say the obvious: The stakes here are high. … The Court appoints itself — instead of Congress or the expert agency — the decision-maker on climate policy. I cannot think of many things more frightening.”

Justices Stephen Breyer and Sonia Sotomayor joined Kagan’s dissent.

Flatt and McCubbin said the ruling tilts power away from the executive branch and toward Congress, turning on its ear the traditional authority that agencies have to act when Congress’ direction is ambiguous. Our conversation has been edited for clarity:

Can you summarize what the decision means?

Flatt: So, what the ruling said was that EPA can regulate greenhouse gases. But it cannot do certain things unless Congress has explicitly given them the authority to use those tools. ...

That’s a change from the past, where the courts have said, “Well, if Congress isn’t completely clear, we will defer to the agency as long as Congress hasn’t said they cannot do certain things.”

McCubbin: In one sense, this ruling is somewhat narrow. The only thing that the court technically did was declare that EPA could not, under Section 111(d) of the Clean Air Act, require existing power plants to limit greenhouse gas emissions by shifting electricity generation to cleaner energy sources. The court did not say that EPA couldn’t regulate greenhouse gases in some other fashion, even under 111(d). The court did not say EPA couldn’t use other provisions to try to address greenhouse gases.

The basis for the ruling though — this concept called the major questions doctrine — that is a huge potential barrier. Basically, every federal agency is now focused on this phrase.

What is the major questions doctrine?

McCubbin: The major questions doctrine says, in simple terms, that if a federal agency is going to address the really big thorny questions of our day, that agency has to be able to point to some clear authority from Congress, in a statute, to address that big thorny question. Here in this case, the court thought deciding what energy mix we’re going to have in our society is a pretty important question that Congress should weigh in on [and] not leave it to this agency.

And I think there is some truth to that. I think the pendulum maybe has swung to where we have agencies addressing profound issues for our society with very little guidance from Congress. The court’s theory is that Congress is functional enough to actually address these big important issues, and maybe 10 years ago when the House passed Waxman-Markey [a climate change bill from 2009], we were close to being functional. But in this day and age, that theory doesn’t match up with practicality.

I would argue that the concepts of the major questions doctrine have been in other Supreme Court decisions, but this is the first time that the majority has actually used that phrase.

The problem is … the justices in this opinion don’t all agree on what is a really big thorny question. No one knows precisely. For example, Chief Justice John Roberts has one sort of test. Justice Neil Gorsuch in his concurrence has a different sort of test.

How will this ruling affect future climate regulation?

Flatt: Overall, it means that it is going to be more difficult, if not impossible, for the EPA to use certain kinds of regulatory tools. In particular, Justice Roberts, in the majority opinion, called out the potential use of emissions trading that was in the Clean Power Plan, saying that all this fuel switching and requiring different fuels is a very big thing to do. And Congress did not give you authorization to do that. What you need to do with greenhouse gases is essentially regulate them like you’ve regulated other pollutants — using control technology at the source of the pollution itself.

McCubbin: The one good thing about this opinion, actually, is that it did not second-guess an earlier decision where the court said EPA can address greenhouse gases under the Clean Air Act. There were people who were worried that this case would actually go that far. And the court didn't.

So the court wants the EPA to use more traditional forms of pollution control, like installing equipment to reduce emissions at the smokestack. But the EPA said it’s impossible to get significant greenhouse gas reductions through that method.

McCubbin: That’s exactly right. I would suspect that at least some people are wondering, under this opinion now, could EPA require carbon capture and sequestration at a coal facility? That’s a very expensive technology. Would that be a traditional enough method? Or would it still be too big? Would it be too controversial? Would it be too expensive? We don’t know.

What does this mean for the EPA’s ability to regulate the types of hazardous air pollutants discussed in our “Sacrifice Zones” series? The EPA regulates these pollutants under the Clean Air Act, which Congress amended in 1990.

McCubbin: Many of these statutes are quite old and quite generic. But the hazardous air pollutant provision [a section of the Clean Air Act] is an example of, I think, what the court thinks Congress should do. In 1990, Congress … really did its job and specified a lot of details for how to address toxic pollutants. It listed 189 pollutants that had to be regulated. It told the EPA how many facilities to look at in each particular category of industry to determine the maximum emission control.

The agency has pledged to better regulate hazardous air pollutants in response to our reporting last year. Could this ruling affect those promises, or the EPA’s ability to step up enforcement?

Flatt: Enforcement is always something that the agency is given a great deal of flexibility on. … The ability to enforce is always a core agency power. So if you’re just saying you’re going to enforce better, that’s fine.

The ruling cited an earlier case related to the major questions doctrine, where the Supreme Court said the Occupational Safety and Health Administration couldn’t require COVID-19 vaccines or testing in workplaces. It said Congress would need to give OSHA the power to do that. Many of the statutes that govern federal agencies were written decades ago, before issues like climate change became as relevant or urgent as they are today. Is it realistic to wait for Congress to give more instruction, especially when Congress is deadlocked?

Flatt: Even if Congress were functional, it slows down the ability to deal with issues and novel problems. Congress can’t do things in an emergency way. They literally might not be in session. So that really does show that even with a functional Congress, you’re really kneecapping the ability of the government to do things.

McCubbin: That is the problem here. The court is asking for a clear statement from Congress. And it is very doubtful in this day and age that we’re going to get that on big major issues. So one potential implication is that we are not going to have very much federal action, and it’s going to default to the states on everything from climate change to abortion rules.

Could this decision have a chilling effect on proposed rules from the EPA and other federal agencies?

Flatt: Not in this administration. Yes, agencies don’t like to be overturned. But they’re going to try to do what they want to do. Now, on the other hand, I don’t expect any lessening of any challenges from state attorneys general, whatever the EPA does. That’s just the blood sport. That’s always going to happen. It’s political.

McCubbin: Yes, I definitely think so. It will have that — if not chilling, at least slowing down effect — because they’ll have to be double careful.

They’re going to have to at least think hard: Are we stepping into an area where we might be seen as addressing a major question? And without a bit of guidance, there may be a slight chilling effect or pulling back. Or they may say, “Let’s aggressively go forward and test the limits.” But it will change agencies’ behavior because of this signal from the court.

by Lisa Song

Federal Patient Privacy Law Does Not Cover Most Period-Tracking Apps

1 day ago

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Following the Supreme Court’s decision overturning Roe v. Wade, advocates for privacy and reproductive health have expressed fears that data from period-tracking apps could be used to find people who’ve had abortions.

They have a point. The Health Insurance Portability and Accountability Act, the federal patient privacy law known as HIPAA, does not apply to most apps that track menstrual cycles, just as it doesn’t apply to many health care apps and at-home test kits.

In 2015, ProPublica reported how HIPAA, passed in 1996, has not kept up with changes in technology and does not cover at-home paternity tests, fitness trackers or health apps.

The story featured a woman who purchased an at-home paternity test at a local pharmacy and went online to get the results. A part of the lab’s website address caught her attention as a cybersecurity consultant. When she tweaked the URL slightly, a long list of test results of some 6,000 other people appeared.

She complained on Twitter and the site was taken down. But when she alerted the Office for Civil Rights within the U.S. Department of Health and Human Services, which oversees HIPAA compliance, officials told her they couldn’t do anything about it. That’s because HIPAA only covers patient information kept by health providers, insurers and data clearinghouses, as well as their business partners.

Deven McGraw is the former deputy director for health information privacy at the HHS Office for Civil Rights. She said the decision overturning Roe, called Dobbs v. Jackson Women's Health Organization, should spark a broader conversation about the limits of HIPAA.

“All of a sudden, people are waking up to the idea that there’s a lot of sensitive data being collected outside of HIPAA and asking, ‘What are we going to do?’” said McGraw, who is now the lead for data stewardship and data sharing at Invitae, a medical genetics company. “It’s been that way for a while, but now it’s in sharper relief.”

McGraw noted how that’s not just the case for period-tracking apps but also some apps that store COVID-19 vaccine records. Because Congress wrote HIPAA, lawmakers would have to update it to cover those cases. “Our health data protections are badly out of date,” she said. “But the agencies can’t fix this. This is on Congress.”

Consumer Reports’ digital lab evaluated eight period-tracking apps this spring and found that four allowed third-party tracking by companies other than the maker of the app. Four apps stored data remotely, not just on the user’s device. That makes the information potentially subject to a data breach or a subpoena from law enforcement agencies, though one of the companies surveyed by Consumer Reports has said it would shut down rather than turn over users’ data.

In a press release last week, HHS sought to allay worries with some advice that sounds reassuring.

“According to recent reports, many patients are concerned that period trackers and other health information apps on smartphones may threaten their right to privacy by disclosing geolocation data which may be misused by those seeking to deny care,” HHS said in the release.

The document quoted HHS Secretary Xavier Becerra about the protections provided by HIPAA: “HHS stands with patients and providers in protecting HIPAA privacy rights and reproductive health care information,” Becerra said. He urged anyone who thinks their privacy rights have been violated to file a complaint with the Office for Civil Rights.

The release later acknowledged that, in most cases, HIPAA rules do not protect the privacy or security of individuals’ health information when they access or store it on personal cellphones or tablets. It offered guidance on steps people can take to protect their information.

Since the court’s decision overturning Roe, some period-tracking apps have taken steps to minimize the risk of personal information being shared. One such company called Flo said it is developing an “anonymous mode” that would not require users to provide their name or email address.

“Flo does not share or sell any health data with any other company, but wanted to take this additional step to reassure users who are living in states affected by an abortion ban,” the company said in a press release. “It is important to note that once this mode is activated, users will no longer be able to recover data when the device is lost, changed, or stolen and there may be limitations to using the app’s full personalization benefits. This is why Flo is offering Anonymous Mode as an option for concerned users instead of activating it by default.”

In a statement after the Supreme Court decision, the digital civil liberties group Electronic Frontier Foundation said consumers should pay attention to “privacy settings on the services they use, turn off location services on apps that don’t need them, and use encrypted messaging services.

“Companies should protect users by allowing anonymous access, stopping behavioral tracking, strengthening data deletion policies, encrypting data in transit, enabling end-to-end message encryption by default, preventing location tracking, and ensuring that users get notice when their data is being sought,” the EFF statement said. “And state and federal policymakers must pass meaningful privacy legislation. All of these steps are needed to protect privacy, and all are long overdue.”

by Charles Ornstein

Google Allowed a Sanctioned Russian Ad Company to Harvest User Data for Months

5 days 8 hours ago

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The day after Russia’s February invasion of Ukraine, Senate Intelligence Committee Chairman Mark Warner sent a letter to Google warning it to be on alert for “exploitation of your platform by Russia and Russian-linked entities,” and calling on the company to audit its advertising business’s compliance with economic sanctions.

But as recently as June 23, Google was sharing potentially sensitive user data with a sanctioned Russian ad tech company owned by Russia’s largest state bank, according to a new report provided to ProPublica.

Google allowed RuTarget, a Russian company that helps brands and agencies buy digital ads, to access and store data about people browsing websites and apps in Ukraine and other parts of the world, according to research from digital ad analysis firm Adalytics. Adalytics identified close to 700 examples of RuTarget receiving user data from Google after the company was added to a U.S. Treasury list of sanctioned entities on Feb. 24. The data sharing between Google and RuTarget stopped four months later on June 23, the day ProPublica contacted Google about the activity.

RuTarget, which also operates under the name Segmento, is owned by Sberbank, a Russian state bank that the Treasury described as “uniquely important” to the country’s economy when it hit the lender with initial sanctions. RuTarget was later listed in an April 6 Treasury announcement that imposed full blocking sanctions on Sberbank and other Russian entities and people. The sanctions mean U.S. individuals and entities are not supposed to conduct business with RuTarget or Sberbank.

Of particular concern, the analysis showed that Google shared data with RuTarget about users browsing websites based in Ukraine. This means Google may have turned over such critical information as unique mobile phone IDs, IP addresses, location information and details about users’ interests and online activity, data that U.S. senators and experts say could be used by Russian military and intelligence services to track people or zero in on locations of interest.

Last April, a bipartisan group of U.S. senators sent a letter to Google and other major ad technology companies warning of the national security implications of data shared as part of the digital ad buying process. They said this user data “would be a goldmine for foreign intelligence services that could exploit it to inform and supercharge hacking, blackmail, and influence campaigns.”

Google spokesperson Michael Aciman said that the company blocked RuTarget from using its ad products in March, and that RuTarget has not purchased ads directly via Google since then. He acknowledged the Russian company was still receiving user and ad buying data from Google before being alerted by ProPublica and Adalytics.

“Google is committed to complying with all applicable sanctions and trade compliance laws,” Aciman said. “We’ve reviewed the entities in question and have taken appropriate enforcement action beyond the measures we took earlier this year to block them from directly using Google advertising products.”

Aciman said this action includes not only preventing RuTarget from further accessing user data, but from purchasing ads through third parties in Russia that may not be sanctioned. He declined to say whether RuTarget had purchased ads via Google systems using such third parties, and he did not comment on whether data about Ukrainians had been shared with RuTarget.

Krzysztof Franaszek, who runs Adalytics and authored the report, said RuTarget’s ability to access and store user data from Google could open the door to serious potential abuse.

“For all we know they are taking that data and combining it with 20 other data sources they got from God knows where,” he said. “If RuTarget’s other data partners included the Russian government or intelligence or cybercriminals, there is a huge danger.”

In a statement to ProPublica, Warner, a Virginia Democrat, called Google’s failure to sever its relationship with RuTarget alarming.

“All companies have a responsibility to ensure that they are not helping to fund or even inadvertently support Vladimir Putin’s invasion of Ukraine. Hearing that an American company may be sharing user data with a Russian company — owned by a sanctioned, state-owned bank no less — is incredibly alarming and frankly disappointing,” he said. “I urge all companies to examine their business operations from top to bottom to ensure that they are not supporting Putin’s war in any way.”

Google’s initial failure to fully enforce sanctions on RuTarget highlights how money and data can flow through its market-leading digital advertising systems with little oversight or accountability. An April report from Adalytics showed that Google had continued serving ads on Russian websites that had been on the Treasury sanctions list for years. In June, ProPublica reported that Google helped place, and earned money from, more than 100 million gun ads, despite the company’s strong public stance against accepting such ads.

The findings about RuTarget also come as Google and other tech companies face intense scrutiny from legislators about their handling of personal data.

Sen. Ron Wyden, D-Ore., who sits on the Senate Intelligence Committee, criticized Google for its failure last year to provide him and his colleagues with a list of the foreign-owned companies it shares ad data with.

“Google has refused to disclose [to senators] whether its ad network makes Americans’ data available to foreign companies in Russia, China and other high-risk countries,” he said in a statement to ProPublica. “It is time for Congress to act and pass my bipartisan bill, the Protecting Americans’ Data From Foreign Surveillance Act, which would force Google and other networks to radically change how they do business and ensure unfriendly foreign governments don’t have unfettered access to Americans’ sensitive information.”

Wyden and his colleagues introduced the bipartisan bill last week to prevent sensitive data about Americans from being sold or transferred to “high-risk foreign countries.” Wyden and a different group of Senate colleagues also sent a letter to Federal Trade Commission Chair Lina Khan last week asking her to investigate Google and Apple for enabling mobile advertising IDs in cellphones. These unique IDs can be combined with other data to personally identify users.

Wyden’s letter cited mobile IDs as one way that Google and Apple transformed “online advertising into an intense system of surveillance that incentivizes and facilitates the unrestrained collection and constant sale of Americans’ personal data.”

Aciman of Google said that the mobile advertising ID was created to give users control and privacy, and that Google does not allow the sale of user data.

“The advertising ID was created to give users more control and provide developers with a more private way to effectively monetize their app,” he said. “Additionally, Google Play has policies in place that prohibit using this data for purposes other than advertising and user analytics. Any claims that advertising ID was created to facilitate data sales are simply false.”

Bidstream Data Under Scrutiny

At the heart of both the senators’ concerns and the Adalytics report is the data collected on global internet users that gets passed between companies as part of the digital ad buying process. This treasure trove of information can include a person’s unique mobile ID, IP address, location information and browsing habits. When passed between companies to facilitate ad buying, the trove is called bidstream data. And it’s essential to the roughly half a trillion dollar digital ad industry that is dominated by Google.

Many digital ads are placed as a result of a real-time auction in which the seller of ad space, such as a website, is connected with potential buyers, like brands and agencies. An auction starts when a user visits a website or app. Within milliseconds, data collected about this user is shared with potential ad buyers to help them decide whether to bid to show an ad to the user. Regardless of whether they bid or not, ad buying platforms like RuTarget receive and store this bidstream data, helping them automate the amassing of rich repositories of data over time.

The auction process is run by ad exchanges. They connect buyers and sellers and facilitate the sharing of bidstream data between them in conjunction with a process called cookie syncing. Google operates the world’s largest ad exchange, and RuTarget is one of many companies it shares bidstream data with. The more RuTarget connects with ad exchanges like Google, the more information it can gather and combine with data collected from other online and offline sources.

Justin Sherman, a fellow at Duke’s Sanford School of Public Policy who runs a project focused on data brokers, said bidstream data is largely unregulated and can be highly sensitive, even if it does not include personal information such as names or emails.

“There’s growing attention to the ways in which our data ecosystem and our ecosystem of data brokers and advertisers gives away or sends or sells highly sensitive information on Americans to foreign entities,” he said. “There is also concern about foreign entities illicitly accessing that information.”

Google Failed to Disclose Bidstream Data Partners

Fears over the ill-usage of the information led Warner, Wyden and four colleagues to ask Google and six other ad exchanges in April 2021 to list the domestic and foreign partners they shared bidstream data with in the past three years. They warned that this data could have serious implications for U.S. national security.

“Few Americans realize that some auction participants are siphoning off and storing ‘bidstream’ data to compile exhaustive dossiers about them. In turn, these dossiers are being openly sold to anyone with a credit card, including to hedge funds, political campaigns, and even to governments,” they wrote in letters to AT&T, Index Exchange, Google, Magnite, OpenX, PubMatic, Twitter and Verizon.

Google responded a few weeks later but refused to list the companies it shares bidstream data with, citing “non-disclosure obligations.”

Franaszek’s research reveals concerns about the accuracy of Google’s response. He identified eight pages on Google’s support website that list hundreds of foreign and domestic companies that are eligible to receive bidstream data from it. One list contains over 300 companies, of which 19 are Chinese owned or headquartered and 16 are based in Russia, including RuTarget.

Franaszek also found that some of these companies publicly disclosed their relationship with Google. And, as reported by Vice, some of Google’s competitors disclosed to the senators the foreign partners they share data with.

This raises questions as to what Google was referring to when it said nondisclosure obligations prevent it from naming its partners, according to Franaszek.

“Google was publicizing, on its own website, lists of foreign [partners] months before they told the senators that,” he said.

Google’s Aciman said the lists on Google’s website do not disclose the nature of its relationship with the companies, and he reiterated that it has nondisclosure obligations with companies who act as bidders.

One of the lists on Google’s site (“Ad Manager Certified External Vendors”) includes a column that describes what each Google vendor does. At least 13 of the companies are publicly identified as “RTB bidders,” meaning they act as bidders in Google’s real-time ad auction process.

Publishers Sharing Data With RuTarget

The user data shared by Google with RuTarget and other potential bidders is drawn from millions of websites and apps that rely on the Silicon Valley giant to help them earn money from ads. And many would likely be surprised to learn that a sanctioned Russian ad company was until two weeks ago able to harvest information about their visitors.

Because of its relationship with Google, RuTarget is publicly listed as a recipient of user data by major publishers including Reuters and ESPN. This means RuTarget can receive data from these companies about the millions of people who visit their online properties each month. Like other publishers, ESPN and Reuters list RuTarget as a recipient of user data in cookie consent popups shown to users browsing their sites from the EU and other jurisdictions with data privacy laws requiring such disclosures.

A spokesperson for Reuters said the companies shown in its consent popup, including RuTarget, come from a list of vendors provided by Google.

“This list of vendors is managed by Google, and Reuters uses Google’s list of vendors on our website. We understand that Google suspended buyers and bidders based in Russia, and we have no record of any transactions with RuTarget since April 6,” Heather Carpenter of Reuters said.

ESPN did not respond to a request for comment. As a Google partner, it’s possible that data about users browsing ProPublica’s website has at some point been shared with RuTarget. The opaque and technical nature of digital advertising makes it difficult to know for sure.

Jason Kint, head of the digital publisher trade group Digital Content Next, said Google’s market power leaves publishers with little choice except to work with the company.

“Premium publishers have to trust Google for a significant number of services that they depend on,” he said. “This is another example of misplaced trust. I’m just incredibly disappointed in Google.”

RuTarget’s website also lists an impressive group of global brands among its clients, including Procter & Gamble, Levi’s, Mazda, MasterCard, Hyundai, PayPal and Pfizer. This suggests the companies have worked with RuTarget to purchase ads, likely in an effort to target Russian-speaking audiences.

A spokesperson for Pfizer said the company is not currently working with RuTarget. “Following investigation with colleagues we have established we do not have any current working relationship with the organisation you mention, and have no recent record of any relationship,” Andrew Widger, the Pfizer spokesperson, said in an email.

The remaining companies did not respond to a request for comment.

Sherman of Duke said RuTarget’s connections to Google and so many other entities shows how the “ecosystem of digital advertising and of data collection and data brokers is a mess and a really thorny web to untangle.”

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Correction

July 1, 2022: This story originally misspelled the first name of the Federal Trade Commission chair. She is Lina Khan, not Linda.

by Craig Silverman

How We Fight Back When Officials Resist Releasing Information You Have a Right to Know

6 days 5 hours ago

This column was originally published in Not Shutting Up, a newsletter about the issues facing journalism and democracy. Sign up for it here.

The city of Uvalde, Texas, the scene of the horrific shooting in an elementary school last month, has been forceful in its unwillingness to release public records related to the tragedy that took the lives of 19 children and two adults.

The city’s blanket denial took me back 25 years to my own battle for records with another Texas town coping with a tragedy.

In May 1997, two hours into Splash Day, the opening day for pools in the city of Garland, Texas, a 15-year-old boy drowned. A group of teens told me that they had sought help from lifeguards when they saw the boy wasn’t moving at the bottom of the pool. According to the teens, the staff said the boy was probably swimming, I reported in The Dallas Morning News.

A few days later, I interviewed a 16-year-old who said the lifeguards entered the pool only after a girl cried that she had swum above the boy’s limp body. “At least two people went up to the lifeguards and told them that someone was drowning,” she told me. “But they thought they were lying. They told the two girls, ‘Don’t play like that.’”

The boy’s death was the second in three years at a public pool in Garland. City officials defended the actions of the lifeguards.

Though I had less than a year’s experience as a full-time reporter, I wanted to know more about what happened. Public records are one of the basic ways journalists can try to reconstruct events when people give conflicting or unclear accounts of what happened. Within days, I had filed requests under the Texas Public Information Act for any 911 calls related to the boy’s drowning, any incident reports prepared, copies of the CPR certificates for the lifeguards at the town’s pools and any guidelines that had been established for lifeguards.

Texas has pretty strong public records laws — they may not be as good as Florida’s, which are seen by some as a gold standard, but they’re far better than those in, for example, New York.

Garland, a large Dallas suburb, said it wanted to reject my requests because it anticipated that the boy’s mother would sue the city. (She had said on TV that she wanted the pool closed and that she wanted “to take them for everything they’ve got.”) Lawyers also cited other lawsuits the city faced related to incidents at its pools.

The resulting fight showed me how guarded city officials can be and how sometimes when a reporter is fighting for information in the public interest, there’s more at stake than what’s in any given document.

In Texas, unlike in many other states, when a jurisdiction wants to withhold records, it has to explain its rationale to the state attorney general’s office, which can agree or disagree with the reasoning. In my case, the attorney general’s office determined that Garland did not have sufficient grounds to withhold the 911 recording or the incident report. But instead of providing the documents, the city sued the attorney general’s office, seeking to block their release. (By law, the suit would stop the release of the records until a district court judge made a decision.) The Dallas Morning News intervened in the case.

While our case was pending, the teen’s mother and another relative filed a formal claim with the city seeking damages. A judge ruled against us, accepting the city’s reasoning.

We appealed the judge’s ruling and lost. The purpose of the litigation exception, the appeals court explained, “is to enable governmental bodies to protect their position in litigation by requiring parties seeking relevant information to obtain it, if at all, through ‘discovery’ processes,” which are governed by rules and overseen by the court.

We never did receive the records we sought.

But that wasn’t the end of the story. Our attorneys and other First Amendment advocates in the state successfully pressed the Legislature to change the law, saying that government agencies should only be entitled to claim a litigation exemption from public records requests if they have a valid reason at the time of the request. They shouldn’t be able to cite a lawsuit or claim filed much later as proof that their denial was proper.

One of the News’ lawyers in the case, Paul Watler, told me in an email recently that he could not find any examples in which the change in the law caused records to be released that otherwise would not have been. But, he wrote, “it is certainly my belief that the amendment put a stop to the practice of governmental bodies using the exception to withhold public information when the body lacked a reasonable anticipation of litigation, which is what had occurred in the Garland case.”

That brings me back to the Uvalde records being withheld. All told, as of June 15, we and our partners at the Texas Tribune had filed about 70 records requests related to the shooting and hadn’t gotten any records back; we’ve gotten a few things since then. We weren’t just denied by the city, but also by Gov. Greg Abbott’s office, the Texas Department of Public Safety and the U.S. Marshals Service. My colleague Lexi Churchill has written about our fight to obtain the records, which is ongoing.

Media lawyers are worried the city might try to cite what has been referred to as the “dead suspect loophole,” which prevents the release of public records related to crimes in which no one was convicted or given deferred adjudication. The gunman in Uvalde died and so will never face a court ruling, which gives officials a reason to withhold records forever.

While the media may not win this records fight either, the attention could ultimately change the law.

A range of figures in Texas, from media advocates to the speaker of the House, have called for the loophole to be closed. “The ‘dead suspect loophole’ allows law enforcement agencies to withhold details about cases that end w/o a conviction, including when a suspect dies in custody. The statute was originally intended to protect the wrongfully accused, but it hasn’t really worked that way in practice,” House Speaker Dade Phelan tweeted. “It’s time we pass legislation to end the dead suspect loophole for good in 2023.”

A Texas state senator who represents Uvalde has gone so far as to sue the state Department of Public Safety for its failure to release public records.

Watler, one of the lawyers in my Dallas Morning News case, said the dead suspect loophole has inhibited the release of information following other mass shootings, including the 2016 killing of five Dallas police officers. Police killed the suspect the following day.

Out of the profound grief of Uvalde, the Texas Legislature might improve transparency and close the dead suspect loophole. Though it may not bring clarity to what happened to the children in Robb Elementary School, it could make records more accessible in the future.

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by Charles Ornstein

Congress Investigates Portable Generator Manufacturers Following Carbon Monoxide Deaths

6 days 21 hours ago

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This article is co-published with The Texas Tribune, a nonprofit, nonpartisan local newsroom that informs and engages with Texans. Sign up for The Brief weekly to get up to speed on their essential coverage of Texas issues.

The story was also produced in partnership with NBC News.

A congressional committee is investigating whether portable generator manufacturers have done enough to protect the public from deadly levels of carbon monoxide emitted by their products.

Rep. Carolyn B. Maloney, D-N.Y., who leads the House Committee on Oversight and Reform, sent letters to top executives at four major generator companies on Tuesday requesting copies of records documenting why they have not implemented potentially lifesaving safety upgrades in many generator models for sale. Maloney also asked for messages sent or received by officials at the companies — Generac Power Systems, DuroMax Power Equipment, Firman Power Equipment and Champion Power Equipment — related to any injuries or deaths connected to their products.

The committee investigation comes more than two decades after U.S. regulators identified the deadly risks posed by portable generators and six months after an investigation by NBC News, ProPublica and The Texas Tribune found that federal efforts to make portable generators safer have been stymied by a statutory process that empowers manufacturers to regulate themselves. That system has resulted in limited safety upgrades and continued deaths. Maloney repeatedly cited the news outlets’ findings in her letters to company executives.

Portable generators, often used to power critical medical equipment and appliances such as refrigerators and air conditioners during electrical outages, emit enough carbon monoxide to kill within minutes when operated in enclosed spaces or too close to exterior openings. Carbon monoxide deaths caused by generators predictably follow nearly every major power outage caused by extreme weather, which scientists say is becoming more common with climate change. Generators played a role in at least 10 deaths in Texas during the February 2021 winter storm and electric grid failure.

“As families prepare for potential extreme weather during the 2022 hurricane season, they shouldn’t have to worry about whether the products they buy to keep themselves safe are dangerous and potentially life-threatening,” Maloney said in a statement. “Unfortunately, with tragedy after tragedy, we’ve seen that portable generators have become one of the deadliest consumer products on the market.”

Portable generators kill an average of 80 people in the U.S. annually. After years of studying the problem, the Consumer Product Safety Commission concluded that warning labels and manuals instructing users to only operate generators outdoors were not enough to prevent accidental deaths. In 2016, the agency determined that manufacturers could save lives by making machines that emit significantly less carbon monoxide.

Instead, under industry-friendly federal laws, generator makers were allowed in 2018 to propose their own less expensive and voluntary solution: sensors that automatically turn the machines off when carbon monoxide builds up to an unsafe level.

But in the years since, some manufacturers have not added the safety switches or reduced carbon monoxide emissions in many generators for sale, especially in low-budget models, leaving consumers in many instances to choose between cost and safety, the ProPublica, Texas Tribune and NBC News investigation found.

The safety commission echoed those findings in a report issued this year. The 104-page report said automatic shut-off sensors alone, even if manufacturers installed them in every model, could not prevent all carbon monoxide poisonings caused by generators. The best solution, according to the commission’s findings, was to both reduce generator carbon monoxide emissions and add automatic shut-off switches — a comprehensive approach that only a few manufacturers have implemented.

Based on those findings, the commission said its staff would urge the agency’s five commissioners to move forward with a federal rule requiring generator makers to cut carbon monoxide emissions and add safety switches in the next fiscal year, which begins in October.

Maloney cited the safety commission report in her letters Tuesday to the chief executive officers of the four companies. Maloney told each of the CEOs she was concerned that the companies had “failed to adequately implement voluntary standards to reduce the risk of death from CO poisoning,” based on the commission’s report.

The letters said that the four companies had failed to add any safety upgrades to many or most of the generators they listed for sale in the fall of 2021.

“The Committee is seeking to understand why your company has failed to adequately adopt industry-led standards, how your company plans to prevent putting your customers at risk in the future, and whether legislative reform is necessary to protect consumers,” she wrote to each company executive.

Maloney gave the companies until July 12 to turn over information related to the safety of their products, details about the amount of money they have saved by declining to implement changes and their communication with federal regulators. If the companies fail to voluntarily comply, the committee’s chair has the power to issue subpoenas.

Tami Kou, a Generac spokesperson, said that company officials were in the process of reviewing the letter and that they would respond to lawmakers. In an earlier statement to reporters, Kou defended the company’s efforts to protect consumers. Kou told the news organizations that by 2023, all portable generators sold by the company would be equipped with shut-off sensors.

Dennis Trine, CEO of Champion, said in a statement that the company prioritizes the safety and quality of its products and that officials had started compiling the information requested and will provide it to the committee.

“Temporary, emergency power saves lives for people storing hundreds of dollars of Insulin in their refrigerators and people using breathing machines to sleep at night. The list goes on regarding the critical benefits of portable generators,” Trine wrote in an email.

Trine also said portable generators “never” kill users when they are “used correctly as depicted on the product, packaging and owners manual.”

But safety advocates say those instructions aren’t always easy to follow, because the machines usually can’t be operated in rain or snow. And a review of user manuals by the news organizations, which didn’t include Champion’s products, found that they can provide conflicting messages. Some instruction booklets suggest keeping generators a shorter distance from windows or doors than the 20-foot minimum recommended by the safety commission, while others provide more general guidance such as keeping the machines “far away” from homes.

The other two companies did not immediately respond to requests for comment.

Susan Orenga, executive director of the Portable Generator Manufacturers’ Association, the trade group that developed the voluntary shut-off switches standard, told federal regulators that generator makers have been affected by supply chain problems caused by the pandemic, according to the safety commission’s February report.

“It has been difficult to obtain parts, including CO sensors, to move forward any quicker,” Orenga told the agency.

But Marietta Robinson, a commissioner with the Consumer Product Safety Commission from 2013 to 2018, said portable generator manufacturers could have taken such steps years ago. She welcomed the House committee investigation.

“Most portable generator manufacturers have not invested in making their products safer,” Robinson said. “Instead, they have invested heavily in fighting both this technological change and regulations that would require it.”

The Consumer Product Safety Commission previously estimated that reducing generators’ carbon monoxide emissions would add about $115 to the manufacturing cost of most units, which typically sell for $500 to $1,500.

Robinson noted that generator manufacturers have “made many millions of dollars” off of people’s need for their products in the wake of increasingly frequent severe weather events.

“The least they can do is invest the modestly additional amount in making these products safer by significantly reducing their emissions of CO and saving the lives of those using this product,” Robinson said.

by Mike Hixenbaugh, NBC News, and Perla Trevizo, ProPublica and The Texas Tribune

The Other Cancel Culture: How a Public University Is Bowing to a Conservative Crusade

1 week ago

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This article was co-published with The Chronicle of Higher Education.

In August 2020, Boise State University chose a doctoral student in public policy, Melanie Fillmore, to deliver what is called a “land acknowledgment” speech at a convocation for incoming freshmen. Fillmore, who is part Indigenous, would recognize the tribes that lived in the Boise Valley before they were banished to reservations to make way for white settlers.

Fillmore considered it an honor. She was devoted to Boise State, where she had earned her bachelor’s and master’s degrees, taught undergraduate courses and served on job search committees. She also admired Marlene Tromp, a feminist literary scholar who came from the University of California, Santa Cruz, in 2019 to become Boise State’s first female president. Tromp had been hired with a mandate to promote diversity, and including an Indigenous speaker in the ceremony marking the start of students’ higher education would advance that agenda.

The convocation was to be virtual, because of the pandemic. Fillmore put on beaded Native American jewelry and recorded an eight-minute video on her phone. She began by naming the “rightful owners of this land,” the Boise Valley Indigenous tribes, and then described her own “complicated” background. Her father was Hunkpapa Lakota, her mother white. “I can trace eight generations of my Lakota ancestors being removed from the land of their lifeblood to the reservation, just as I can trace seven generations of Norwegian and English ancestors taking that land,” she said.

Melanie Fillmore (Angie Smith, special to ProPublica)

Fillmore urged viewers to “find a way to share your story here at Boise State” and to learn the history of Indigenous people. “When we acknowledge the Boise Valley ancestors and their land, we make room for that story of removal that was genocidal in purpose,” she said. “When we tell those stories honestly and fully, we heal, and our ancestors heal with us.”

She submitted her speech to the university, but the students never heard it. Boise State higher-ups thought that it was too long and too provocative to roll out in a politically precarious climate, one former official said. They consulted another administrator about whether to drop the speech. “I communicated that pulling it was a bad idea and incredibly wrong,” said this person, who has also left the university. “I don’t believe in de-platforming Indigenous voices.”

The advice was disregarded. Two days before the convocation, the vice president for student affairs told Fillmore that her appearance was canceled, explaining that her safety might be at risk or that she might be trolled or doxxed online.

Fillmore was devastated. She had encouraged the students to tell their stories, and now hers was being erased. She wondered if administrators were worried about the timing. The Idaho Legislature — which normally meets from January to March, when it decides how much money to give to public education, including Boise State — would hold a special session three days after the convocation to consider COVID-19 measures. Conservative legislators, who ever since Tromp’s arrival had been attacking Boise State’s diversity initiatives, might hear about Fillmore’s talk and seize on it to bash the university.

“I didn’t say anything that I haven’t already been sharing with my research and work,” she wrote to a faculty mentor, political scientist Stephen Utych, in an email the next day.

“I was incredibly frustrated for Melanie, but also that the university caved on something so relatively benign, because there’s so much pressure coming externally,” Utych said in an interview. He added that concerns about the Legislature’s impact on Boise State were one reason he quit his tenured professorship this year to work in market research.

When the university’s convocation committee, which organized the event, was informed of the decision, Amy Vecchione expressed misgivings. “I remember saying, ‘Typically, what we do is allow speech to take place, regardless of the content,’” said Vecchione, assistant director of the university’s center for developing online courses, who was the faculty senate liaison to the committee. “‘We process reactions if there are any. That’s part of academic freedom.’”

After the convocation, Tromp commiserated with Fillmore over Zoom. “She told me it was a sad outcome,” Fillmore said. Tromp did not respond to questions about the incident. Alicia Estey, chief of staff and vice president for university affairs, said in an email that “safety was a concern.”

Almost two years later, Fillmore still broods about how she was treated. Although she loves teaching, she’s rethinking her aspirations for an academic career. “I really lost a lot of faith in Boise State,” she said. “It was more important for the university to cope with whatever the Legislature wanted than to advocate for students. I feel more like a liability than a part of the community.”

Across the country, elected officials in red states are seeking to impose their political views on public universities. Even as they decry liberal cancel culture, they’re leveraging the threat of budget cuts to scale back diversity initiatives, sanitize the teaching of American history and interfere with university policies and appointments.

In Georgia, the governor’s appointees have made it easier to fire tenured professors. Florida passed a law requiring public universities to survey faculty and students annually about “the extent to which competing ideas and perspectives are presented,” and allowing students to record professors’ lectures as evidence of possible bias. In North Carolina, the Republican-dominated legislature, through its control over key positions, is “inappropriately seeking to expand [its] purview into the day-to-day operations” of state campuses, the American Association of University Professors reported in April. In Texas, the lieutenant governor and conservative donors worked with the state university’s flagship Austin campus to start an institute “dedicated to the study and teaching of individual liberty, limited government, private enterprise and free markets,” according to The Texas Tribune.

Perhaps reflecting such tensions, the average tenure of public university presidents has declined from nine years to seven over the past two decades, and they are increasingly being fired or forced to resign, according to data prepared for this article by Sondra Barringer and Michael Harris, professors of higher education at Southern Methodist University. Between 2014 and 2020, 29% of departures by presidents of NCAA Division 1 public universities were involuntary, up from 19% between 2007 and 2013, and 10% between 2000 and 2006. Moreover, based on media reports and other sources, micromanaging or hyperpartisan boards were responsible for 24% of involuntary turnover at such universities in red states from 2014 to 2020, a rate more than four times higher than in blue states, Barringer and Harris found.

“One way to weaken these institutions is to weaken the leadership of these institutions,” Harris said. “Higher education is under attack in a way that it has never quite been before. These are direct assaults on the core tenets of the institutions. ... Boards are running leaders out of town. It’s scary stuff.”

The pressure has been intense in Idaho — and especially at its largest university, Boise State. Egged on by the Idaho Freedom Foundation, a nonprofit group dedicated to “exposing, defeating, and replacing the state’s socialist public policies,” conservative legislators have pushed to prevent an overwhelmingly white institution from considering diversity in its policies and programs.

In 2020, Idaho banned affirmative action at public universities. Last year, the state trimmed $1.5 million from Boise State’s budget, targeting diversity, equity and inclusion programs, along with a total of $1 million from the other two state universities. Idaho also became the first of seven states to adopt laws aimed at restricting colleges’ teaching or training related to critical race theory, which examines how racism is ingrained in America’s laws and power structure. The lieutenant governor convened a task force to “protect our young people from the scourge of critical race theory, socialism, communism and Marxism” in higher education. This year, the Legislature adopted a nonbinding resolution condemning critical race theory and The New York Times’s 1619 Project for “divisive content” that “seeks to disregard the history of the United States and the nation’s journey to becoming a pillar of freedom in the world.”

Boise State is a revealing prism through which to examine how public universities, meant to be bastions of academic freedom, are responding to red-state pressures. The school would seem to be in a strong position to resist them. It receives a relatively modest 18% of its budget from the state, with the balance from tuition, student fees, federal student financial aid, research grants and donors. Buoyed by its nationally known football team, which plays on a blue field that has come to rival the potato as Idaho’s most recognizable symbol, and located in one of the nation’s fastest-growing metropolitan areas, Boise State has seen its academic stature and private fundraising rise. It received $41.8 million in donations in fiscal 2021, up from $34.2 million in 2020, although one prominent donor vowed to reduce his giving, complaining that the university was trending leftward.

But for all its seeming clout and independence, Boise State has yielded again and again. It has canceled events, like Fillmore’s speech, that might alienate conservatives; avoided using the terms “diversity” and “inclusion”; and suspended a course on ethics and diversity with 1,300 students over a legislator’s unfounded allegation of misconduct by a teacher.

University administrators “seem to want to placate the conservatives,” said sociology lecturer Michael Kreiter, who was an instructor in the suspended course and teaches classes on racism. “Their goal, in my view, is just to stay out of sight, hoping that all of this backlash won’t get focused on them.”

Idaho’s anti-critical race theory law “has chilled some Boise State educators and shut down their teaching and speech about race and gender in the classroom,” said Aadika Singh, legal director at the ACLU of Idaho, which investigated potentially unconstitutional enforcement of the law. “But it is also clear that some courageous educators have doubled down and reacted to the legislature’s attacks on education by teaching more controversial topics. The university administration has not been courageous; they haven’t had their faculty’s backs.” While the investigation remains open, Singh said, the ACLU of Idaho shifted its focus to educating faculty members on their academic freedom and free-speech rights in the classroom.

From left, Idaho Gov. Brad Little; Kevin Satterlee, president of Idaho State University; Marlene Tromp, president of Boise State University; C. Scott Green, president of the University of Idaho; and Jim Everett, co-president of the College of Idaho, at Boise Entrepreneur Week in 2019. (Photo by Angie Smith)

Boise State spokesperson Mike Sharp said that the 18% slice of its budget doesn’t convey the full scope of the state’s support for the university. Its land is titled in the name of the state Board of Education, and its buildings are all state buildings, he said. If Boise State had to cut programs to meet payroll, he added, enrollment would decline, and its credit rating might be downgraded. Without state support, “Boise State as it exists today would disappear,” Sharp said.

In an email to ProPublica, Tromp explained her strategy. “My aim is to support our faculty, students and staff and to open lines of dialogue with those in our community who are certain universities don’t see or hear them,” she wrote. “The work we are doing has the potential to be truly transformative — not just here but more broadly.” She declined to comment further, saying it is “a delicate moment, in which it continues to be easy to harm the best efforts in almost any direction.”

Some professors worry that the unanswered attacks are hurting Boise State’s credibility. When faculty members and community organizations recently sponsored a symposium on how to adjust property taxes to help homeowners affected by Boise’s soaring housing values, they held it off campus and didn’t list the university as a sponsor, in contrast to a similar symposium that the university conducted on campus 15 years ago.

“I am saddened by what’s happened in the last couple of years,” said Boise State political scientist Stephanie Witt, who helped organize the discussion. “There’s the perception that working with us is somehow connected to this taint on all higher education. We can’t be trusted.”

As it searched for a president in 2019, Boise State was increasingly gaining national recognition — and not just for athletics. Founded as a junior college by the Episcopal church in 1932, it entered the state system in 1969 and became a university in 1974. For years thereafter it was largely a commuter school for working adults. But now enrollment was steadily growing, especially from out of state; 17% of its undergraduates come from California. Its status had recently been upgraded to “high research activity” under the Carnegie system for classifying universities, and U.S. News & World Report had named it one of the country’s 50 most innovative universities.

One shortcoming stood in the way of its aspirations: a lack of diversity. Its faculty is 83% white, 5% Latino, 5% Asian and 1% Black. Even though 43% of degree-seeking undergraduates come from outside predominantly white Idaho, fewer than 2% are Black. Latinos make up 14%. The services needed to attract faculty and students of color, as well as low-income and LGBTQ students, and make them feel at home were scanty compared with many universities.

“We are a modern day Cinderella story,” a university commission concluded in 2017. “Unfortunately ... it is not clear that everyone is being invited nor supported to participate in the ball.” It called for creating “an infrastructure with executive leadership, and with the appropriate resources.”

During the presidential search, faculty, staff and students emphasized the importance of diversity. But some candidates were wary of Idaho politics. One finalist, Andrew Marcus, former dean of arts and sciences at the University of Oregon, cited “limited state funding and a climate of growing national concern about universities” as challenges in his job application. A Boise State staffer warned Marcus that Idaho was a one-party state in which Republicans were split into three factions: Mormons, who supported state funding for higher education; and libertarians and Trump acolytes, who didn’t.

Another hopeful bowed out after researching state politics. “I felt my values may not be shared by the governance structures in Idaho,” she said. “I didn’t want to have those fights.”

Tromp was the clear choice for the job. Born in 1966, she was raised a two-hour drive from the Idaho border, in Green River, Wyoming. Her father was a mechanic in a trona mine, a mineral processed into baking soda, and her mother was a telephone operator. Her high school guidance counselor applied to colleges for her, because she couldn’t afford the application fees. When an East Coast university offered her a full scholarship, her father said, “Honey, what would happen if you got all the way across the country and this turned out not to be real?” She enrolled at Creighton University in Nebraska, where she was smitten by Victorian poetry.

After earning her doctorate at the University of Florida, she spent 14 years at Denison University, a liberal arts college in Ohio. An English professor and director of women’s studies, she earned teaching awards and churned out books and articles. She advocated for nontraditional departments such as queer studies, said Toni King, a professor of Black studies and women’s and gender studies at Denison. “She cares very deeply about individual people, she pulls talent together, she innovates beyond,” King said. “She was always, ‘We can get there quicker, sooner, bigger.’”

The Boise State campus (Angie Smith, special to ProPublica)

Tromp immersed herself in campus life, speaking at “Take Back the Night” marches to raise awareness of violence against women. She was married on the steps of Denison’s library in 2007. Music department faculty played in the reception band. When she left for Arizona State, King thought, “There goes a college president.”

At Arizona State, Tromp served as dean of a college that offered interdisciplinary programs across the sciences, social sciences and humanities. At UC Santa Cruz, which she joined in 2017 as executive vice chancellor, she launched a mentoring program for faculty from underrepresented groups. She also proposed a new strategic plan too quickly, without enough familiarity with campus culture, according to Ronnie Lipschutz, an emeritus professor of politics.

“Marlene swept in and wanted to make an impact,” said Lipschutz, who is the author of an institutional history of UC Santa Cruz that examines why numerous strategic plans there have failed. “She didn’t talk to many people about how the place operated.” Tromp did not respond to questions about the strategic plan and her experience at Santa Cruz.

The battle over her plan was dragging on when Tromp left. She told the Santa Cruz academic senate that “incidents involving her personal and family’s safety” led her to accept the Boise State presidency, according to meeting minutes summarizing her talk. She also “expressed fear that there may be a lack of understanding of how easy it is to incite rage against the leaders in our community.” Santa Cruz colleagues said that she had been alarmed when people threatened and jeered her while she was jogging along a coastal road. They may have been unhoused students for whom dormitory space wasn’t available, and who had been denied permission to live in their cars and park in a campus lot, one friend said.

For a feminist university president, Idaho seemed unlikely to provide a safer, less volatile environment. “We were all surprised” at her departure, “especially since her project had not finished,” Lipschutz said. “The fact that she was going to Idaho was also a bit of a surprise. It was like, ‘Why on earth would you go to Idaho?’”

Tromp had no such doubts. “She was very enthusiastic and very much felt that she was coming home to the region that shaped her,” King said.

The Legislature wasn’t about to give her a honeymoon. In June 2019, Boise State’s interim president had highlighted the university’s diversity initiatives in a newsletter. They included graduation fetes for Black and LGBTQ students, six graduate fellowships for underrepresented minority students, recruiting a Black sorority or fraternity and implicit bias training for employees.

The next month, eight days after Tromp started, half of the 56 Republicans in Idaho’s House of Representatives wrote to her, assailing these programs as “divisive and exclusionary” and “antithetical to the purpose of a public university in Idaho.”

Through no fault of her own, Tromp was boxed in. She responded by calling for “meaningful dialogue,” thanking legislators for their “genuine engagement” and saying she looked forward to hearing their concerns.

In the midst of this firestorm, she met with three student activists. Ushered into her office, they noticed her treadmill desk and the bookshelves featuring her own works. When they told her about racism on campus, including swastikas painted on dormitory walls, Tromp started crying, according to two students, Ryann Banks and Abby Barzee.

“Didn’t you know about this before you took the job?” Banks asked her.

“I did not know,” Tromp said.

About 10 days after the legislators’ letter, cartoon postcards were mailed anonymously to state officials and lawmakers, depicting Tromp as a clown. Other attacks ensued. Although Tromp had spent only two years at UC Santa Cruz, the Idaho Freedom Foundation’s sister organization, Idaho Freedom Action, lampooned her as a “California liberal ... Turning Boise State Into a Taxpayer-Funded Marxist Indoctrination Center.” A scholar of xenophobia in Victorian England, Tromp was experiencing fear of outsiders firsthand.

After the foundation encouraged its supporters to troll her, Tromp received “hundreds and hundreds and hundreds of some of the most venomous hateful emails I could possibly imagine,” she said at a private 2021 meeting, according to a recording the Idaho Freedom Foundation obtained and posted. “Threats to drag me out in the street and sexually assault me and kill me. Messages of hatred. ... It’s a manifestation of the toxicity of the political climate across our country.”

Much as former President Barack Obama once courted congressional Republicans, Tromp sought to conciliate the conservative legislators. In one-on-one meetings, she assured them that she took the free-speech rights of a student wearing a Make America Great Again hat as seriously as anyone else’s. “All means all” became her mantra. Previously either a Democrat or undeclared, she registered to vote in Idaho as a Republican.

But she faced several disadvantages, starting with her gender. “These extremists think that it’s easier to pick off a woman than a man, and so they go after” her, said former Boise State President Bob Kustra.

Tromp’s striking appearance — she’s tall and slender, with close-cropped hair, glasses (often red) and multiple ear piercings — may have disconcerted some Idahoans. “I sometimes wonder if Dr. Tromp isn’t an easier target because she looks like a modern woman,” said Witt, the political scientist. “People say, ‘She’s got more than one hole in her ears, she’s got short hair.’”

As Idaho’s only urban university, Boise State attracts disproportionate media attention and conservative skepticism. It also has few of the natural allies on whom universities often lean politically: alumni in key government posts. Tromp reports to the state Board of Education, which has only one Boise State graduate among its eight members.

While its campus is a mile from the state Capitol building, Boise State’s presence there is sparse. About 10% of legislators are Boise State alumni, which may be partly attributable to its lack of a law school. Two Mormon institutions, Brigham Young University in Provo, Utah, and Brigham Young University-Idaho in Rexburg, together have about twice as many alumni in the Legislature as Boise State does. The University of Idaho has almost double Boise State’s representation. Gov. Brad Little is a University of Idaho graduate.

The disparity is even greater on the Joint Finance-Appropriations Committee, which sets the higher education budget. Six members of the Republican majority on JFAC graduated from the University of Idaho, including a co-chair, and none from Boise State.

As Idaho’s only land-grant university, with the state’s only public law school, the University of Idaho possesses in-state cachet and connections that Boise State is hard-pressed to match. Its diversity initiatives are comparable to Boise State’s. It has a chief diversity officer, as well as a director of diversity and inclusion for its engineering college. Boise State has neither position. Yet the Legislature appropriated 72% more per student to the University of Idaho in fiscal 2022 than to Boise State.

The University of Idaho’s president, C. Scott Green, called out the freedom foundation this past January, denouncing “a false narrative created by conflict entrepreneurs who make their living sowing fear and doubt with legislators and voters.”

Green avoided any pushback because “he has friends in key positions,” said Rep. Brent Crane, a committee chairman and former House assistant majority leader, who graduated from Boise State in 2005.

Brent Crane (Angie Smith, special to ProPublica)

Even though Crane is an alumnus, Boise State can’t count on his support. His father, a former state legislator and treasurer, is treasurer of the Idaho Freedom Foundation, with which Crane agrees 82% of the time, according to its rankings.

The 47-year-old Crane represents the Boise suburb of Nampa, where he was born and grew up, and where he’s vice president of his family’s security and fire alarm business. He and his brother also own a fire sprinkler company. At a nearby coffeehouse, he said that, when he was a political science major at Boise State, his teachers never revealed their opinions. “What I respected most about my professors was that I didn’t know if they were Democrats or Republicans,” he said. “Whatever the student thought, the professor took the opposite tack. In my perfect world, I’d like to see Boise State get back to where it was when I was there.”

Crane, who is white, said that he disagrees with critical race theory: “There’s no racism in my life.” In his boyhood, he said, “African Americans were revered and looked up to. They were the athletes who played on the football and basketball teams. They were the heroes.”

Under immediate pressure, Tromp began rethinking her agenda. “From day one, when she came in, and the letter from the legislators came in saying, ‘You’re under a microscope, you’d better start scrubbing your campus of these programs,’ that changed the operating environment from her perspective, and probably the perspective of everyone,” one insider said.

“There was a quiet reassessment of what can we reasonably accomplish and an ongoing conversation about how do we serve our students best without unnecessarily inflaming the rage and the accusations of these legislators?’”

Crane, the legislator and Boise State alumnus, had a role in one of the university’s early concessions. Boise State was advertising for a new position: vice provost for equity and inclusion. It would be the top diversity job at the university, implementing Tromp’s agenda. The vice provost would oversee recruiting and retaining faculty, building diversity into the curriculum and monitoring the campus climate.

The search produced two finalists. One of them, Brandy Bryson, looked into Idaho politics and withdrew her name from consideration. “There was no way the institution was going to survive the political strong-arming that was coming from the Legislature,” said Bryson, director of inclusive excellence at Appalachian State University in North Carolina. “Boise State’s desire to hire a vice provost for equity and inclusion was a clear commitment to academic excellence and the empirically proven benefits of diversity, which the Legislature didn’t seem to understand or value.”

The other finalist, John Miller Jr., then chair of social work at a liberal arts college in the South, noticed that someone from the Idaho Freedom Foundation was tracking him on social media. Nevertheless, he accepted an invitation to visit Boise State, where he met in March 2020 with Tromp and other leaders, and gave a presentation.

Some search committee members had reservations about Miller, who wasn’t a shoo-in, insiders said. Still, “the vibe I got, when I was dropped off at the airport, I fully expected an offer,” Miller said. “I was definitely under strong consideration.”

After the student newspaper reported on the opening, though, Boise State’s critics weighed in. Idaho Freedom Foundation President Wayne Hoffman wrote on the group’s website that “BSU didn’t get the message” from the “written rebuke” by the 28 legislators. Shortly after Miller returned to South Carolina, Crane denounced his alma mater for hiring a “vice president of diversity,” calling it “a direct affront” to the Legislature and “me personally.” Despite getting the job title wrong, Crane clearly meant the vice provost position.

Crane also conveyed his concerns privately to Tromp. He regarded the new position as part of “the woke agenda sweeping the country: I don’t want to see Boise State caught up in that,” he told ProPublica. The House had already killed the higher education budget twice. If Tromp had forged ahead, other Boise State priorities might not have been funded, Crane said.

“She and I disagree on the vice provost of diversity,” he told ProPublica. “That’s not a hill she wants to die on. She chose to pay deference.” A week later, Boise State notified Miller that it had halted the search. It never filled the position.

Crane continued to lambaste Boise State. During an April 2021 debate on the higher education budget, Crane read aloud what he said was an email from an unnamed Boise State music student complaining that a professor had asked a class to discuss how Black composers are superior to white composers. The student protested that skin color has nothing to do with the quality of music but was purportedly told to be quiet. (The incident could not be confirmed.)

“I’m disgusted. I’m embarrassed and I’m ashamed,” Crane told the legislature. “There has been a direct shift in the ideology that’s being taught at Boise State University. ... Our tax dollars” do not “need to be spent silencing kids’ voices on our college campuses.”

One way that Boise State sought to reduce legislative pushback was by adjusting its language. For example, Tromp asked a university planning committee to avoid the words “diversity” and “inclusion,” which legislators would be searching for, said Angel Cantu, a former student government president on the committee. Boise State’s 2022-26 strategic plan doesn’t mention “diversity” or “inclusion,” while the phrase “equity gaps” appears four times. By contrast, the University of Idaho’s plan calls for building an “inclusive, diverse community” and creating an “inclusive learning environment.”

Boise State administrators discussed the importance of terminology at several meetings, a former official recalled. The message was that “you can use different words to have the same meaning. Equity and words like that are less incendiary.”

The university tweaked job titles similarly. In August 2020, Francisco Salinas, then the university’s top diversity officer, moved from “director of student diversity and inclusion” to “assistant to the vice president for equity initiatives.”

Although his responsibilities did change, Salinas said, the new description wasn’t his choice, and he disagreed with scrubbing words like diversity. “The tactics being used” against Boise State, he said, “were bullying tactics. It’s the same thing you learn as a kid. If a bully is successful at taking your lunch money, they’re going to keep going. You have to stand up and let them know they can’t do that to you.”

Discouraged, Salinas left Boise State in April to become dean of equity, diversity and inclusion at Spokane Falls Community College in Washington. He said other diversity officials have fled. “I know what Dr. Tromp’s heart is,” he said. “I was very pleased she was hired. I thought she’d be able to make progress along this axis. But the environment did not afford that.”

The legislative barrage also affected recruitment. “I’ve been on hiring committees and I see who applies for jobs here,” said Utych, the former political science professor. “They are a lot whiter than they are at other universities. Part of that is the location, but part of that is also the Legislature attacking diversity and inclusion.”

Tromp “described being very, very disheartened that the best thing to do might be to pull back because of the resistance,” her friend King recalled. “There was concern, with all the information she had before her, how could she move forward? She had to think about the university as a whole.”

The Rainbow Graduation in April (Angie Smith, special to ProPublica)

When the university did move forward with a lightning-rod event, it took precautions to avoid a backlash. Republican legislators had attacked the “Rainbow Graduation,” which honors LGBTQ students, in their letter to Tromp, and the Idaho Freedom Foundation had accused Boise State of holding “segregationist” commencements. At this spring’s Rainbow Graduation, Boise State’s dean of students pointedly reminded the 30 or so seniors that “this is not a commencement ceremony.” Since they were aware that they would actually graduate nine days later, the disclaimer appeared to be intended for critics outside the university.

Some faculty were undaunted. The sociology department has doubled the number of its courses focusing on race and racism from two to four, and it opened an Anti-Racism Collective that brings in speakers. “This is a great opportunity in some sense,” said sociology department chairman Arthur Scarritt. Added Kreiter, who doesn’t have tenure: “I feel I don’t have a lot of longevity here. I’m just going to teach this as fiery as I can.”

Several professors and administrators urged Tromp to fight back. “There were a lot of people on campus, even in senior leadership, who said, ‘You can’t get out of this by taking the high road,’” one recalled. “I would have preferred a more direct approach.”

Tromp drew the line at cultivating the Idaho Freedom Foundation. Hoffman said he has asked to meet with her on multiple occasions and has been refused. “Nothing has changed at Boise State,” he said in an email. “It’s just handled more carefully.”

There is some evidence for the contention by Crane and other critics that conservative students at Boise State tend to feel squelched in class. A state Board of Education survey completed last November found that 36% of Boise State students who self-identified as right of center felt pressured often or very frequently to accept beliefs they found offensive, as opposed to 12% of students in the center and 6% on the left. Conservative students were more apt to feel this pressure from professors; liberals, from classmates.

Still, the faculty encompasses a range of views. Anne Walker, chair of the economics department, holds a fellowship in free enterprise capitalism. One member of the lieutenant governor’s task force on communism in higher education was Scott Yenor, a Boise State political scientist and occasional Tucker Carlson guest. In December 2020, Yenor and an Idaho Freedom Foundation analyst co-authored a report urging the Legislature to “direct the university to eliminate courses that are infused with social justice ideology.” In a speech last fall, Yenor mocked feminists as “medicated, meddlesome and quarrelsome” and universities as “the citadels of our gynecocracy.”

Boise State’s donors also span the political spectrum. Timber and cattle ranching magnate Larry Williams served for 20 years on the Boise State Foundation board and has donated millions of dollars for athletics and business programs. He has also given six figures to the Idaho Freedom Foundation. In this year’s Republican primary campaign, he gave about $125,000 to more than 30 conservative candidates, including $1,000 to Crane.

Larry and Marianne Williams are pictured on a display at a Boise State sports training facility named after them. (Angie Smith, special to ProPublica)

Throughout 2020, Williams pressed Boise State to scuttle the programs identified by the 28 Republican legislators, to no avail. Although he found Tromp to be open and engaging, he told legislators in February 2021 that he would no longer donate to Boise State, with the exception of its football program, “until this is turned around.”

“It appears BSU no longer shares our Idaho values,” Williams wrote. “Students are taught ... that our honest, hardworking rural farmers, ranchers, miners and loggers are ‘white privileged’ with ‘implicit bias’ toward minorities and Native Americans.”

The Idaho Freedom Foundation’s Hoffman acknowledged that Boise State has fewer diversity initiatives than some big universities in other states. “We recognize that it’s a small but growing dedication of resources to this enterprise,” he said. “I don’t care how big it is. I care if any taxpayer dollars are wasted on these efforts. We want to catch it now before it becomes an even bigger problem.”

Like white students from rural Idaho who are exposed for the first time to concepts like white privilege and systemic racism, some students of color, especially from other states, endure culture shock on campus. After Kennyetta Coulter, a biology major from Long Beach, California, arrived at Boise State last year, accompanied by her mother, they hardly saw another Black person for two weeks. “If you don’t like Boise, don’t be afraid to tell me,” her mother said on leaving.

Kennyetta Coulter (Angie Smith, special to ProPublica)

In a “Difficult Conversations” class, Coulter, who describes herself as a political moderate, found that she was the only student in her discussion group who favored background checks for gun buyers or was open to letting transgender athletes participate in sports based on their gender identity. Her three roommates, all of whom had blue eyes and blond hair, were nice to her. But sometimes she felt peer pressure to suppress her views. At Boise State football games, she squirmed in the student section while “big, buff white boys with cowboy boots” chanted, “Fuck Joe Biden.”

Coulter became so depressed that she sought counseling. “Sometimes I just feel I’m all alone,” she said, “and I’m the only one who understands what I’m going through.” She didn’t have the energy to go to class and stayed in bed and watched television.

The administration’s reluctance to challenge legislators dispirited her. “Why isn’t the university saying anything?” Coulter wondered.

In some red states, public universities have fought back. The University of Nebraska has been especially effective in warding off political pressure. It’s the only public university in Nebraska, and about half of the state’s legislators earned degrees from institutions within the University of Nebraska system. So did all eight regents. And as a retired vice admiral and former superintendent of the U.S. Naval Academy, Nebraska president Ted Carter has the kind of military credentials that make it hard to call him a communist.

University regent Jim Pillen, a veterinarian and former Nebraska football star who is running for governor, proposed a resolution last year that critical race theory “seeks to silence opposing views and disparage important American ideals” and should not be “imposed in curriculum, training and programming.”

Aided by the ACLU of Nebraska and other advocacy groups, the university’s administration, faculty and student government mobilized against the resolution. At a hearing last August before the regents, almost 40 people testified against it, while only a handful supported it. Defenders of critical race theory noted that the Declaration of Independence refers to “merciless Indian Savages.” A retired English professor pleaded with the board: “If you pass this, you repudiate my whole career.”

The four nonvoting student regents also voiced their opposition, including Batool Ibrahim, the first Black student government president of Nebraska’s flagship Lincoln campus. Ibrahim considers herself a native Nebraskan, although technically she isn’t. Her Sudanese parents were flying to the U.S. in 1999, hoping she would be born on American soil so she could become president someday, when her mother went into labor on the plane. The pilot hurriedly landed in Dubai, where Ibrahim was born. The family soon moved to Lincoln, where she grew up.

Critical race theory “is the history of people of color in this nation,” Ibrahim said. “It is my history. So when we talk about whether critical race theory should be taught or it should not be taught, you’re telling me that my history does not belong in the classroom.”

Pillen defended his resolution, saying that it did not violate academic freedom and that “Nebraskans deserve the confidence of knowing their hard-earned tax dollars cannot be used to force critical race theory on anyone.”

The board upheld teaching critical race theory by a 5-3 vote. But the battle was just starting. One regent in the majority warned that 400 of 550 constituents who contacted him supported the resolution — a promising sign for Pillen, who would go on to win the Republican gubernatorial nomination.

In November 2021, the chancellor of the University of Nebraska’s Lincoln campus, saying he had been “shaken” by the Minneapolis police killing of George Floyd, announced a plan to “recruit, retain and support the success of students, faculty and staff who are people of color.” Nebraska Gov. Pete Ricketts, who can’t seek reelection because of term limits and has endorsed Pillen, called the plan “ideological indoctrination” that would “inject critical race theory into every corner of campus.”

Then a Nebraska legislator proposed withholding funds from colleges or public schools that engaged in “race or sex scapegoating.” In a rerun of the regents’ hearing, 40 people testified against the bill in February, while three supported it. Speaking for the university, Richard Moberly, dean of the law school, warned that the bill could be interpreted to prohibit legitimate discussion of systemic racism and unconscious bias. It died in committee.

Pillen isn’t giving up. “As governor, I’ll fight CRT and other un-American, far-left ideologies in our classrooms,” he told ProPublica.

Despite Tromp’s conciliatory approach, a controversy in October 2020 further roiled the university’s critics. It pitted a popular downtown establishment, Big City Coffee, which had just opened a branch in Boise State’s library, against student activists galvanized by Floyd’s killing five months before.

Big City Coffee’s name appears to be ironic. Agricultural signs hang from the walls and rafters: “Duroc Hog,” “Strawberries for Sale,” “Cattle Crossing.” But it was another aspect of the downtown location’s decor that prompted student complaints, even though it wasn’t replicated in the library shop: a “thin blue line” flag. The students argued that such flags can signify support for white supremacists and hostility to the Black Lives Matter movement, and that a business with those sentiments should not have a campus outlet.

The coffee shop owner, who describes herself as a political moderate, explained that she was engaged to a former police officer who had been shot and disabled in the line of duty, and that she only meant to support law enforcement. Student government President Angel Cantu agreed that the shop should not be kicked off campus simply for being sympathetic to first responders.

The protesters weren’t mollified. They were already upset with Cantu because they wanted the university to cancel its security contract with Boise police. He felt Boise State shouldn’t do so without first knowing how to replace the department’s services.

The wrangle escalated as Big City Coffee shut down the campus branch, and other student government leaders impeached Cantu. The coffee shop owner sued Boise State, Tromp and three other university officials, accusing them of forcing her off campus. Charges against the university and Tromp were dismissed, while the case is proceeding against the other defendants, who have denied wrongdoing.

The branch’s demise and Cantu’s impeachment galvanized conservative students. Jacinta Rigi, a sophomore who had opposed the impeachment, posted a video accusing the student government of ignoring her and others on campus. “Freedom of speech is being abused and stolen from many students at the university and our voices are being silenced,” she said. The video drew almost 8,300 views, and Rigi ran for student government president in 2021.

Although Rigi lost — she now works at Fox News in New York while completing her Boise State degree online — the political momentum on campus had shifted. This past March, Adam Jones, a former intern in the Republican Party’s Boise office who urged Boise State to reconcile with the Legislature, was elected student government president. “Too often it is looked at that the state is being the bad guy,” Jones told ProPublica.

Adam Jones (Angie Smith, special to ProPublica)

Jones is a Boise native. His father, a lawyer, and his mother, a banker, both graduated from Boise State. He campaigned in a 1993 white Ford pickup truck he rebuilt himself, with “Blue Lives Matter” and “God Bless America” stickers on its rear windshield, a mounted American flag and a “USA4EVA” license plate. Asked about public safety at a candidates’ debate, he said, “Every time I see a Boise police officer go by, I feel safe.”

In March 2021, about 1,300 Boise State students were taking University Foundations 200, “Foundations of Ethics and Diversity.” The course, which predated Tromp, was split into more than 50 sections. Each tackled the topic through a different lens, from the “Star Wars” saga to how lack of access to technology affects rural Americans and other groups.

Sociology professor Dora Ramírez was teaching a section on censorship. She was about to start a unit about a bill, under consideration in the Idaho Legislature, attacking critical race theory. Then, Ramírez said, she and the other UF 200 instructors got a lesson in censorship from their own university.

Boise State had received a complaint from a legislator, who has never been publicly identified. The legislator said he had seen a video of a UF 200 class in which an instructor had demeaned a female student’s intelligence and forced her to apologize in front of the class for being white. She was supposedly taunted by other students and left the class in tears.

Dora Ramírez (Angie Smith, special to ProPublica)

Without seeing the video, Tromp suspended all UF 200 sections for a week and hired a law firm to investigate. “Isn’t it ironic?” to suspend a censorship class, Ramírez recalled thinking. “What a way to undermine the authority of all those instructors. You work so hard to build a rapport with all those students. Then they’re thinking, ‘What did she do wrong?’”

Some faculty members were appalled. “A lot of us were quickly pointing out, ‘We have students of color made to feel bad every day of the week,’” said sociologist Martin Orr, a former president of the faculty senate. “One white student feels bad, all hell breaks loose.”

When the course resumed, Kreiter used the suspension as fodder for his UF 200 section on inequality in higher education. “The university is robbing you of your education because of politics,” he told students. “You’re still out the same tuition bill, but you’re getting less education.”

The law firm’s report, which came out in May, concluded that no student was mistreated and no instructor acted improperly. The complaint apparently mischaracterized a class discussion about universal health care in which a student had called an instructor’s logic “stupid” — not the other way around. “There were no reports of anyone being forced to apologize for being white.” The legislator told investigators that he didn’t have the video, which has never surfaced publicly.

Tromp told the Inlander, a community newspaper in Spokane, Washington, that since she hadn’t known in which class section the alleged incident took place, she had been forced to suspend the entire course. Other university presidents whom she consulted agreed with her decision, she said. “It’s a little bit like being told there’s a gas leak in the building, but you don’t know where it is,” Tromp said. “It always feels dramatic to clear the building to find the gas leak.”

For one UF 200 instructor, who was teaching a section on misinformation, the incident was “very much” what his class was about. Legislators were “trying to craft a completely unwarranted narrative for political reasons in order to shut something down.”

Nevertheless, Tromp redoubled catering to them. She established an “Institute for Advancing American Values” to inspire “us to talk and listen to each other respectfully.” Its first speaker was conservative pundit Jason Riley.

Boise State also scaled back an annual tradition, “Day at the Capitol.” In the past, a dozen student government members would set up a booth in the Capitol rotunda and chat with legislators. Other students were invited to watch from the gallery.

Mostly, Democratic lawmakers dropped by. Republicans sent aides to say they were busy. “We got used to being avoided by them,” Cantu said. “We still went out of our way to invite them.”

This year, there was no booth. “The university’s concern was that the students would protest or do something inappropriate,” Jones said. Two student leaders met briefly with the governor as he declared it “Boise State University Day.” Three other students delivered gifts — 105 jars of honey, courtesy of Boise State’s beekeeping team — to the offices of each of the 70 representatives and 35 senators.

While reining in students, Boise State invited Crane, the alumnus who had opposed hiring a vice provost for equity and inclusion, to introduce its leadership team on that special day to the House chambers. Crane was delighted to help.

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by Daniel Golden and Kirsten Berg

Army Corps of Engineers to Order New Study of Grain Elevator That Could Harm Black Heritage Sites

1 week ago

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Update, June 30, 2022: The Army Corps of Engineers has concluded that a report the grain elevator developer commissioned is “insufficient.” The Corps, which is considering a federal permit application from the developer, will require the company to conduct a new report to assess potential harm to the surrounding historic sites, which will replace the gutted report it submitted last year, according to a Corps spokesperson.

The federal agency charged with overseeing historic preservation policy has expressed concern that a Louisiana industrial project could inflict harm on African American historic sites. The move follows a ProPublica investigation that found an archeological consulting firm had gutted a report to the Army Corps of Engineers that originally detailed that harm.

In a letter sent last week to the Army Corps, the Advisory Council on Historic Preservation said it is aware that the report commissioned by the developer of the project “has been challenged by the original author of the report.” It went on to state: “The ACHP requests that the Corps clarify how it will address this issue.” The Corps is considering a permit application from the project’s developer.

Greenfield, a Colorado-based agricultural company, plans to build a grain transfer facility, which would stretch for more than a mile from the Mississippi River through sugar cane fields. The grain terminal has been contested by community and advocacy groups that say the project would make life untenable in parts of Wallace, a small, nearly all-Black community. They also argue that the project would damage important historical sites, including the nearby Whitney Plantation Museum, which serves as a memorial to generations of people forced to work the fields against their will, and the Evergreen Plantation, an unusually intact plantation that’s been designated a national landmark.

Greenfield has said that its project will not harm any historic properties. As evidence, it cited a survey it commissioned. But that report, produced by a consulting firm called Gulf South Research Corporation to allow Greenfield to comply with the National Historic Preservation Act, was altered dramatically before it was submitted to the Louisiana Division of Historic Preservation.

The letter sent last week to the Army Corps was written by Jaime Loichinger, an assistant director at the Advisory Council on Historic Preservation, who said in an interview that ProPublica’s story had raised questions about the “validity of the report” and spurred the agency’s intervention.

The Army Corps, Loichinger said, must “take steps to supplement or replace” the report that was altered “to make sure that they [the Corps] have a full and complete understanding of the historic properties.”

The original draft of the report had concluded that the development would harm historic properties including the Whitney Plantation Museum. The report’s authors had written that the entire area around Whitney and the Wallace community should be characterized as a historic district.

According to internal Gulf South company emails that ProPublica obtained and to one of the drafters of the original report, an architectural historian-turned-whistleblower named Erin Edwards, the firm was told by its client to change the report or risk losing the Greenfield contract and other future contracts.

In its letter to the Army Corps, the Advisory Council on Historic Preservation echoed the findings of the original report.

“We understand that most of the residents of the community of Wallace are the descendants of the African Americans who labored as slaves on the Whitney and Evergreen Plantations prior to emancipation and continued as farm laborers and tenant farmers after emancipation,” the letter says. “As such, there appears to be potential for an historic district associated with this descendant community and an encompassing cultural landscape.”

Gulf South previously denied that it had changed the findings because of pressure and said it stood by the content of the final report. Greenfield said it would respect any historic sites discovered in the course of construction. “Protecting historic and cultural resources is a priority in our discussions with the Corps of Engineers,” the company said in response to questions about the recent Advisory Council on Historic Preservation letter. “We take our responsibilities as stewards of this land very seriously.”

The project has drawn recent condemnation from other prominent voices in the weeks since the ProPublica investigation. Marc Morial, the former mayor of New Orleans and current president of the National Urban League, whose own ancestors were enslaved on the Whitney Plantation, sent a letter to Greenfield’s executives on June 3 to express his “unequivocal and vigorous opposition to your ill-advised plans to develop a massive grain elevator complex” and noting his concern about the “silencing of an unfavorable independent assessment.”

And on June 21, the Louisiana Trust for Historic Preservation, the state’s leading preservation organization, placed the land around Wallace and the Whitney Plantation on its 2022 “most endangered places” list.

“Plans for a large-scale grain elevator, port and other industrial development will change this corridor’s historic integrity and destroy the overall quality of life for local residents,” the Louisiana Trust said in a press release.

The Army Corps is only now beginning its permit review. The Corps previously told ProPublica that it has concerns about possible harm to historic sites. The Corps said last week that it will be in touch with the Advisory Council on Historic Preservation this week and will then respond more formally.

Greenfield has already begun work on the land. In late May, it informed Wallace residents that it planned to drive large metal beams into the ground in a sugar cane field to determine whether construction could proceed as planned.

The Descendants Project, an organization that aims to build power among communities who trace their ancestry to people enslaved in the river parish communities, raised the prospect that the work could disturb the unmarked graves of enslaved people. As part of an ongoing lawsuit the group is pursuing, The Descendants Project asked a Louisiana judge to impose a restraining order on Greenfield’s planned “pre-construction” testing on the property.

“You’re talking about people’s final resting place,” Joy Banner, one of two sisters from Wallace who founded The Descendants Project, said on June 3 in a packed courtroom. “That’s why we are here today: because we don’t know where our ancestors are buried.”

Greenfield’s lawyer said that “there’s been no testimony at all about specific burials” in precisely the sites where the company planned to begin driving in piles. He claimed that Greenfield would incur financial losses if it was barred from beginning pile-driving work on its property.

The judge denied the emergency restraining order. Days later, the Army Corps separately refused a request from the Tulane University Environmental Law Clinic to stop the pile driving, saying it had no jurisdiction because the work on its own would not impact wetlands.

Greenfield’s builders began pounding massive beams into the ground near the Banners’ family home on June 17 and continued the work on June 20 — a federal holiday commemorating Juneteenth, which celebrates the emancipation of enslaved people.

“I think they are trying to send the message that this project can’t be stopped, and that they’re moving forward,” said Jo Banner, Joy’s sister. “The cranes are there and they’re acting like they have the permit.”

In its letter, the Advisory Council on Historic Preservation made clear its belief that the permit, and Greenfield’s plans, should not be treated as an inevitability, and it reminded the Corps of its responsibility to consider environmental justice in permitting decisions. “A federal agency should consider alternatives in a way that gives full consideration to the effects of that undertaking on historic properties,” the letter said.

by Seth Freed Wessler

Help Us Learn About Sheltered Workshops in Missouri

1 week 2 days ago

We are journalists from ProPublica and The Kansas City Beacon. We want to know what it is like inside sheltered workshops.

Sheltered workshops are special jobs where most workers are people with disabilities.

Some people in sheltered workshops make very little money. They make less than minimum wage.

Some states have closed their sheltered workshops.

Missouri still has many sheltered workshops.

We want to know what it is like inside sheltered workshops. We want to talk to people who:

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Protecting your privacy: We will let you know if we are going to write about your story. We will ask you before we share your name or any personal information. We are the only ones who will read what you submit. Thank you for sharing your story.

by Madison Hopkins, The Kansas City Beacon

The Polluter Just Got a Million-Dollar Fine. That Won’t Cure This Woman’s Rare Cancer.

1 week 2 days ago

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Rhonda Fratzke recalls getting a strange question from her oncologist last year after she was diagnosed with cancer of the blood vessel linings: Had she ever worked with vinyl chloride?

Industrial workers exposed to the potent carcinogen, a colorless gas used to make plastic, have been known to develop the extremely rare ailment called angiosarcoma of the liver.

Fratzke, 60, spent much of her life as a homemaker. But for almost a decade, she lived near a plant in Calvert City, Kentucky, that manufactured polyvinyl chloride, a plastic known as PVC. ProPublica featured the Westlake Chemical Corporation facility in an investigation last month that revealed how regulators had failed to curb dangerous emissions, including vinyl chloride, from the company’s Calvert City operations. The cumulative cancer risk from vinyl chloride and other air pollution in the community surrounding Westlake’s plant far exceeded what the EPA considers acceptable, according to a ProPublica analysis and an EPA estimate.

Just three weeks after the story published, the Department of Justice announced a proposed consent decree that would require Westlake to pay a $1 million penalty and spend another $110 million to upgrade equipment at its Calvert City plant and at two of its other facilities in Lake Charles, Louisiana. The consent decree is a settlement between the federal government and the company that includes agreed-upon remedies for reducing Westlake’s environmental pollution and allows the parties to avoid going to trial. It targets Westlake’s industrial flares — giant candle-like devices that burn off waste gases. They’re supposed to destroy 95% of the contaminants piped into them, but Westlake repeatedly failed to operate them properly, according to the complaint, which was filed on behalf of the EPA and state environmental regulators in Kentucky and Louisiana. At times, the flares ceased working altogether, allowing all of the toxic waste to escape into the air.

The Westlake chemical plant in Calvert City, Kentucky (Joseph Ross, special to ProPublica)

The consent decree said Westlake denies violating any of the regulatory requirements that the EPA and state authorities said it had run afoul of. The company didn’t return requests for comment. In a statement provided to Law360, Westlake said it was “​​pleased to have reached an agreement with the United States Environmental Protection Agency and is making investments to reduce environmental emissions in concert with the company’s sustainability strategy.”

The news gave Fratzke a sense of validation. She and her family moved to Calvert City, near the Illinois border in Western Kentucky, in 1989. The following year, Westlake took over a local chemical plant, eventually expanding into three interconnected facilities. From 1990 to 1998 — which covers most of of the time Fratzke was living in the area — Westlake’s operations released 10,000 to 70,000 pounds of vinyl chloride per year, according to self-reported estimates that the company submitted to the EPA. That placed the company’s Calvert City plants among the nation’s top 10 industrial emitters of vinyl chloride for two of those years.

Those numbers are “absolutely astonishing,” said Arthur Frank, a Drexel University professor of public health and medicine. ProPublica shared details of Westlake’s history and Fratzke’s illness with the professor. “There’s a very high likelihood” that the vinyl chloride in the air “played a role,” he said.

In recent years, vinyl chloride emissions from Westlake have risen as high as 170,000 pounds a year, dwarfing emissions from other facilities in the city of 2,500.

It’s virtually impossible to prove that a specific contaminant caused any individual’s cancer. But Fratzke can’t help recalling how she raised four kids in that Calvert City house and spent countless hours growing roses and tomatoes in her garden. Was she breathing in extra vinyl chloride by spending all that time outside? Did the watermelon and squash she tended so carefully absorb the chemical from the soil? “Now I think, ‘Oh my God, what was I feeding my kids?’” Fratzke said.

Her youngest son, Jeremiah, rode his bike so much that he wore out the tires. She wondered: When he pedaled through the swampy area by the side of the road, was that water contaminated? Fratzke said Jeremiah was diagnosed with non-Hodgkin lymphoma at age 23 and is now in remission. Exposure to certain chemicals — including benzene, which is emitted by the Westlake plant — has been linked to that type of cancer.

Westlake’s facility has a habit of leaking vinyl chloride; in 2011, for instance, 11,000 pounds of the compound streamed from a hole in a piece of piping that hadn’t been inspected. State and federal regulators have fined the plant for at least six instances of unauthorized vinyl chloride emissions since 2010, including twice since the EPA began investigating Westlake’s flares in 2014. A recent Kentucky air monitoring study also found high levels of vinyl chloride in Calvert City. From October 2020 to March 2021, two monitors installed near the Westlake plant recorded higher levels of vinyl chloride on average than any of the 129 other monitors nationwide designed to detect the chemical. A third monitor, on the grounds of Calvert City Elementary School, recorded levels in the top 10, according to data pulled from an EPA database.

It’s “ridiculous” how long it takes to investigate a violation, negotiate a consent decree and get the Justice Department to release it, said Scott Throwe, a former senior staffer in the EPA’s Office of Enforcement and Compliance Assurance. “It’s a very slow process” — around eight years, in this case — and “in the meantime the facilities are still chugging along and operating poorly, and the public is the one that suffers.”

Fratzke said she hopes the renewed attention on Westlake will raise awareness of local health risks. “They should notify the public” that they’re “in danger living this close to the plant,” she said.

Fratzke near the Westlake chemical plant (Joseph Ross, special to ProPublica)

She worried about other residents who might have angiosarcoma without knowing it. Fratzke only received her diagnosis after her doctor ordered extra tests to determine the cause of abnormalities found on her liver.

ProPublica asked the Kentucky Cancer Registry for data on statewide angiosarcoma cases. Based on national statistics and Kentucky’s population, one would expect four or five new cases a year. The most recent data available, from 2019, reveals 17 cases. The prior nine years saw eight to 18 diagnoses per year. Frank said the numbers do seem unusual, but it’s impossible to be sure if they’re linked to air pollution without having more information on the type of angiosarcoma and knowing whether the cases are clustered near industrial plants.

The settlement would require Westlake to reduce the amount of pollutants sent to the flares and to ensure that the flares are working as they should. These changes would cut the plants’ hazardous air pollution by 65 tons per year and reduce its volatile organic compounds (which form smog) by 2,258 tons per year, the regulators predicted. Westlake will also install monitors around the boundary of each facility to monitor for benzene, a potent carcinogen.

Throwe said the document is powerful, with “a lot of teeth.” But it will only work if the EPA monitors Westlake to ensure the requirements are being implemented, he said. Without follow-up, “it’s not worth the paper that it’s written on.”

The EPA’s Washington, D.C., office, which led the investigation into Westlake that resulted in the consent decree, did not respond to requests for comment.

After a public comment period (which ends July 15), the agreement will be finalized if it receives court approval. (Instructions for submitting comments can be found here.) Throwe said consent decrees rarely receive many comments, and he doesn’t expect the terms of the final agreement to change much, if at all.

Few leaders in Calvert City were willing to criticize Westlake, ProPublica found during a reporting trip this spring. In surrounding Marshall County, more than a quarter of the private-sector jobs come from chemical plants and other manufacturing.

“What is particularly sad about this situation is, this is a small company town,” Throwe said. Westlake is “significantly impacting the health of their own employees … and the children that live in the community.”

Rhonda Fratzke with her husband, Rodney Fratzke, her granddaughter Caylee Hermann and Precious the dog (Joseph Ross, special to ProPublica)

Fratzke now lives 9 miles outside Calvert City. In the winter, when the leaves are off the trees, she can see the glow from Westlake’s flares. “It just lights up the sky,” she said.

“I’m not putting down Calvert City, I’m not putting down the plant,” she said. Westlake pays taxes and donates to the community, including the high school where her grandson enjoys more resources than what’s available at other schools, she said. The companies “pay and do all that stuff, I think, to keep people happy. … So I think people tend to turn their head the other way as the money flows.”

Do You Live Near an Industrial Facility? Help Us Investigate.

Lylla Younes contributed reporting.

by Lisa Song

School Board Candidates Who Criticized the Hiring of a Black DEI Educator Lose Their Elections

1 week 4 days ago

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Two Georgia school board candidates who criticized the hiring of a Black educator focused on diversity, equity and inclusion initiatives lost their runoff elections this week. Meanwhile, a person who helped organize the effort to push educator Cecelia Lewis out of her job is narrowly losing her bid for a seat in the state House of Representatives.

The three were described in a ProPublica story last week that detailed how Lewis was attacked in both Cherokee County and neighboring Cobb County by white parents making baseless claims that she was bringing critical race theory to both school districts. (CRT maintains that racial bias is embedded in America’s laws and institutions and has caused disproportionate harm to people of color; it’s rarely if ever taught in K-12 public school systems.)

State House candidate Noelle Kahaian, a paralegal and conservative nonprofit leader, is trailing her opponent by 23 votes. The state has until July 1 to certify results, and candidates who come within half a percentage point of their opponent can request a recount.

The two Cherokee County school board candidates, Sean Kaufman and Ray Lynch, were defeated by wide margins on Tuesday. They were part of a four-candidate slate attempting to gain a majority for a more conservative school board. That collective effort, dubbed 4CanDoMore, was endorsed by the 1776 Project PAC, a new super PAC that touted victories of far-right school board candidates it had backed in multiple states. The two other 4CanDoMore candidates, Michael “Cam” Waters and Chris Gregory, had lost to incumbents in the May 24 primary.

In a statement to ProPublica, Cherokee County School District Chief Communications Officer Barbara Jacoby said that the group of people who targeted Lewis “do not speak for our community, as was illustrated when their candidates failed in their recent attempt to win a majority on the School Board. We do not support hate, and we are deeply sorry for how Ms. Lewis and her family were treated by these members of our community.”

Kaufman, Lynch and Kahaian did not respond to requests for comments. In a public statement to his Facebook page, Kaufman congratulated his opponent, Erin Ragsdale. “I truly believe that Cherokee County had some incredible candidates — and we really could not lose,” he wrote. “I wish her the very best and give her my full support in the November election.”

Lewis, an accomplished middle school principal from Maryland, was hired in the spring of 2021 as the Cherokee County School District’s first-ever administrator devoted to diversity, equity and inclusion initiatives. Community members targeted Lewis soon after her hire was announced. Kahaian, the state House candidate, was a presenter in a meeting during which plans to push Lewis out of her job were hatched. Parents went on to attack Lewis’ credentials and wrongfully accuse her of promoting critical race theory.

Lewis quit the job before she even started, following a chaotic school board meeting during which board members and students were evacuated and escorted to safety amid threatening outbursts from attendees.

Months later, parents using a private Facebook group began complaining that Lewis had a new job in neighboring Cobb County. (People with access to the group shared screenshots of posts with ProPublica.) She’d been hired as that district’s social studies supervisor. She lasted just two months there, resigning from the position after the district received an onslaught of erroneous complaints about her supposed intentions to indoctrinate children through CRT.

After ProPublica published its story about the community’s campaign against Lewis, one woman wrote in the parents’ private Facebook group: “Looks like we should prepare for antifa here in Cherokee County. I’m genuinely concerned for those names listed in that piece.”

Community members who disagree with those who targeted Lewis have been hesitant to speak up, according to Mandy Marger, a mother of two whose family moved to Cherokee County a decade ago.

Marger said she was encouraged by the outcome of the runoffs.

“The idea that groups who had such extreme views thought that they could grab a hold of our community was frightening,” Marger said. “They made it very clear that those of us who did not align with them were going to have to stand up, and I’m really, really proud of our community — especially today — that we did.”

Jacoby said in her statement that Lewis’ departure was the district’s loss.

“No one wants their community to be the place where a story like this unfolds, but it is important for us all to understand what happened and reflect on what we can do to ensure it doesn’t happen again,” Jacoby said. “It’s a cautionary tale about the dangers of misinformation and what can happen when you judge others based on falsehoods spread on social media or by people with political agendas.”

by Nicole Carr

Ten Ways Billionaires Avoid Taxes on an Epic Scale

1 week 5 days ago

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Last June, drawing on the largest trove of confidential American tax data that’s ever been obtained, ProPublica launched a series of stories documenting the key ways the ultrawealthy avoid taxes, strategies that are largely unavailable to most taxpayers. To mark the first anniversary of the launch, we decided to assemble a quick summary of the techniques — all of which can generate tax savings on a massive scale — revealed in the series.

1. The Ultra Wealth Effect

Our first story unraveled how billionaires like Elon Musk, Warren Buffett and Jeff Bezos were able to amass some of the largest fortunes in history while paying remarkably little tax relative to their immense wealth. They did it in part by avoiding selling off their vast holdings of stock. The U.S. system taxes income. Selling stock generates income, so they avoid income as the system defines it. Meanwhile, billionaires can tap into their wealth by borrowing against it. And borrowing isn’t taxable. (Buffett said he followed the law and preferred that his wealth go to charity; the others didn’t comment beyond a “?” from Musk.)

2. The $5 Billion IRA

Other billionaires used less conventional ways to avoid income, we found. Tech mogul Peter Thiel amassed a $5 billion Roth IRA, a type of account that shields income from taxes and is intended to help low- and middle-class savers prepare for retirement. Back in 1999, Thiel stuffed low-valued shares of the company that would become PayPal into the account, a maneuver tax lawyers said risked running afoul of IRS rules. (It’s not clear if the government ever challenged the move.) He set himself up to reap billions in untaxed gains. (Thiel did not respond to questions for the original article.)

3. The $1 Billion Parlor Trick: Turning High-Tax-Rate Trading into Low-Tax-Rate Income

Even when tech billionaires do show income on their tax return, they tend to pay relatively low income tax rates. That’s because of the type of income they have: Gains from long-term investments, such as from stock sales, are taxed at a lower rate. But what do you do if you’re making over $1 billion every year, and it’s largely from short-term trading? Do you just accept that you’ll pay the higher rate on all that income? As we reported this week, Jeff Yass, head of one of the most profitable firms on Wall Street, did not meekly accept this fate. Instead, his firm, Susquehanna International Group, found creative ways to transform the wrong sort of income into the right kind, generating tax savings that exceeded $1 billion over just six years. (Susquehanna declined to comment but in a court case that centered on similar allegations, it maintained that it complies with the law.)

4: The Magic of Sports Ownership: Make Money While (Legally) Reporting Losses

The tax code offers business owners a slew of methods to erase income through deductions, none more awesome than buying a sports team, as former Microsoft CEO Steve Ballmer did with the Los Angeles Clippers. It doesn’t matter whether the team is actually profitable and growing in value. It can still be a write-off. (In some cases, we found, owners could effectively deduct a given player’s contract not once, but twice. They’re allowed to take deductions comparable to those for factory equipment that loses value as it ages, even as teams almost inevitably gain in value.) That’s one reason owners tend to pay far lower tax rates than the athletes they employ, or even the people serving beer in the team’s stadium. In our story, we found a Clippers arena worker who made $45,000 a year and paid a higher tax rate than the billionaire Ballmer. (Ballmer said he pays the taxes he owes.)

5. Build, Drill and Save: The Real Estate and Oil Businesses Can Both Be Tax Havens

In certain industries, like real estate or oil and gas, the tax breaks are so plentiful that billionaires can erase their income entirely even as they grow richer. That’s how real estate developer Stephen Ross (who also happens to own the Miami Dolphins) went 10 years without paying any income tax. Ross said that he followed the law. Another mogul, this one in the oil business, managed to tap a near bottomless well of write-offs via one of the biggest oil spills in history. (The mogul’s representatives did not respond to requests for comment.)

6. Even a Billionaire’s Hobbies Can Pay Off at Tax Time

Deductions from hobbies and side projects, which the ultrawealthy can structure as businesses, are another fun option. For some billionaires, it’s race horses: We found that six owners of thoroughbreds at the 2021 Kentucky Derby had taken a combined $600 million in tax write-offs on their horse racing operations. For others, like Beanie Babies founder Ty Warner, it’s luxury hotels. The billionaire splurged on a couple of landmark Four Seasons locations and then went 12 years without paying any income tax. (Representatives for Warner did not respond to requests for comment.)

7. Think Your Taxes are Too High? Change the Tax Laws

Sometimes, it pays to fight for a new tax break. For the billionaires who contributed millions to Republican politicians, the payoff came in the form of Trump’s “big, beautiful tax cut” for passthrough businesses. We found the change sent $1 billion in tax savings in a single year to just 82 ultrawealthy households. Some business owners also boosted their savings with a trick: They slashed their own salaries and categorized the money instead as passthrough income.

8. Why Tech Billionaires Pay Less Than Hedge-Fund Managers

With so many options to reduce taxes, the richest Americans often manage low income tax rates. We analyzed the incomes and taxes of the country’s top 400 earners, those averaging over $110 million in income per year. Overall, the group paid relatively low rates, but certain segments (tech billionaires, heirs, private equity executives) stood out even within this elite population because they were able to draw on the sorts of techniques detailed above. (Also drawing on these techniques were wealthy politicians, like the governors of Colorado and West Virginia.)

9. Brother, Can You Spare a Stimulus Check?

But the real standouts were the billionaires who reported such low incomes that they qualified for government assistance. At least 18 billionaires received stimulus checks in 2020, because their tax returns placed them below the income cutoff ($150,000 for a married couple).

10. Trust This: How Wealthy Families Pass Billions to Heirs While Avoiding Taxes

The holes in the estate tax, we found, are even more remarkable. There are well-worn ways to make sure Uncle Sam doesn’t get his cut of a fortune being passed on to heirs, and the most common is through a trust. How common no one can say, but we found evidence that at least half of the nation’s 100 richest individuals had used estate-tax-dodging trusts. In another story,we followed three century-old dynasties down through the generations, showing how they used trusts to avoid taxes, so that a fortune could pass all the way from the original early 20th century tycoon to, for example, the great-great-granddaughter who recently collected $210 million before her 19th birthday.

Help Us Report on Taxes and the Ultrawealthy

Do you have expertise in tax law, accounting or wealth management? Do you have tips to share? Here’s how to get in touch. We are looking for both specific tips and broader expertise.

by Paul Kiel

“We’re at a Crisis Point”: NY Attorney General Hearing Spotlights Child Mental Health Care Failures

1 week 6 days ago

This article was produced for ProPublica’s Local Reporting Network in partnership with THE CITY. Sign up for Dispatches to get stories like this one as soon as they are published.

By slashing inpatient psychiatric care, New York has left people with too few places to turn for treatment of serious mental health conditions, state Attorney General Letitia James said at a hearing held by her office Wednesday.

James called the hearing following reports by THE CITY and ProPublica on New York state’s failure to provide mental health care to children and adolescents. Our investigation found that state officials have closed nearly one-third of the beds for children in state-run psychiatric hospitals since 2014, under a “Transformation Plan” rolled out by former Gov. Andrew Cuomo. During the same period, nonprofit groups shut down more than half of the beds in New York’s residential treatment facilities for kids, in large part because state payments were too low to keep the programs running.

“We’re at a crisis point, and we certainly need action,” James said at the hearing. “Emergency departments are overwhelmed by individuals who require more intensive psychiatric services but are unable to access necessary psychiatric inpatient beds or services in the community.

“When a child is in crisis,” James continued, “parents or caretakers have only two options: go to the ER or call 911. And too often, as we’ve seen in our office, they’ve had run-ins with the police that only make the situations that much worse. These children are waiting months and months for treatment.”

The lack of care is, in large part, a direct result of cost-saving measures and deliberate hospital bed closures made during the Cuomo administration, said James, who cited our reporting during the hearing.

In return for closing beds, state officials promised to expand access to outpatient and community-based mental health services that aim to keep kids safe at home. But those programs were never adequately funded, and providers say they can’t afford to hire or retain enough staff. According to a lawsuit filed in March, New York fails to provide community-based mental health services to the vast majority of children who are entitled to them under federal law. (The state officials named in the suit have not yet responded to the complaint.)

“Things are desperate out there,” testified Alice Bufkin, associate executive director for policy and advocacy at the Citizens’ Committee for Children of New York. “Children are presenting at younger and younger ages with serious mental illness. Families are blocked at every stage from finding care. Young people are cycling in and out of ERs and hospitals because they can’t get the care they need early.”

The problems are “driven by chronic underinvestment in the children’s behavioral health system,” both by New York state and by private insurance plans, which underpay mental health providers and fail to ensure access to preventive mental health care, Bufkin said.

In March, Rich Azzopardi, a spokesperson for Cuomo, told THE CITY and ProPublica that facility closures were part of a larger effort to shift funds out of hospital beds and into outpatient care. The Cuomo administration significantly increased investment in community-based mental health services, Azzopardi wrote.

During this year’s session, the New York Legislature approved funding increases for many mental health programs. However, several providers and advocates testified at the hearing that very little of the new money has been distributed, and that the increases, while valuable, will not go far enough to reverse decades of underfunding.

It can be all but impossible to access hospital care for kids experiencing mental health emergencies, said Ronald Richter, New York City’s former child welfare commissioner and the current CEO of JCCA, which runs residential programs for children in foster care in Westchester County. Kids in crisis are turned away by the Westchester Medical Center, Richter said. “These emergency rooms are unable to evaluate young people because they are overwhelmed. They are afraid to admit young people into their ERs because they have no place to discharge these young people to. There are simply not enough psychiatric beds for children who are suffering.”

From 2014 to 2021, New York closed 32% of its state-run hospital beds for kids, cutting the total from 460 to 314. The biggest reduction took place at the New York City Children’s Center, where the bed total was cut nearly in half — down to 92 in 2021. Meanwhile, in the first five years after the Transformation Plan’s launch, the number of mental health emergency room visits by young people on New York’s Medicaid program — the public health insurance plan that covers more than 7 million lower-income state residents — shot up by nearly 25%.

JCCA staffers sometimes resort to bringing kids to Bellevue, a public hospital in New York City, for a better chance that they will be evaluated or admitted, Richter said.

In response to Richter’s testimony, James noted that hospitals are legally required to evaluate and stabilize anyone who presents at the emergency room with a medical crisis, and she asked New Yorkers who are turned away for emergency mental health care to contact her office “so we can look at these complaints to determine whether individuals are complying with the law.”

“This hearing is about exploring potential areas of reform and informing my office for future investigations into allegations of inadequate mental health treatment or lack of parity,” James said.

In all, more than two dozen people testified at the hearing, including elected officials, health care providers and New York residents who said they couldn’t access mental health care when they or their children needed it.

Among them was a mother from Long Island named Tamara Begel, whom we identified in our reporting by her middle name, Rae. Begel’s son started cycling in and out of psychiatric emergency rooms after he attempted suicide at age 9. Most times, he was not admitted to an inpatient bed. When he was, he had to wait several days in the ER because all of the psychiatric hospital beds for kids were full. “The problems started way before COVID,” Begel said at the hearing.

During his most recent hospitalization, doctors said that Begel’s son needed care at a longer-term state psychiatric facility, but beds were full there too. He waited two months in a hospital unit designed for short-term stays, where he was assaulted by other patients and restrained multiple times, both physically and with injected medication, his mom testified.

“The system of care on Long Island in general has completely collapsed,” Begel told James. “Parents are at the breaking point because we cannot get the health care for our children. We need people to step in.”

by Abigail Kramer and Gabriel Poblete, THE CITY

$53.3 Million. 33 Jobs. No Plan. That’s How Mississippi Lawmakers Are Spending BP Oil Spill Money.

1 week 6 days ago

This article was produced for ProPublica’s Local Reporting Network in partnership with the Sun Herald. Sign up for Dispatches to get stories like this one as soon as they are published.

Nothing about the proposal to create a “town center” in the coastal bedroom community of Gautier, Mississippi, made sense to Becky Montgomery Jenner.

The mall that once functioned as the town’s community hub is literally a shell of its former self, with a rusting metal structure covering a concrete slab where shoppers once browsed. In its place the city wants to create a downtown where people can live, shop and dine.

No developers, banks or investors have signed on to the project. An advisory board that Jenner sits on voted 6-1 against recommending the project for economic development funding paid by the oil company BP following its massive oil spill in the nearby Gulf of Mexico.

State lawmakers put up $3.5 million anyway. Jenner couldn’t believe it.

“We’ve got this shopping center, defunct shopping center, in the middle of no-friggin’-where,” she said. Lawmakers “should look at which projects had the most viability, which projects had the greater return on the investment, which projects benefited the most people.”

The money that legislators sent to Gautier is part of a $750 million settlement paid by BP to compensate the state for the economic damage caused by the 2010 oil spill. Coastal Mississippi business leaders hoped the money would be used to transform the Gulf Coast economy, attracting new industries, creating jobs and lifting wages in communities dominated by low-paying service jobs.

But Mississippi’s Gulf Coast Restoration Fund is failing to meet any conventional measure of success for an economic development program, a joint investigation by the Sun Herald and ProPublica found.

Becky Montgomery Jenner, a member of the Gulf Coast Restoration Fund Advisory Board. Lawmakers have approved projects the advisory board voted against recommending, like the purchase of a former mall site in Gautier. (Hannah Ruhoff/Sun Herald)

Legislators put the power to spend the money in their own hands, and they’re doling it out without an overall plan. They’re using the cash to fill gaps in local government budgets and funding projects with few metrics for success. They’ve disregarded input of an advisory board made up of local business leaders, a committee lawmakers created when outlining how the money should be spent. In grant agreements, recipients have committed to creating few jobs, even fewer of them high-wage jobs.

Just 33 full-time equivalent jobs have been promised by the 24 projects for which Gulf Coast Restoration Fund grants have been finalized, according to grant agreements. Those projects have received $53.3 million — an average of $1.6 million per job. Economic development experts say that’s high.

“These are very legitimate questions of whether or not this money is really going to end up doing anything,” said advisory board chair Ashley Edwards, who is president and CEO of the Gulf Coast Business Council.

The city of Gautier put the grant toward the $5 million purchase of the mall property, where a songwriters’ museum is also planned. The grant agreement requires the city to complete some improvements to an adjacent park that the city considers part of the town center. The city says an amphitheater being built at the park will provide a stream of customers and revenue.

Several promising projects have gotten money from the Gulf Coast Restoration Fund, said Jamie Miller, chief operations officer at the Mississippi Development Authority, which handles economic development for the state.

But overall, the Gulf Coast Restoration Fund is being spent exactly as state Rep. Charles Busby worried it would be when lawmakers drafted the rules in 2018.

Back then, Busby said, he hoped the Legislature would rely on the Mississippi Development Authority to decide “how we could best utilize the money to do something that was truly transformational for the coast.

“With the system that we’re currently using, I just don’t see how that’s possible,” he said.

Mississippi lawmakers awarded $3.5 million to the city of Gautier to buy the site of a former mall so the city can develop a town center. (Hannah Ruhoff/Sun Herald) The Fight Over BP Damages, Spending

For three months after the Deepwater Horizon drilling platform exploded in April 2010, millions of barrels of oil spewed into the Gulf of Mexico, fouling the coastline from Texas to Florida.

Workers in protective boots took the place of sunbathers on Mississippi beaches, scooping dark patches of oil from the white sand. Offshore, vessels trolled for oil instead of fish.

Gulf Coast states settled lawsuits against the company in 2015. For two years, Mississippi leaders battled over who would control the settlement money and where it would go.

The Gulf Coast Business Council, which represents business interests along the coast, proposed legislation that would have placed the money in a trust overseen by an independent, appointed board that would have authority to seek expert advice. That’s similar to how Florida decided to handle the money.

There, most of the BP money recovered by the state goes to Triumph Gulf Coast, a nonprofit corporation. A seven-member board, appointed by state elected officials, approves projects for funding.

The nonprofit’s staff has vetted projects and positioned them for approval by the time they reach the board, said Triumph Gulf Coast economic advisor Rick Harper. “Our statute requires us to have performance metrics,” he said.

The BP money is meant to make up for “revenue the state of Florida didn’t receive when people couldn’t plan their beachfront wedding back in 2010 or ’11,” he said. “And so, it’s our responsibility to make sure there’s a good return on those investments.”

Lawmakers in Louisiana and Alabama, which received $1 billion each from BP for economic damages, are using their settlements to fill budget holes, fund Medicaid and build roads and bridges. Mississippi House Speaker Philip Gunn said he insisted his state spend its share of BP money “in a way that would result in greater economic prosperity for the region.”

Lawmakers in Jackson decided they would choose how to spend $477 million over 15 years, but they created an advisory board to offer input from business leaders.

“We’re held accountable,” state Rep. John Read said in an interview, explaining why legislators decided to choose projects themselves. “It came down to this: How many votes did you get the last election?”

Each year, $30 million in BP money is earmarked for the six counties closest to the coast. That’s separate from BP money directed to environmental restoration and other purposes.

Workers skim a patch of weathered oil near a boat ramp in Gulfport, Mississippi, in July 2010. (Amanda McCoy/Sun Herald)

From the beginning, business leaders wanted to see the restoration fund used for “transformative” economic development in a region that has seen little in the way of new industries since casinos arrived in the 1990s.

Instead, the law outlines 15 priorities. Some are the sorts of things you’d expect to see in such a program, including job creation, measurable return on investment and projects that are "transformational for the future of the region.”

Other priorities in the law give legislators broad latitude to approve all sorts of proposals. For example, projects can enhance quality of life, which includes recreation, and can be supported by multiple public or private entities.

“This is a laundry list of economic development platitudes from 10,000 feet up that could be used to justify almost any use,” said Greg LeRoy, executive director of Good Jobs First, a nonprofit that advocates for accountability in economic development.

The Mississippi Development Authority accepts applications for funding. It scores them based on the priorities laid out in the law and passes them to the Gulf Coast Restoration Fund Advisory Board for input.

A proposal to build a public safety complex in Bay St. Louis received a score of 7 out of 45 from the Mississippi Development Authority and was not recommended by the advisory board. The project was granted $1 million by the Legislature. (Obtained and annotation added by the Sun Herald and ProPublica)

By the end of each year, the development authority is required to pass its recommendations, along with the advisory board’s input, on to the Legislature. State lawmakers representing the six South Mississippi counties meet privately to decide which projects to fund, not all of which have gone before the board.

The projects are voted on in the final frenetic days of the legislative session, when lawmakers meet late into the evening to divvy up money from various sources.

Coastal legislators said they consider the advisory board’s advice, but don’t feel compelled to follow it. In the restoration fund’s first year, 11 of the 26 projects funded by lawmakers didn’t go before the advisory board.

Former state Rep. Jim Simpson, who serves on the board, said the law gives legislators final say.

“They asked us for advice, but they didn’t give us a checkbook,” Simpson said. “And I’m not sure everybody on our committee understood the distance between our advice and the checkbook.”

$50 Million to Create Few Jobs on the Mississippi Coast

Before spending any money, economic development experts say, officials should decide how they’ll measure return on investment. Common metrics include jobs, tax revenue and private spending.

By any of these measures, the renovation of the historic Quarles House in Long Beach, Mississippi, built in the 1890s for the city’s first teacher, would not pass muster. The two-story clapboard house with a center gable sits in a modest neighborhood about a half-mile from the beach.

The building has been vacant since Hurricane Camille in 1969, said Carol Paola, a Long Beach teacher championing the project. Camille ripped off verandas that once graced the first and second floors. The house’s doors and windows are boarded up, but the interior is in remarkably good shape, she said.

The city hopes to turn the house into a venue for weddings and community events. State lawmakers approved $2 million for renovations.

The next step, as with all projects awarded BP economic development money, is a signed grant agreement between the development authority and the grant recipient. The agency requires certain paperwork first: a cost estimate, a budget, a timeline and, for government-sponsored projects, a resolution of support.

Grant applicants are supposed to submit supporting documents up front when applying for funds. But the Quarles House was one of the projects that bypassed the advisory board, and some documentation was missing. Almost two years after lawmakers awarded the money, the state is waiting on required paperwork from the city of Long Beach, no grant agreement has been signed, and the money is sitting unused in a state account.

The Legislature granted $2 million for renovations to the Quarles House in Long Beach, Mississippi. Two years later, the state is waiting on paperwork from the city to issue the grant. (Hannah Ruhoff/Sun Herald)

The payoff for the state’s investment, whenever it cuts the check? The city hopes to create one part-time job, according to its records. Meanwhile, Mayor George Bass said he hopes events at the historic home will bring in enough money to cover maintenance and insurance costs — the sort of collateral expense that development experts say local governments should avoid when using one-time funds for economic development projects.

Many of the projects that have gotten restoration fund money are like the Quarles House, with no way to judge return on investment. The majority of projects with grant agreements have no private funding, according to state records. And most of the grant agreements include no commitment to create jobs.

“Even the most lax economic development programs at least make a showing of ‘We care about the number of jobs,’” said Rachel Weber, a professor of urban planning and policy at the University of Illinois, Chicago. “So for every dollar coming out of this fund, how many jobs are the recipients claiming to make?”

The $1.6 million average cost per job is driven up largely by the number of government projects that are not expected to create any jobs, according to an analysis by the Sun Herald and ProPublica. Not counting those projects, just seven grant agreements have been signed with private and nonprofit entities. Those projects, which have received about $10.9 million, promise 26 jobs — about $421,000 per job.

That’s “far too high for Mississippi taxpayers to ever come close to breaking even,” said LeRoy, of Good Jobs First.

He said his organization has long advocated for a cap of $35,000 per job. A 2016 Good Jobs First study found that at least 19 states imposed some dollars-per-job caps, and that “the caps are quite low, seldom exceeding four figures.”

In Florida, the average cost per job for public infrastructure projects between 2018 and 2021 was $36,391, Harper said. Those are jobs promised in grant agreements and funded through the state’s BP-funded economic development program.

Some project applications in Mississippi promise lots of jobs, but those figures don’t make it into grant agreements, which is the mechanism the development authority uses to hold grant recipients accountable. An initial application by the city of Diamondhead for improvements to a commercial district, for example, said the project would create 596 jobs, but under its grant agreement the city isn’t required to create any.

Much of the BP economic development money is going to local governments, and Miller, the development authority’s chief operations officer, said the agency can’t hold government bodies responsible for ensuring that private businesses eventually create those jobs.

That’s not an issue in Florida, where public infrastructure projects get BP money only if they commit to creating new jobs. Triumph Gulf Coast works with economic development officials in eight counties along the Florida panhandle to identify public projects that will attract private companies offering jobs.

For an industrial park in Florida’s Santa Rosa County, county commissioners guaranteed 454 new jobs that would pay at least 15% above the prevailing county wage, said Harper, the adviser with Triumph. The jobs must be created no later than February 2027, five years after Triumph agreed to fund the project, or the county must return some of the $15.4 million grant to the state.

In Mississippi, job creation goals are far more modest — when they exist. The Walter Anderson Museum of Art in Ocean Springs, for example, promised to create two jobs in exchange for a grant of about $750,000, for one of two projects at the museum recommended by the advisory board. Julian Rankin, the museum’s executive director, said the museum has met that commitment.

State Rep. Manly Barton, a member of the House appropriations committee, said those projects often improve the quality of life.

“I’m not trying to defend it one way or the other,” Barton said. “Sometimes, it is community development, as opposed to economic development. But I think one kind of goes hand in hand with the other.”

That’s how state Rep. Richard Bennett defended the funding for the Quarles House: an investment in “quality of life” for weddings, receptions and student banquets. “In Long Beach right now,” he said, “there’s nowhere in the city we can do those things.”

Doors and windows are boarded up at the Quarles House. Even if the renovation goes forward, the building will be able to handle only small events, because it doesn’t have a catering kitchen or much room for parking. (Hannah Ruhoff/Sun Herald)

Even if the renovation goes forward, the building will be able to handle only small events, because it doesn’t have a catering kitchen or much room for parking. Another venue with a professional kitchen, located on prime beachfront property about 6 miles away in Gulfport, hasn’t lived up to its promise as a wedding venue.

While several legislators believe downtown projects will draw new residents and increase tax revenue, the jobs described in those proposals include retail and restaurant work, which traditionally pay low wages. For May 2021, food service and sales were among the top three occupations across three coastal counties.

Mississippi has long been starved for high-paying jobs, historically ranking last among states for median household income. The average hourly wage for the three coastal counties was 20% below the national average in May 2021, according to the Bureau of Labor Statistics.

“Job growth has not been terrible,” said William Fruth, president of Policom, a research company that ranks the economic strength of communities, “but the wages in the area are terrible.”

Several projects funded with BP money directly advance the kinds of innovation and technology that outside experts say lead to higher-wage jobs. But only one stipulates an average wage: $50,000 a year for four jobs at Mississippi State University’s Cyber Center, which plans to train military and other personnel in cybersecurity.

John Hairston, CEO of Hancock Whitney, which operates banks along the Gulf Coast, said he’s looked to see if the state has publicized outcomes for the investments made with the BP money. He hasn’t found any sign that it has.

“In my adult lifetime, I don’t recall ever seeing that sort of opportunity,” Hairston said. “Every nickel spent on anything that doesn’t create direct, trackable jobs or tax revenue is a missed opportunity.”

No Plan for Spending BP Money

Many of the projects that have received restoration fund grants are the sorts of things you’d see in a local government budget or a state bond or transportation bill: $2.1 million for a levee to protect 200 homes in a Gulfport subdivision. Nearly $500,000 to upgrade a crumbling roadway in George County. Another $1.9 million for Friendship Park in Picayune.

The Mississippi Development Authority scored those projects no higher than 6 out of 45. None were recommended by the advisory board. Legislators funded them anyway.

Although they offered explanations for many of the projects, several legislators acknowledged there isn’t an overall plan guiding their decisions. They said they spread money across their districts and turn to the fund when they can’t find money elsewhere.

Barton said the levee was funded because it would receive matching dollars from the federal government. “They weren’t going to get the money from anywhere else,” he said.

Timothy Bartik, senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Michigan, reviewed a list of approved projects and the jobs promised, if any.

“I would say it’s a more speculative economic development impact,” he said, “in the sense that who knows exactly how much these infrastructure projects improve amenities and improve quality of life in a way that will attract people and jobs.”

An economic development strategy “is meaningless if what you say is ‘We’re gonna do everything,’” Bartik said. “Because you can’t do everything. You have a limited amount of money. And so you need to prioritize.”

The development authority has suggested a change to the system: The second year of the grant program, it asked lawmakers to send the money straight to the agency so it could select proposals. An agency official said in a letter to lawmakers this would enable the agency to fund projects that deliver “an appropriate return” on the state’s investment.

The Legislature rejected the suggestion.

Without a plan to guide their actions, lawmakers have responded to requests like the one that came from the head of George County’s health system. Greg Havard, CEO of the George Regional Health System, went directly to legislators to secure a $1 million grant to expand its cafeteria. In exchange, the hospital promised to create four jobs.

A cafeteria worker restocks for lunch at the George Regional Health System’s hospital in Lucedale, Mississippi. The cafeteria was expanded with $1 million from the state. (Hannah Ruhoff/Sun Herald)

Havard said the expansion is a boost to the economy of the rural county on the Alabama state line. More importantly, he said, the expanded cafeteria gives families a place to talk, and it’s easier to feed residents and staff.

Edwards, the advisory board chair, questioned the investment. “I’m sure that was a real need for them,” he said. But what is the return on investment, he asked, for a hospital cafeteria renovation in George County?

Havard said the cafeteria has four full-time employees and two part-time ones, including a few involved in food preparation and a clerk, and it has exceeded revenue expectations. The return on investment might be small, he said, but the project will pay for itself “in just a few short years.”

Edwards chose his words carefully when talking about how legislators are running the program. “They want to do everything they can to bring the bacon back home to their constituents,” he said. “We’re not in opposition to that.

“I just think that we would prefer to have a more comprehensive, more thoughtful strategy and shared vision around how to get the most bang for our buck.”

How Long Will It Take to Transform South Mississippi’s Economy?

This spring, a state income tax cut consumed much of the Legislature’s attention, making for some long nights at the close of the session. Many days, 80-year-old House Appropriations Chair John Read left the ornate Capitol building after midnight as talks wound down and the Senate and House settled on appropriations, including projects the Gulf Coast Restoration Fund would cover.

Jenner, one of the advisory board members, has complained to legislators about their approval of projects that haven’t been vetted by the board. This year, the Legislature selected only one project without an application: the third phase of the Cyber Center, spearheaded by Mississippi State University.

While it’s the Legislature’s prerogative to approve projects that bypass the board, Sen. Brice Wiggins said, “I think we recognize that that’s not the best approach.”

Nonetheless, this year the Legislature again funded several government proposals with few, if any, job projections. A public safety complex for the city of Bay St. Louis received $1 million; its application says no jobs will be created. The restoration of the Long Beach harbor will cost $1 million and would create one job, according to its application.

Read believes a number of projects the Legislature approved, including the Cyber Center, show potential for transforming the economy. He said he thinks it’s a good sign that none of the projects approved so far have “tanked.”

“To me, ‘transformative’ is how many people are going to be working down the road, and I think that’s going to have to come with time,” he said.

And that’s once the checks have gone out. About $99.2 million out of $112.5 million granted over the first three years of the program hadn’t been spent as of June 15, according to the development authority. Almost half of the 44 projects funded in 2020 and 2021 still await grant agreements as of June 15.

Several advisory board members said they want to take a more targeted approach in upcoming years.

Edwards would like to see local governments band together to propose projects with regional scope, with more backed by private investment and outcomes measured in terms of jobs with good pay.

Advisory committee member Moses Feagin, who also serves as the chief financial officer at Mississippi Power, said he would prefer that the state hold on to its money and let the fund accumulate for a large private manufacturing or business prospect that would lift wages across the region.

Feagin said he usually rejects local government projects that could secure funding elsewhere. If lawmakers award $2 million here and $3 million there, he said, “Realistically, you ask yourself, what difference is that going to make?”

A binder of applications for grants from the Gulf Coast Restoration Fund (Hannah Ruhoff/Sun Herald)

Alex Mierjeski contributed research. Ryann Grochowski Jones contributed data reporting.

by Anita Lee, Sun Herald

How Susquehanna’s Jeff Yass Avoided $1 Billion in Taxes

1 week 6 days ago

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In the high-stakes world of high-speed, short-term securities trading, investors can reap massive payouts but often face higher tax rates due to the nature of their business. But one of America's richest men somehow earns billions from speedy trades while paying a tax rate lower than many middle-class Americans.

The Man

Among dozens of Wall Street billionaires whose tax returns ProPublica examined, one stood out: Jeff Yass of Susquehanna International Group.

The Mystery

Yass consistently pays lower tax rates than his peers, even as he has risen to be one of the top 10 highest earners in the country, receiving more than $1 billion per year in income. He paid an average federal income tax rate of just 19% in recent years, far below what many of his fellow Wall Street billionaires pay. That has saved Yass more than $1 billion in taxes over six years, ProPublica estimates.

What has made this pattern all the more remarkable is the nature of Susquehanna’s business: The firm was built on high-frequency trading, which tends to produce short-term gains; these are taxed at around 40%. And yet, year after year, Yass’ income has been taxed almost entirely at the 20% rate reserved for longer-term investments. (For more details, read our full story.)

So How Does He Do It?

ProPublica spoke to former Susquehanna employees and examined court records, securities filings and tax records to find out how Yass managed this. Taxes, according to Yass’ former colleagues, are an obsession for the billionaire and his fellow executives. As one former employee put it, “They hate fucking taxes.”

Susquehanna has crafted aggressive multibillion-dollar trading strategies that appear designed to slash its tax bill.

One main engine of Yass’ tax avoidance, ProPublica found, is a huge investment fund called Susquehanna Fundamental Investments. Every year, like clockwork, the fund effectively wipes out hundreds of millions of dollars worth of Yass’ income that would otherwise get hit at the highest tax rates, while generating hundreds of millions in income that is taxed at the lower rate.

Regulatory filings give a glimpse of the fund’s trading. The fund has to disclose a snapshot of certain holdings to the Securities and Exchange Commission a few times each year, though many types of trades are exempt from disclosure.

Over several years, the fund held billions of dollars of individual stocks in such companies as Google, Wells Fargo and Coca-Cola. These stocks are among the largest companies in the S&P 500 index. Meanwhile, the fund also held a large bet against the S&P 500. In essence, it held a bet against many of those exact same stocks.

Experts say that the counterintuitive strategy of simultaneously betting for and against the market can yield tax benefits. Essentially, it can offer a relatively low-risk way to generate short-term losses and long-term gains.

The short-term losses can be used to wipe away other short-term gains that would get taxed at almost 40%. Yass’ high-speed trading business generates hundreds of millions of these gains each year. The long-term gains replace the lost income, but get taxed at a much lower rate of around 20%. For every $100 run through this process, a trader would net from $17 to $20 in tax savings, depending on prevailing rates.

The IRS Says You Can’t Do Straddles, But…

Because of the potential for abuse, there are intricate rules in the tax code barring certain kinds of bets for and against the same securities. These are known as “straddles” because the trader is standing on both sides of the same bet. (For a step-by-step on how straddles work, read our full story.)

It’s not clear whether the IRS has ever challenged Susquehanna Fundamental’s trades. But the agency has gone after Yass and his partners in other cases, resulting in bills for back taxes totaling more than $100 million.

In one recent case, the IRS found that Susquehanna violated restrictions on betting for and against the same stocks. Court records from the case show the firm bought more than $1 billion worth of Swiss stocks, while taking out equal bets against the same stocks at the same time and claiming tax savings in the process.

The firm is disputing that the trades were designed primarily to save money on taxes, and in 2020 sued the IRS in federal court to dispute its tax bill. It has maintained in court filings that it complies with all legal requirements. The case is still pending.

A spokesperson for Susquehanna and Yass declined to comment in response to detailed questions from ProPublica.

Yass And His Partners Paid Only the Low Tax Rate, Unlike Other Wall Street Billionaires

Ordinary income — including from short-term stock trading — was taxed at about 40% for high earners in 2017. But special kinds of income, like gains from long-term investments, were taxed at around 20%. This chart shows what percentage of each person’s taxable income was taxed at that lower rate in 2017.

Note: ProPublica contacted representatives for each of the billionaires listed here. All of them declined to comment. (Source: IRS records, ProPublica analysis. Image credits: Eddie Malluk, Laura Goldman, Jemal Countess, Mark Lennihan, Ryan Muir for The New York Times, Thos Robinson, Misha Friedman, Patrick McMullan)
by Justin Elliott, Jeff Ernsthausen and Paul Kiel

Facebook Finally Agrees to Eliminate Tool That Enabled Discriminatory Advertising

1 week 6 days ago

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In a settlement announced by the Department of Justice on Tuesday, Meta Platforms — formerly known as Facebook — has agreed to eliminate features in its advertising business that allow landlords, employers and credit agencies to discriminate against groups of people protected by federal civil rights laws.

The deal comes nearly six years after ProPublica first revealed that Facebook let housing marketers exclude African Americans and others from seeing some of their advertisements. Federal law prohibits housing, employment and credit discrimination based on race, religion, gender, family status and disability.

For years, ProPublica and other researchers showed that problems persisted in the delivery of advertisements related to housing, employment and credit, even as Facebook pledged to fix the loopholes that we identified.

This week’s settlement was the result of a lawsuit brought three years ago by the Trump administration alleging that Meta’s ad targeting system violated the Fair Housing Act. The DOJ also argued that Facebook used a machine learning algorithm to restrict and create ad audiences, which had the effect of skewing delivery toward or against legally protected groups. This was the first time the federal government challenged algorithmic bias under the Fair Housing Act.

As part of the settlement, Meta has agreed to deploy new advertising methods that will be vetted by a third-party reviewer and overseen by the court.

The company said in a statement that it will implement a “novel use of machine learning technology that will work to ensure the age, gender and estimated race or ethnicity of a housing ad’s overall audience matches the age, gender, and estimated race or ethnicity mix of the population eligible to see that ad.”

The statement, by Roy L. Austin Jr., Meta’s vice president of civil rights and deputy general counsel, noted that although the settlement only requires Facebook to use its new tool for advertisements related to housing, it will also apply to posts about employment and credit. (Facebook declined a request for additional comment.)

Civil rights attorney Peter Romer-Friedman, who has brought several cases against the company, said that previous negotiations had tried and failed to hold Facebook accountable for algorithmic bias. “Ultimately what this shows is that it’s never been a question of feasibility to eliminate algorithmic bias,” he told ProPublica. “It’s a question of will.”

After we reported on the potential for advertising discrimination in 2016, Facebook quickly promised to set up a system to catch and review ads that discriminate illegally. A year later, ProPublica found that it was still possible to exclude groups such as African Americans, mothers of high school kids, people interested in wheelchair ramps and Muslims from seeing advertisements. It was also possible to target ads to people with an interest in anti-Semitism, including options such as “How to burn Jews” and “Hitler did nothing wrong.”

We later found that companies were posting employment ads that women and older workers could not see. In March 2019, Facebook settled a lawsuit brought by civil rights groups by creating a “special ads portal” specifically for employment, housing and credit ads. The company said the portal would curb advertisers’ targeting options and also limit its algorithm from considering gender and race when deciding who should see ads.

But when ProPublica worked with researchers at Northeastern University and Upturn to test Facebook’s new system, we found more examples of biased ad delivery. Though Facebook’s modified algorithm prevented advertisers from explicit discrimination, delivery could still rely on “special ad” or “lookalike” proxy characteristics that correlated with race or gender.

The research also found that Facebook skewed the audience depending on the content of the ad itself. How many women might see a job listing for an open janitorial position, for instance, depended not just on what the advertiser told Facebook, but also on how Facebook interpreted the advertisement’s image and text.

ProPublica also continued to find employment advertisements that favored men or excluded older possible applicants, potentially violating civil rights law. Some advertisers we interviewed were surprised to learn that they were unable to reach a diverse audience, even if they tried.

In a press release, the DOJ said Tuesday’s settlement requires Meta to stop using the “Special Ad Audience” tool by the end of the year. It also requires Meta to change its algorithm “to address disparities for race, ethnicity and sex between advertisers’ targeted audiences and the group of Facebook users to whom Facebook’s personalization algorithms actually deliver the ads.” The company must share details with the DOJ and an independent reviewer before implementing changes.

As part of the settlement, Meta also agreed to pay a $115,054 fee, the maximum allowed by the law.

“Because of this ground-breaking lawsuit, Meta will — for the first time — change its ad delivery system to address algorithmic discrimination,” U.S. Attorney Damian Williams for the Southern District of New York said in a statement. “But if Meta fails to demonstrate that it has sufficiently changed its delivery system to guard against algorithmic bias, this office will proceed with the litigation.”

by Ariana Tobin and Ava Kofman

Louisiana Limits Solitary Confinement for Youth

2 weeks ago

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This article was published in partnership with The Marshall Project, a nonprofit news organization covering the U.S. criminal justice system, and NBC News. Sign up for The Marshall Project’s newsletters and follow them on Twitter, Instagram and Facebook.

Lawmakers in Louisiana passed new restrictions on the use of solitary confinement in juvenile facilities following an investigation by The Marshall Project, ProPublica and NBC News into harsh conditions in a youth lockup.

The law, which will go into effect Aug. 1, marks the first time that lawmakers in a state known as the world’s incarceration capital have put limits on solitary confinement for youth, advocates say.

The news organizations’ investigation found that in one of the state’s facilities, the Acadiana Center for Youth at St. Martinville, boys as young as 14 were held in solitary confinement virtually around the clock for weeks. The boys were forced to sleep on the floor in the dark and were shackled when they left their cells to shower. In this facility, which opened last summer, the teens received no education for months, in violation of state and federal law.

The conditions were so severe, one expert said, they amounted to “child abuse.”

St. Martinville opened despite an ongoing debate about the dangers of solitary confinement in Louisiana’s juvenile lockups, a controversy that began in 2019 after two teens in a different facility died by suicide in solitary confinement within 72 hours.

Rep. Royce Duplessis, a New Orleans Democrat and the bill’s sponsor, said he didn’t think the legislation would have been successful without reporting from NBC News, The Marshall Project and ProPublica, which brought crucial attention to the conditions in juvenile facilities.

“It showed the public, it showed legislators that some things were happening that nobody should be proud of,” Duplessis said. “It showed we need to make some changes.”

Advocates say the new law, signed by Democratic Gov. John Bel Edwards on June 16, will improve conditions at facilities like St. Martinville.

“I’m not expecting this to be a panacea, but the law makes a clear statement about what’s expected of them, and that is something that hasn’t been there before,” said Rachel Gassert, policy director at the Louisiana Center for Children’s Rights. “And unlike agency policy, it cannot be changed behind closed doors by political appointees.”

The Acadiana Center for Youth at St. Martinville (Bryan Tarnowski for NBC News, The Marshall Project and ProPublica)

The new law places strict constraints on how the state juvenile justice agency can use solitary confinement, limiting young people to no more than eight hours in isolation unless they continue to pose a physical threat to themselves or others. The agency is also required to, within the first hours of placing children in solitary confinement, check on their mental health and to notify their parents or guardians. The law additionally compels the agency to better track and report the use of isolation in its facilities.

With the new law, Louisiana joins about one-third of states that have laws restricting the use of solitary confinement for youth. Many of the remaining states lack any policies limiting solitary confinement at all.

When Duplessis introduced the solitary confinement bill in March, he wasn’t confident it would win enough support to pass.

“This is Louisiana,” he said. “We have a history, a long history of being punitive, and our history with respect to juvenile justice has not been a good one.”

When the bill came before a House committee in April, several Republican lawmakers initially expressed skepticism, raising concerns that the bill would tie the hands of juvenile justice authorities who have been dealing with escapes and violence at their facilities.

But after a hearing in which young people shared stories about the trauma they experienced in solitary confinement, the committee unanimously voted to advance the bill. It later passed both legislative houses by large margins after Bill Sommers, who leads the state’s juvenile justice agency, threw his support behind the measure.

The House hearing took place just days after a legislative auditor released a report that found that the state’s juvenile justice agency often violated its own rules on isolation, which allowed the state to hold youth in solitary confinement for up to seven days. In 2019 and 2020, about 40 percent of solitary confinements exceeded the maximum duration allowed under agency policies. The audit found that, on average, confinements lasted about six days, more than 14 times as long as the national average as of October 2020.

The bill initially would have limited time in solitary to no more than four hours, but after legislative negotiations, it was amended to allow isolation for up to eight hours at a time and up to three stints in a row, for a maximum of 24 hours. During that time, a mental health professional must try to help the person in solitary calm down at least every hour and staff must check on them every 10 minutes. The law also requires that the state provide juveniles in solitary confinement with reading materials, access to sunlight and an opportunity to contact their parents or guardians and their attorneys.

The law does not apply to juvenile facilities that house minors who’ve been accused but not convicted of crimes because those facilities — mostly run by local jurisdictions — are regulated by the state’s child welfare agency, which already has policies limiting solitary confinement.

The law covers youth prisons run by the state’s Office of Juvenile Justice, which isn’t subject to oversight by other agencies, but youth and their families will now be able to take the agency to court if it violates the law. “We finally have tools with which to hold them accountable, when previously we had none,” Duplessis said.

Medical experts and youth advocates have long decried the use of solitary confinement, saying it can lead to depression and, in some cases, psychosis. The practice is considered particularly harmful for youth, whose brains are still developing. The American Medical Association, the American Psychological Association and the United Nations have all condemned the practice. In 2016, the federal government banned solitary confinement for juveniles at its facilities, citing the harm that isolation can cause. More than half of suicides in juvenile facilities involve children who are, or recently were, in isolation, research has found.

Solan Peterson died by suicide while in solitary confinement at a Louisiana juvenile detention facility. (Courtesy of Peterson Family)

One of the boys whose deaths prompted the recent debate about solitary confinement for juveniles in Louisiana was Solan Peterson, 13. He was placed in solitary after his arrest in 2019 for allegedly setting toilet paper on fire in the bathroom at his middle school. Solan was in a private detention facility that holds minors accused of crimes. That facility would not be affected by the new law, but Solan’s father, Ronnie Peterson, applauded its passage as positive development, though he said he would like to see solitary confinement abolished altogether. “It is encouraging. I think it’s a good step. I just don’t think it’s enough,” he said.

Lawmakers held hearings last year on the use of solitary confinement in juvenile facilities, ultimately ordering the auditor’s report. Despite that scrutiny, the state’s Office of Juvenile Justice last summer quietly opened St. Martinville. The new facility was set up to isolate teens in cells for weeks or months at a time.

Sommers initially defended the state’s actions at St. Martinville, describing the facility as “born of necessity,” in the wake of several high-profile, violent incidents at dormitory-style facilities as the agency struggled to find enough staff.

But during hearings for the new legislation, Sommers acknowledged the state needed to make changes to the way it handles solitary confinement.

“There is no doubt that we have a severe staffing shortage, but this is the right thing to do here,” he told lawmakers.

D’Angelo Davis, 21, testified in the House in April that during the four years he spent in state juvenile facilities, staff typically used solitary confinement unfairly. Isolation provided none of the therapeutic or educational benefits that juvenile facilities are meant to provide, he said.

In a recent interview, Davis praised the passage of the bill, adding that it showed that lawmakers “actually care about what’s going on with kids.”

“Think about yourself inside of a four-wall box. You go days without showering, you barely eat the food they give you,” he said of his experience. “Once you see yourself, you don’t even look like yourself. You’re a whole different person. … It deteriorates you.”

If you or someone you know needs help, here are a few resources:

by Annie Waldman, ProPublica, Beth Schwartzapfel, The Marshall Project, and Erin Einhorn, NBC News

Utah Officials Called It the “Year of Water.” Special Interests Still Resist Conservation.

2 weeks ago

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This story was co-published with The Salt Lake Tribune.

Utah policymakers billed the 2022 legislative session as the “year of water.” Gov. Spencer Cox signed into law more than 15 measures related to water conservation, heralding “generational” progress as the West’s megadrought continues well into its third decade.

Those pieces of legislation allow farmers to earn money by sending their water downstream to shrinking lakes, require water meters for landscaping, appropriate $40 million to protect the Great Salt Lake and more. But perhaps more telling were proposals that lawmakers carved up or voted down.

Legislators in the country’s fastest-growing and second-driest state rejected a bill meant to address leaky pipes. New laws aimed at mandating low-flow plumbing both in state facilities and new homes had to be scaled back to win passage. And regulations on Utah’s lush green lawns remained largely off-limits, as interest groups stalled or rewrote bills targeting grass.

A ProPublica investigation last year found that Utah’s water policy was largely controlled by a group of water districts and allied special interest organizations and politicians who prioritized building new water projects over conservation.

ProPublica reviewed water-related proposals again following this year’s legislative session, including minutes from committee meetings, lawmaker testimony and internal communications obtained via public records requests. The analysis showed the Legislature remains hesitant to act quickly on water conservation or on a scale that fully reflects the region’s dire situation, in part due to the influence of a rotating cast of special interest groups.

With little new water to tap, Utah is running out of time to reduce the amount that residents use on a daily basis. The Bureau of Reclamation announced in mid-June that Colorado River Basin states might have to cut water use by as much as a quarter next year, compared with average consumption.

“Is it the year of water?” asked Zach Frankel, executive director of environmental advocacy group Utah Rivers Council. “The answer is, ‘Hell no.’”

The Grass Is Always Greener

The water conservation debate in Utah and around the West often focuses on residential use because taking water from farmers and appearing unfriendly to the agriculture industry remains a political third rail. In Utah, outdoor landscaping accounts for about two-thirds of residential water consumption, and a growing consensus around the region sees tearing out lawns as a key strategy to alleviate the strain on the overdrawn Colorado River.

At least five members of the Utah House of Representatives began the session intending to address the grass question. Two bills passed. One gave the Utah Division of Water Resources approval to spend up to $5 million annually on turf removal incentives, but the bill didn’t appropriate money to do it; the other prohibited municipalities from banning water-efficient landscaping or mandating grass on park strips, the narrow bands between the sidewalk and the street. Towns have grabbed headlines for threatening to fine residents who replaced lawns with water-saving alternatives.

Utah remains behind other Western states on removing grass.

California banned irrigating ornamental turf, such as landscaping on a highway median. In Colorado, lawmakers passed a bill to create a turf removal system. And Nevada, leading the fight against grass, passed a law in 2021 banning the roughly 40% of turf in the Las Vegas metro area that sees little public use. The Southern Nevada Water Authority, the area’s water wholesaler, has also increased the amount it pays property owners to remove turf from $0.40 per square foot in 1999 to $3 in 2018, and it spent nearly $269 million since 1999 to replace nearly 205 million square feet of grass with less water-intense landscaping.

The largest water district in Utah, the Central Utah Water Conservancy District, pays up to $1.25 per square foot at residential properties and $2 at commercial facilities and has ripped out about 233,000 square feet in recent years. The district’s proposed budget for fiscal year 2023 includes $1.6 million for turf removal. In southwestern Utah, the Washington County Water Conservancy District and the towns it serves are removing nearly 600,000 square feet of grass, and local municipalities are working on ordinances to ban or cap the amount of turf allowed on certain properties.

“We recognize in Utah in a lot of ways we’re behind what Colorado and some of our neighboring states have done, and we as a state are focused,” said Rep. Gay Lynn Bennion, a Democrat who worked on turf legislation this session.

But internal communications suggest Utah is stymied by politicking, with groups such as the Utah League of Cities and Towns, which lobbies on behalf of municipalities, fighting against aggressive policy.

Rep. Raymond Ward, a Republican, proposed a bill to prohibit municipalities from requiring grass lawns. In January, he told ProPublica his idea ran into early opposition from the league, “who I knew would be the chief opponent because it impinges on what they think is their birthright, which is zoning,” he said.

Ward tweaked his proposal to assure the league that the bill wouldn’t get in the way of municipalities’ beautification ordinances. The group toned down its opposition, Ward said, but lobbyists from homeowners associations continued to attack and the bill failed.

A similar turf law did pass — one endorsed by lobbyists from municipalities and water districts — that Ward described as a “watered down version” of his bill.

Sponsored by Republican Rep. Ryan Wilcox, that bill would’ve prohibited municipalities from requiring that grass cover more than 35% of a property’s irrigated area.

On the same day the House unanimously passed the bill, Justin Lee, the Utah League of Cities and Towns’ director of government relations and a registered lobbyist, emailed Wilcox: “With a few tweaks we think there is potential to get our members more excited about this bill.” Meanwhile, the Jordan Valley Water Conservancy District’s general manager, assistant general manager and general counsel were drafting substitute language.

Jordan Valley Water Conservancy District staff drafted substitute language for HB282 the day an earlier version of the bill passed the House. (Obtained and annotated by ProPublica)

Wilcox met with Lee, the water district and several towns, and later that week he sent Lee a proposed bill substitute. “Please Review,” Wilcox wrote. Lee responded to the legislator, “This is exactly what we were looking for.” Wilcox introduced the substitute, and Lee showed up to support the bill, which had been changed to keep most decision-making on landscaping with local municipalities.

In an interview, Lee said that the league isn’t opposed to all grass-related legislation and that limiting irrigated turf could be considered at some point. The group’s main concern this year was preserving municipalities’ authority to write local rules, such as beautification ordinances, he said.

Bart Forsyth, Jordan Valley Water Conservancy District’s general manager, said he wanted to ensure Wilcox’s bill wouldn’t get in the way of cities that were already implementing water efficiency standards. His district got involved, Forsyth said, because other groups were opposed and “for the bill to pass, some changes would likely be needed.”

Wilcox declined to comment.

The Utah League of Cities and Towns has opposed turf bills for years. In 2016, then-Sen. Scott Jenkins, a Republican who was upset that a local ordinance compelled him to plant a lawn around his plumbing wholesale warehouse in Orem, filed a bill to curb such mandates. Jenkins told ProPublica that the league doomed the bill.

“Considering the fact that we’re hurting for water right now, especially in Utah and in the West, that’s just so dumb to do,” Jenkins said. “They ask us to not turn our faucets on or shut them off when we’re brushing our teeth, but they’re just flat out wasting water here.”

The league’s position statement on that year’s legislation noted that Jenkins did not first run the bill past a group consisting of the league and others representing towns, real estate and development interests. The bill died on the Senate floor.

“People are realizing we need to do things differently,” Lee said. “I think some of the pushback you saw in previous years is just not going to be as big going forward.”

Pulling Punches in the Legislature

With less pushback from special interests, Utah’s Legislature had, for it, a banner year on water. Still, bill sponsors were quick to defang water conservation legislation to get it passed.

Republican Rep. Robert Spendlove wrote HB121 to push water-saving measures at state-owned properties. His bill capped how much turf could be planted at new government facilities and called for state agencies to reduce their water use 25% by 2026. But a fiscal note claimed it would cost nearly $215 million to install efficient toilets and faucets, and Spendlove amended the bill to only apply to outdoor water savings.

Spendlove didn’t respond to requests for comment.

There was also a bipartisan push to update plumbing and building codes to require more efficient toilets, showerheads, bathroom sinks and urinals. In a presentation, Democratic Sen. Jani Iwamoto and Forsyth argued that more efficient plumbing fixtures could save 4.5 billion gallons annually by 2030. Much of the bill’s substance eventually passed, but sponsors still had to remove toilets from it in an act of appeasement to a fellow legislator.

“In the Legislature, sometimes it can stop for just one person. Their plumber may have said something,” Iwamoto said, declining to name which lawmaker flushed the key provision because of unsubstantiated fears of clogged toilets. Former President Donald Trump railed against low-flow plumbing fixtures when he was in office.

Even one of the signature bills in Utah’s year of water — requiring meters on secondary water systems that allow unlimited use of untreated water outdoors — was a target. Since 2018, lawmakers had tried and failed to mandate meters statewide, which data found reduced water use by an average of 23% simply because residents saw how much water they used. But emails showed that the Utah League of Cities and Towns and some individual municipalities continued fighting it this session.

The bill passed after legislators gave cities until 2030 to install meters, exempted small counties and provided money to cover as much as 70% of the cost. Not mentioned in various news releases heralding Utah’s commitment to conservation: That money came from the American Rescue Plan Act, the federal COVID-19 stimulus package signed by President Joe Biden.

Lee said a small number of municipalities were worried about secondary meters, and paying for them assuaged those concerns.

But even when state power brokers throw support behind water conservation, it’s sometimes not enough to get through the Legislature.

Rep. Melissa Ballard, a Republican, made a third attempt to require providers to study how much water their pipes and other infrastructure lose, often from leaks, and she presented HB115 with the support of both the Utah Department of Natural Resources and the state’s largest water districts. The bill failed anyway.

Asked what happened, Ballard told ProPublica in an email: “I wish I had an answer for you. Some legislators and water districts didn’t even look at the bill.” The Legislature sent HB115 back to the clerk of the House to be filed with bills that didn’t pass.

The general session ended in March. In April, with all of Utah in a drought, Cox declared a state of emergency. The governor acknowledged the executive order was largely for public awareness and let it lapse a month later.

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by Mark Olalde

Meet the Billionaire and Rising GOP Mega-Donor Who’s Gaming the Tax System

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One day in July 1985, three young men from Philadelphia, their lawyer and a burly Pinkerton guard arrived at a horse track outside Chicago carrying a briefcase with $250,000 in cash.

Running the numbers on a Compaq computer the size of a small refrigerator, Jeffrey Yass and his friends had found a way to outwit the track’s bookies, according to interviews, records and news accounts. A few months earlier, they’d wagered $160,000, gambling that, with tens of thousands of bets, they could nail the exact order of seven horses in three different races. It was a sophisticated theory of the racing odds, honed with help from a Ph.D. statistician who’d worked for NASA on the moon landing, and it proved right. They bagged $760,000, then the richest payoff in American racing history.

But that summer day, when they presented their strikingly long list of bets at the track window, they were turned away. Their appeal to the track owner got them ejected. Yass, just 27, then sued for the right to place the bets. The track’s lawyer fumed to a federal judge that the men were trying to corner the betting market “through the use of their statistics and numbers.”

Yass lost, but that year he and his friends repeated variations of the strategy at horse and greyhound tracks around the country. Then they decided to turn their focus from a world of hundreds of thousands of dollars to a world of billions: Wall Street.

Four decades later, the firm he and his friends founded, Susquehanna International Group, is a sprawling global company that makes billions of dollars. Yass and his team used their numerical expertise to make rapid-fire computer-driven trades in options and other securities, eventually becoming a giant middleman in the markets for stocks and other securities. If you have bought stock or options on an app like Robinhood or E-Trade, there’s a good chance you traded with Susquehanna without knowing it. Today, Yass, 63, is one of the richest and most powerful financiers in the country.

But one crucial aspect of his ascent to stratospheric wealth has transpired out of public view. Using the same prowess that he’s applied to race tracks and options markets, Yass has taken aim at another target: his tax bill.

There, too, the winnings have been immense: at least $1 billion in tax savings over six recent years, according to ProPublica’s analysis of a trove of IRS data. During that time, Yass paid an average federal income tax rate of just 19%, far below that of comparable Wall Street traders.

Yass has devised trading strategies that reduce his tax burden but push legal boundaries. He has repeatedly drawn IRS audits, yet has continued to test the limits. Susquehanna has often gone to court to fight the government, with one multiyear audit battle ending in a costly defeat. The firm has maintained in court filings that it complied with the law.

Yass’ low rate is particularly notable because Susquehanna, by its own description, specializes in short-term trading. Money made from such rapid trades is typically taxed at rates around 40%.

In recent years, however, Yass’ annual income has, with uncanny consistency, been made up almost entirely of income taxed at the roughly 20% rate reserved for longer-term investments.

Congress long ago tried to stamp out widely used techniques that seek to transform profits taxed at the high rate into profits taxed at the low rate. But Yass and his colleagues have managed to avoid higher taxes anyway.

The tax savings have contributed to an explosion in wealth for Yass, who has increasingly poured that fortune into candidates and causes on the political right. He has spent more than $100 million on election campaigns in recent years. The money has gone to everything from anti-tax advocacy and charter schools to campaigns against so-called critical race theory and for candidates who falsely say the 2020 election was stolen and seek to ban abortion.

ProPublica has pieced together the details of Yass’ tax avoidance using tax returns, securities filings and court records, as well as by talking to former traders and executives. (The former employees spoke on condition of anonymity, with many citing a desire to avoid angering Yass.)

Through a spokesperson, Yass declined to be interviewed for this article. The spokesperson declined to comment in response to a long list of questions for Susquehanna and the firm’s founding partners.

Gregg Polsky, a University of Georgia law professor and former corporate tax lawyer who was retained by ProPublica to review Susquehanna’s tax records, said the tax agency may have more to scrutinize. The strategies revealed in Yass’ records, he said, were “very suspicious and suggestive of potential abuse that should be examined by the IRS.”

Yass And His Partners Paid Only the Low Tax Rate, Unlike Other Wall Street Billionaires

Ordinary income — including from short-term stock trading — was taxed at about 40% for high earners in 2017. But special kinds of income, like gains from long-term investments, were taxed at around 20%. This chart shows what percentage of each person’s taxable income was taxed at that lower rate in 2017.

Note: ProPublica contacted representatives for each of the billionaires listed here. All of them declined to comment. (Source: IRS records, ProPublica analysis) (Image credits: Eddie Malluk, Laura Goldman, Jemal Countess, Mark Lennihan, Ryan Muir for The New York Times, Thos Robinson, Misha Friedman, Patrick McMullan)

More than 35 years after he was booted from the racetrack outside Chicago, Yass still lives to gamble. Not just on horses, but on poker and on the market. He sheepishly admitted, in a podcast discussion, that he has even placed wagers on his children’s sports games.

Asked to describe his approach to trading at Susquehanna, Yass once reached for a poker analogy. “If you’re the sixth-best poker player in the world and you play with the five best players, you’re going to lose,” he said. “If your skills are only average, but you play against weak opponents, you’re going to win.”

That philosophy along with, Yass freely admits, a lot of luck, has made him a billionaire many times over.

Compared to many of his fellow billionaires — he’s richer than Hollywood mogul David Geffen, retail brokerage king Charles Schwab and “Star Wars” creator George Lucas — Yass doesn't seem particularly interested in the trappings of extreme wealth.

Yass and his wife, Janine, raised four children in the leafy college town of Haverford, on the Main Line outside of Philadelphia. Their large but unremarkable house could easily be the home of a successful doctor rather than one of the richest men in the country. In his quarter-zip pullover sweater, Nikes and no-nonsense rimless glasses, he’d be impossible to pick out of a crowd at the suburban country club where he plays golf.

If Yass collects expensive art or maintains a megayacht, he has managed to do so in complete secrecy. What comes closest to an identifiable trophy asset is a house in the ultra-exclusive Georgica Association beach neighborhood of East Hampton on New York’s Long Island. Even that property, purchased for $12.5 million in 2005 and held through an LLC, is in an area known as “bucolic and understated.”

Those who have worked with Yass say he lives less for spending money than for the competition of the market and the thrill of taking calculated risk. Yass softens any impression of ruthlessness by deploying a practiced humility and comedic timing. “Some people like art history,” he once explained, “I like probabilistic analysis.”

Yet when it comes to his philosophical outlook, he eschews the jokes. He speaks of capitalism in religious terms. Making new markets, he likes to say, is a “mission from God.”

Like many religious stories, his begins with a conversion experience. Born in 1958 to two Queens CPAs, Yass said reading the economist Milton Friedman’s “Capitalism and Freedom” as a young man delivered him from an early flirtation with socialism.

By the time Yass graduated from the State University of New York at Binghamton in 1979, he was already captivated by trading. (His father had also helped nurture Yass’ love of horse racing by taking him to local tracks to see harness racing, according to Forbes.) Yass’ college thesis weighed whether the budding market in stock options could be justified as socially useful. “I concluded that it should exist,” Yass later cracked. “I got a B.”

After college, he moved to Las Vegas for a year and a half to play poker professionally. Then he returned to the East Coast and settled in Philadelphia, where he began trading options. The previous decade had seen a burst of academic interest in the financial instruments, including a pioneering model of how to more accurately price them. Yass later called the model, and its broader implications for how to make mathematically sound decisions, “the most revolutionary idea in a long, long time.”

A share of stock is a relatively simple concept: It’s a small ownership stake in a company. An option, by contrast, is a contract that confers the right to buy or sell a given stock at a particular price and time in the future.

Options attract mathematically minded traders since a complex set of variables, including the underlying stock price, volatility, time and interest rates, determine how much one of the contracts is worth.

Options are a versatile tool. They can appeal to the risk-averse: Traders can use them as insurance to guarantee they will be paid at least today’s price when they sell in the future. They are also useful to the risk-embracing — gamblers who want to place outsized bets on how a stock will perform. (Here’s how a speculator would use an option: In early June, shares of Netflix were trading at below $200. If the speculator thinks the company’s fortunes will improve dramatically this summer, they could pay just $4.50 each for options to buy the stock at $250 in mid-August. If the stock soars over that figure, they could make a mint.)

In options Yass found more than a financial instrument. He found a way to view the world. Everything — each decision, each interaction — can be judged based on how much it will cost in money, time or negative consequences and compared with the reward. Then action is taken or avoided accordingly. To Yass’ way of thinking, it’s always worth paying $19 for a 20% chance to win $100 but it’s never worth $21.

Along with his college friends, Yass founded Susquehanna, named after the river that connects Binghamton to Pennsylvania, in 1987. The firm benefited from explosive growth in options markets. Yass later played it down to the Philadelphia Inquirer: “We got lucky being in the right place at the right time.”

One of Susquehanna’s landmark moments — involving perhaps both skill and luck — occurred soon after the firm launched: the Black Monday stock market crash on Oct. 19, 1987. Thanks to an option bet that would pay out if stocks went down, Susquehanna was one of the few firms that made money on one of the worst days in stock market history.

From early on, Yass cultivated Susquehanna’s brand as a home for the biggest brains in finance, hiring Ph.D.s and top students. But the firm wasn’t just looking for raw IQ points. It also wanted instinct. It held poker tournaments to teach traders the idea that taking the measure of your opponents is as important as understanding the odds.

The Binghamton buddies ran a freewheeling office full of arguments and gamesmanship. The office had Super Bowl pools and an officewide lottery. Everyone bet on everything. One time, as recounted in Philadelphia magazine, traders bet on whether Yass could name the last Plantagenet king of England. They called Yass. He spat out “Richard III” and then, according to a witness, yelled, “Get back to work!” But he liked the hijinks.

Still, the firm had an inside vs. outside mentality. If you weren’t with the firm, you were the enemy. When traders left to join a competitor, Susquehanna often sued them for allegedly violating non-compete clauses. Susquehanna stood out for its aggressiveness in trading even by the standards of Wall Street. “If he thinks you’re dumb, he’s betting against you,” one former Susquehanna trader said of Yass. “That’s what makes his blood flow.”

Susquehanna developed a specialty in arbitrage, or finding low-risk profit opportunities in mismatched prices of securities, like stocks or bonds. An early adopter of computers to measure risk and test trading strategies, the firm flourished.

In addition to making his own bets, Yass built his firm into one that stands at the very center of the market and takes bets from other traders. On Wall Street, this job is known as market making.

At its simplest, making a market means offering to buy or sell a thing. The jewelry shop on the corner that will sell you a gold ring and has a “We Buy Gold” sign in the window is making a market in gold. If the store buys a gold coin from a customer for $300, then sells it for $320 to the next person who walks in, the store has made a quick $20.

Susquehanna does the same thing, but with securities. Running a market making firm isn’t always as easy as quickly matching a buyer and a seller. A market maker is expected to post its prices and buy and sell to all comers. If a particular stock has more sellers than buyers, the firm might find itself holding too much, exposing the market maker to losses if the stock price drops. It’s a business that thrives when there’s lots of trading volume but can be dangerous if markets crash.

The market making business in stock options, Susquehanna’s specialty, requires juggling a huge number of trades while constantly keeping an eye on all the various bets to make sure that the firm is protected from unexpected market moves.

In 1996, the year Yass turned 38, he made $71 million, tax records show. By then, the firm was employing hundreds of people. Not long before, Susquehanna staff had gathered in Las Vegas for an annual company celebration. Traders brought their families. The firm’s employees watched the Kentucky Derby together. A Marilyn Monroe impersonator interviewed Yass’ father with some tame double-entendres. The highlight was a skit with a junior trader performing as “Jeff Yass Gump,” after Forrest Gump. “Momma always said I was like the other kids,” the trader said. “But the other kids, they went to Harvard and Yale and the University of Pennsylvania and I said: ‘Momma, why am I at the SUNY Binghamton?’ She said it was because I was special.” The crowd roared, Yass the loudest of all.

Despite losing some star traders in the late 1990s, Susquehanna continued to produce massive profits. Yass and the other co-founders managed to keep their enormous wealth a secret. Even by 2005, when Yass had collected at least $1 billion of lifetime income, he was nowhere to be found in the Forbes list of the richest Americans.

That’s in part because Susquehanna is privately held and trades only its own money, meaning it doesn’t have to publicly disclose much about its business. Like many financial firms, Susquehanna itself is not a single company but a complex and shifting web of legal entities whose profits flow to Yass and a small set of partners.

It has been a remarkably consistent profit machine for the partners, except in 2008, the year of the global financial crisis. Yass alone lost $470 million that year, tax records show. Former Susquehanna traders believe the firm risked going out of business. The danger the firm faced “sent chills through everyone,” said one. Like other big trading complexes that did huge business with investment banks, Susquehanna benefited from the massive federal bailout of Wall Street, which propped up the giant firms that were among its biggest trading partners.

Yass, the free market true believer, now owed the survival of much of his fortune to the U.S. government. On a personal level, Yass also received an extra bonus from the government: a $2,000 child tax credit because he reported losing money that year.

Susquehanna quickly bounced back to profitability. In recent years it has supplanted major banks as one of the firms that sits in the middle of massive daily financial flows in stock and other markets. A Bloomberg profile in 2018 reported that Susquehanna trades 100 million exchange-traded fund shares daily. The firm is a prominent player in cryptocurrencies like bitcoin and, in a throwback to Yass’ origins, the exploding business of sports betting. Susquehanna has also branched out into venture capital. One of those investments came through spectacularly: a large stake in ByteDance, the Chinese company behind the social media app TikTok.

By the 2010s, Yass had become one of the richest Americans. But his ultralow profile meant that almost nobody knew that. At least two of Susquehanna’s other co-founders, Arthur Dantchik and Joel Greenberg, have each made billions of dollars themselves, according to ProPublica's analysis.

Yass hit a new milestone in 2012, pulling in more than $1 billion in a single year, according to tax records; by 2018, his income was $2 billion. In the six years ending in 2018, Yass had the sixth-highest average income in the entire country, according to IRS data.

Yass’ Tax Rate Remained Low Even as His Income Grew to Billions Note: “Income tax” here is calculated using the IRS definition of “total income tax,” which excludes payroll taxes. “Income” is adjusted gross income. (Source: IRS data, ProPublica analysis.)

Court filings and ProPublica’s analysis of tax records suggest that, as of 2018, Yass owned around 75% of Susquehanna, with co-founders Dantchik owning around 19% and Greenberg around 3%. (Greenberg retired in 2016.)

Yass was finally added to the Forbes list last year. The magazine put his worth at $12 billion, which would make him the 58th-richest American. ProPublica estimates his true wealth is likely at least $30 billion — based solely on his income over the decades and stake in ByteDance — which would place him in the top 25.

On a Friday afternoon in April 2010, a Susquehanna trader in Pennsylvania emailed his counterparts at Credit Suisse to make a big bet in the stock market. The email instructed the Swiss bank to buy about $70 million worth of shares in some of Switzerland’s biggest companies on Susquehanna’s behalf.

Three minutes later, the trader sent out a second email, this time to Morgan Stanley. He placed a second bet, now wagering against the exact same stocks in the exact same amounts he’d just ordered from Credit Suisse.

The payoff from such a trade might seem to be nothing at all. But there was a winner and a loser. The winner was Susquehanna. The loser was the U.S. government: Susquehanna had managed to slash its tax bill through the trade. The emails come from an ongoing U.S. Tax Court case filed in 2020. There are rules designed to block clever traders from using offsetting bets to conjure tax savings, and the IRS argues Susquehanna broke them. (More on that case later.)

The firm’s willingness to push the boundaries of tax law is not surprising to people who know Yass and his partners. One former Susquehanna executive recalled Yass acknowledging using a trading strategy in which a main goal was not to make profitable trades, but to avoid taxes. Taxes, according to Yass’ former colleagues, are an obsession for the billionaire. As one former employee put it, “They hate fucking taxes.”

It doesn’t matter how seemingly trivial it is. Susquehanna once petitioned the state of Pennsylvania to demand “a refund of taxes paid on repairs to ice machines.” The petition was denied.

Indeed, the firm has a habit of shaping deals that slash its tax bill and then daring the IRS to intercede. Sometimes, the agency successfully challenges them, as when Yass and his two main partners were hit with a total of $121 million in back taxes in 2019. That was the single biggest such payout in ProPublica’s database of IRS records, which includes thousands of audits of the wealthiest people in the country. Susquehanna paid only after losing a long-running battle with the agency, one the firm appealed all the way to the Supreme Court.

Despite periodically tripping IRS wires, the firm’s aggressiveness seems to have paid off. Susquehanna’s tax avoidance has gone on for years, resulting in a strikingly low tax rate for Yass and his partners, according to ProPublica’s analysis.

The strategy behind that trade back in 2010 is key to understanding how they’ve done it. Similarly to how Susquehanna has taken advantage of small differences in prices of options or stocks, it has found ways to exploit a gap in tax rates to save hundreds of millions of dollars in taxes every year.

For someone like Yass, the U.S. system offers an almost irresistible proposition. If you earn the wrong sort of income — the kind that comes from a short-term trade — you’ll pay a relatively high tax rate. But if you earn the right kind — gains on long-held investments — you’ll pay half as much in taxes.

But what is considered “long-term” involves a bright, arbitrary line. Hold a security for less than 366 days, and you are on the wrong side of that line.

The result is that by the arithmetic of the U.S. tax code, $100 made from a sale on the 365th day is worth around $60 after taxes. And $100 made on the 366th is worth around $80.

Short-term, high-frequency traders like Susquehanna often hold securities for less than 365 seconds. As the company itself put it in one recent court filing, the firm “trades securities, commodities, and derivatives, seeking to earn returns from short-term appreciation and arbitrage profits.” This has been the firm’s consistent self-description. Back in 2004, a staffer was more frank in testimony: “We are not, by our nature, into holding stocks.”

With such an approach, long-term gains should be forever out of reach.

And yet, Yass and his partners have managed, year after year, to report that the vast majority of their net income came in the form of long-term capital gains. In several recent years, 100% of their income was taxed at the lower rate.

How do they do it?

One strategy, in simplified form, works like this: Make two bets that should move in opposite directions. Think of, say, both betting on and against Coca-Cola’s stock. Towards the end of the year, one bet will be up, and one will be down. At 365 days, the last day a trade is considered short-term, sell the one that’s down. A day later, sell the one that’s up.

Of course, if you consider the trade as a whole, it makes no money. But that isn’t the point. You’ve found a risk-free way to generate two valuable commodities: short-term losses and long-term gains.

On their own, these losses and gains aren’t of much use. But to someone like Yass, who separately generates an enormous pile of short-term gains each year, they work a kind of magic.

That’s because of how taxes are calculated. Short-term and long-term results are accounted for in separate buckets: Short-term losses are applied first to short-term gains. So the losses from the Coke trade reduce the existing pile of short-term gains. The money made from the Coke trade, meanwhile, goes in the long-term bucket.

In the end, the trader has essentially transformed short-term gains into long-term gains, the type taxed at the special lower rate. From 2003 through 2018, the difference between the two rates ranged from 17 to 20 percentage points. So, for every $100 run through this process, the trader would net from $17 to $20 in tax savings.

So why isn’t everyone using this strategy?

Because as laid out here, it would be illegal.

For decades, traders have devised strategies that looked something like the Coke trade, known as a “straddle” because the trader is taking both sides. Over the years, Congress passed laws and the IRS imposed intricate rules to stop them, taking away the tax benefit of simultaneously betting for and against the same stock.

And yet, Yass and his partners built a machine that produced much the same result.

Since 2011, IRS records show, a partnership called Susquehanna Fundamental Investments has been the source of the majority of long-term gains for Yass and his partners. Every year, it channeled hundreds of millions in long-term gains to them, while also providing hundreds of millions in short-term losses.

Year after year, the gains and losses rose and fell roughly in tandem, as if one were a near reflection of the other. In 2015, for example, Susquehanna Fundamental produced $774 million in long-term gains and $787 million in short-term losses for Yass. In 2017 it was $940 million in long-term gains and $902 million in short-term losses.

One Susquehanna Fund Generated Tax Savings by Combining Huge Gains and Losses Source: IRS data. The bars show the portion of short-term capital losses and long-term capital gains from the Susquehanna Fundamental Investments partnership that flowed to Jeff Yass.

Regulatory filings give a glimpse of the fund’s trading.

Susquehanna Fundamental has to disclose a snapshot of certain holdings with the Securities and Exchange Commission a few times each year, though many types of trades are exempt from disclosure.

Over several years, the fund’s disclosed positions resembled a complex version of the Coke trade. Instead of betting for and against a single stock, the firm bet for and against the entire market.

Susquehanna Fundamental held billions of dollars of individual stocks such as Google, Wells Fargo and, as it happens, Coca-Cola. These stocks were among the largest companies in the S&P 500 index.

Meanwhile, the fund also held a large bet against the S&P 500. In essence, it held a bet against many of those exact same stocks.

On its face, the fund actually lost money for Yass: Over eight years, it registered $5.4 billion in losses against $5 billion in gains — a net loss before taxes. But by transforming the tax rate on so much income, it delivered $1.1 billion in tax savings, and Yass came out way ahead.

It’s not clear whether the IRS has ever challenged the firm’s trading inside Susquehanna Fundamental Investments.

But the trading pattern has similarities to the 2010 Swiss stock trades, which involved betting for and against the exact same stocks. The IRS deems those to have been illegal under tax law.

Those trades were part of a larger deal worked out by Susquehanna and Morgan Stanley that called for the Philadelphia firm to buy $1.4 billion of the stocks and simultaneously bet against them, court records show. (Morgan Stanley declined to comment.) Over the next three years, the deal kicked out at least $365 million in low-rate income to the firm, while generating massive losses that could be used to wipe out other high-rate income, according to the IRS.

When IRS auditors scrutinized the deal, they found that Susquehanna had violated rules against betting for and against the exact same stocks. The agency demanded the firm pay tens of millions of dollars in back taxes.

Yass and his partners refused, arguing that the firm had broken no rules, and sued the IRS in U.S. Tax Court in 2020. They asserted that the deal was supposed to be profitable and wasn’t primarily intended to avoid taxes. But the firm also acknowledged the deal was tailored with an eye to “tax efficiency.” The case is still pending, with Susquehanna currently resisting requests to turn over more documents.

Susquehanna’s ability to manufacture the right kind of income has helped Yass and his partners minimize their taxes for decades. Since 2001, Yass hasn’t paid over 20% in a single year. In 2005, a year when he made what was for him the modest sum of $66 million, he paid $0 in federal income tax.

For Yass’ primary competitors, the story is far different. Citadel and Two Sigma are both huge firms that, like Susquehanna, do a mix of lightning-fast trading and market making. The heads of these firms, like Yass, reported incomes larger than almost anyone else in the country from 2013 to 2018.

But the tax returns of these Wall Street titans — Ken Griffin from Citadel, and John Overdeck and David Siegel from Two Sigma — have no mystifying source of low-rate income.

They also differ from Susquehanna in another telling respect. These firms voluntarily classify their trading activity as ordinary income, according to ProPublica’s analysis of tax records. Doing this makes sense for a firm that specializes in short-term trading and doesn’t expect to generate many long-term gains. That’s why many high-frequency firms make this “Section 475 election,” as it’s called in the tax jargon. If Susquehanna elected to treat its trading this way, its ability to generate long-term gains would be constrained.

Susquehanna also stands apart in how its taxes are prepared, ProPublica’s records show. Unlike his billionaire peers, Yass does not have his tax returns prepared by outside accountants. Instead, they’re prepared in-house at Susquehanna. Avoiding an outside accountant can offer more leeway in filing returns that test the boundaries of the law and might be challenged by the IRS later on, experts say. Several former employees told ProPublica that details of the firm’s tax strategy are closely guarded, even inside the company.

From 2013 to 2018, Griffin, Overdeck and Siegel paid average income tax rates ranging from 29% to 34%. (Representatives for the three men declined to comment.) Yass averaged 19%. ProPublica estimates that if Yass’ tax returns had resembled those of his competitors, he would have paid $1 billion more in federal income taxes during this period alone.

Yass does have one peer who achieved even lower tax rates and did so for years. Billionaire Jim Simons is one of the founders of Renaissance Technologies, one of the premier hedge funds known for high-frequency trading. His rates were often in the single digits between 2009 and 2018, never exceeding 14%. One reason Simons paid so little are deductions from charitable donations, averaging hundreds of millions of dollars each year; Yass doesn’t give nearly as much to charity. But another reason was Renaissance’s ability to create long-term gains over a decade.

That, however, didn’t last. A 2014 congressional investigation and IRS audit concluded the Renaissance scheme to generate such gains was illegal. Simons himself ultimately paid the IRS at least $670 million to resolve the case. Collectively, fund executives and investors paid an undisclosed amount, reportedly in the billions, in back taxes and penalties. A spokesperson for Simons declined to comment.

Having slashed his income tax bills, Yass has already taken steps to protect his fortune from the government for years to come.

He created special trusts designed to sidestep the estate tax when passing money to heirs at death, court records show. In using these grantor retained annuity trusts, or GRATs, Yass joins dozens of other billionaires, as ProPublica has reported.

That suggests that Yass’ adult children, two of whom work at Susquehanna, stand to someday inherit multibillion-dollar fortunes — tax-free.

Over decades of TV appearances and speeches promoting his libertarian gospel, Milton Friedman often liked to say he was “in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.” Friedman died in 2006. Today, Yass, who reveres the economist, is trying to bring Friedman’s ideas to fruition.

Yass has not only worked assiduously to lower his own taxes but has poured millions into political efforts to eliminate them for his class. In recent years he has given $32 million to the anti-tax stalwart Club for Growth. This money paid for TV ads attacking candidates who were seen as wobbly on Friedman’s tax-cuts-anytime-anywhere philosophy.

In Pennsylvania, where Yass is the richest person in the state and a kingmaker in local politics, his favored candidates have shaped tax policy. He is a longtime financial patron of a Democratic state senator, Anthony Williams, one of the creators of a pair of tax credits that allow companies to slash their state tax bills if they give money to private and charter schools. Susquehanna is, in turn, a major user of the tax credits. (Williams did not respond to requests for comment.)

The programs limited the state tax credits a single company could receive, but Yass and the others found a way to sidestep the limits. Yass, Dantchik and Greenberg simply applied for the tax credits through individual companies each had formed, the Philadelphia Inquirer reported in 2015. In all, the credits have saved Yass and the others at least $53 million in state taxes, records show.

Yass’ views on taxes, along with another stance inspired by Friedman, school privatization, seem to have informed his shifting opinion of Donald Trump.

Yass had opposed Trump during the 2016 Republican presidential primary, instead donating large sums to Rand Paul of Kentucky, the de facto leader of the party’s libertarian wing, and to Libertarian Party nominee Gary Johnson.

A week after Trump won the presidency that November, Yass took the stage at a theater in Philadelphia. Even though Trump had not been his candidate, Yass seemed to relish the long-odds election win, joking that those who “didn’t like Tuesday’s results” could move to Canada.

He used the rest of his remarks at the event, part of a local TED Talk-style series, to promote his passion for charter and private schools and attack Philadelphia teachers. “All we ever hear about is how underpaid they are and how abused they are,” Yass said. “Well, the shocking fact is that the average school teacher in Philadelphia with benefits makes $117,000 a year.” Yass acknowledged that a large chunk of that figure was from pension and health care costs. (That year, Yass made $1.26 billion, before benefits.)

Over the next four years, Trump delivered both a historic tax cut for the rich and an education secretary who was a champion of charter schools.

Yass has since backed a range of pro-Trump candidates. In Pennsylvania, he has poured money into this year’s Republican effort to take the open gubernatorial seat, which many expect, if successful, will lead to an abortion ban in the state. The Club for Growth also backed a losing candidate for the state’s open U.S. Senate seat, Kathy Barnette, whose campaign centered on her hard-line opposition to abortion, even in cases of rape. Yass is the second biggest donor to the Club (which did not return ProPublica’s requests for comment).

He is also the largest donor to the Rand Paul-affiliated Protect Freedom PAC, giving $2.5 million of his more than $12 million in recent donations just days after the 2020 election. The group’s website says of Democrats: “Of course, they stole the election.”

Yass is looking to harness discontent with public schools during the pandemic to push privatization of the system. He has given $15 million as the sole funder of a political action committee, the School Freedom Fund, that says “school closures, mask mandates, critical race theory, and more” have created “a unique opportunity to promote School Choice as the structural solution to dramatically improve education in America.”

If Yass came to politics motivated by his libertarian ideology, he now has an acute material reason — beyond taxes — to have a voice in Washington.

Late in the Trump administration, Susquehanna’s prize investment came under threat. President Trump announced on July 31, 2020, that he was considering banning TikTok in the United States. (Backers of the ban cited national security concerns over Americans’ private data being controlled by the Chinese firm behind the app, ByteDance.) Susquehanna's multibillion-dollar stake in ByteDance accounts for a major part of Yass’ fortune.

There’s no record of Yass having given to Trump before. But on Aug. 4, 2020, just a few days after the president’s TikTok announcement, Yass gave $5 million to the Club for Growth. Two days later, the group deviated from its normal practice of funding congressional races and announced an ad campaign in the presidential race: $5 million against Joe Biden. The group didn’t mention Yass, but the ads attacked Biden on Yass’ pet issue, charter schools. Later that month, Yass gave the group another $5 million, and more ads ran against Biden.

At the same time, Trump and other administration officials were personally involved in trying to broker a deal to avoid finalizing the TikTok ban. At one point in September, Trump publicly announced his support for a deal in which U.S. companies would buy stakes in ByteDance and a new board would be formed. Among the proposed members of the board: Dantchik, Yass’ partner at Susquehanna.

It’s not clear if Yass or Dantchik talked to the White House about the deal, which ultimately fell through. Courts later blocked the proposal to ban the app.

Yass hasn’t spoken much publicly about how he thinks about his engagement in politics. A rare glimpse came after the Jan. 6 riot, when a Philadelphia political activist named Laura Goldman emailed Yass to question his donations to the Club for Growth. One of the candidates the group backed, Sen. Josh Hawley, R-Mo., had objected to certifying the presidential election results just days earlier.

“To be clear — I don’t think the election was stolen,” Yass responded in a Jan. 15, 2021, email, first reported by the Guardian. “I gave the club money a year ago. Do you think anyone knew Hawley was going to do that? Sometimes politicians deceive their donors.”

Yass appears to have overcome any doubts about the Club for Growth, which has continued to back candidates who say the election was stolen.

Since he sent that email, he has given the group another $5.5 million.

Help Us Report on Susquehanna, Jeff Yass, and Taxes

Do you have information about Susquehanna International Group or Jeff Yass that we should know? Do you have tips to share? More broadly, do you have expertise in tax law or accounting? Here’s how to get in touch.

Joshua Kaplan contributed reporting.

Update, June 23, 2022: After this article was published, Susquehanna, which declined to respond to a detailed list of questions before publication, sent a statement to The Philadelphia Inquirer, which had reprinted the story on its website and was preparing to publish it in its print edition.

A spokesman for the firm wrote: “The ProPublica story, which is derived from stolen tax records, contains numerous misstatements and factual errors to fit a flawed narrative. In fact, the tax rates cited in the article are significantly understated, because amounts paid for foreign taxes and charitable contributions are omitted. It is also worth noting that Mr. Yass is a self-described Never Trumper who has never questioned or denied the results of the 2020 election.”

The spokesman declined to send the statement to ProPublica or to cite any specific alleged error. In calculating tax rates, ProPublica used the standard methodology used by the IRS for Yass and every other individual mentioned in this article. We have used the same methodology to measure income-tax rates for every article in our “Secret IRS Files” series.

by Justin Elliott, Jesse Eisinger, Paul Kiel, Jeff Ernsthausen and Doris Burke