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

2 years 11 months 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

2 years 11 months 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

2 years 11 months ago

ProPublica is a nonprofit newsroom that investigates abuses of power. Sign up to receive our biggest stories as soon as they’re published.

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

2 years 11 months 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

2 years 11 months 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

2 years 11 months 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:

  • Work in a sheltered workshop in Missouri.
  • Used to work in a sheltered workshop in Missouri.
  • Know someone who works in a sheltered workshop in Missouri.
  • Know a lot about sheltered workshops in Missouri.

To help with our reporting, you can:

  • Answer the questions below.
  • Email reporter Madison Hopkins at madison@thebeacon.media
  • Call or text reporter Madison Hopkins at (913) 283-4743. If Madison does not answer, leave a voicemail that tells us:
    • Your name.
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    • That you are calling about sheltered workshops.

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.

2 years 11 months 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

2 years 11 months ago

ProPublica is a nonprofit newsroom that investigates abuses of power. Sign up for Dispatches, a newsletter that spotlights wrongdoing around the country, to receive our stories in your inbox every week.

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

2 years 11 months 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

2 years 11 months 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.

2 years 11 months 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

2 years 11 months 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

2 years 11 months 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 years 11 months 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 years 11 months 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

2 years 11 months ago

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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

Why the Black Educator Forced Out Over Bogus Critical Race Theory Claims Agreed to Share Her Story

2 years 11 months ago

ProPublica is a nonprofit newsroom that investigates abuses of power. Sign up for Dispatches, a newsletter that spotlights wrongdoing around the country, to receive our stories in your inbox every week.

This story was co-published by ProPublica and FRONTLINE as part of an ongoing collaboration.

Cecelia Lewis did not want to share her story.

In fact, she just wanted all of this to go away.

Late last year, I was on the phone with a former colleague, talking about the local coverage of campaigns against critical race theory across metro Atlanta. 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 taught in K-12 public school systems but has still become a lightning rod in districts around the country — and a catalyst for conservative political candidates seeking to fire up their base.

He mentioned that a woman had quit her job in the Cherokee County School District before she had started and wondered what had happened to her.

We talked about a lengthy statement she’d written for the Cherokee Tribune & Ledger-News, explaining her decision to resign. The letter was published a week and a half after an ugly scene at a school board meeting during which parents railed against the hiring of Lewis (a Maryland middle school principal), as well as diversity, equity and inclusion initiatives (which Lewis had been brought on to helm) and CRT (a formerly arcane, currently politicized concept that Lewis hadn’t even heard of). I later learned people who had gathered outside the building where the meeting was held were beating on windows. School police and other law enforcement officers escorted board members to their homes, where some received ongoing security.

In that letter, Lewis, who had quit the morning after the meeting, explained the DEI plan she would have implemented in Cherokee and how it would benefit all children. And she mentioned she’d been threatened by people who have no idea who she is and what she stands for.

Seemed like something worth deeper reporting.

A comment posted at the bottom of a Cobb County Courier article caught my eye: A reader, who didn’t reveal their identity, warned that Lewis was heading to Cherokee’s neighboring Cobb County School District.

Sure enough, Lewis’ LinkedIn profile showed that she’d worked in Cobb County for a mere two months following her resignation in Cherokee. She had been overseeing social studies for that district. No one had reported on what happened to her in Cobb.

At the same time, I’d been filing open records requests to the Cobb County School District related to COVID-19. I noticed a cache of emails that showed how the then-school board chairman was receiving guidance from a local attorney about conservatives’ definition of CRT, its supposed dangers to children and how the concept was infiltrating corporations and schools.

The school board — like many others across the country in 2021 — had taken a vote against CRT. The vote was the same month that Lewis started working there.

I wanted to know exactly what happened to Lewis in both districts and how it went down. I also wanted to know who was behind the how.

I started contacting Lewis via LinkedIn in December, shortly after talking to my former colleague and trying to connect the dots between what little I knew about her brief time in Georgia. She didn’t write back. But I had some hope that I’d hear from her because I received alerts that she was at least looking at my LinkedIn profile.

She’s considering it, I thought.

Earlier this year, I found her email address and followed up. Still no answer.

I continued filing records requests in the two school districts and, through emails I received from those requests, learned more about the players behind the campaign to run her out. In both Cobb and Cherokee, people had sent similarly worded complaints to the districts, demanding to get rid of Lewis.

Then I found people who were upset about what happened to Lewis. One of them knew a good bit more about what led up to that ugly school board meeting in Cherokee.

That person had a recording of an organizing meeting days prior in a golf course clubhouse. There was also a private Facebook group filled with hysterical posts about Lewis, including some that announced false Lewis “sightings” around the county.

Two of the presenters at the clubhouse meeting are leaders of groups that encourage the public to anonymously report educators for perceived transgressions relating to curriculums, inappropriate books or lessons, or guest speakers — or to just submit any anonymous tip.

Beyond giving me details about the efforts to oust Lewis, the recording and posts provided insight into local and national conservative networks involved in strategies to overthrow school boards, vilify Parent Teacher Associations and pass state legislation to ban a slew of concepts from curriculums. At the clubhouse meeting, the crowd watched a video from Prager University that outlined how white people are being made out to be racists no matter what they say or do — because, well, CRT. They also listened to a controversial recording of a Manhattan high school principal caught on tape talking about the demonization of white children. The group was being coached on how to speak at school board meetings in a way that could land them an appearance on Fox News.

This all struck me as highly coordinated.

By March, I decided to see if meeting me might change Lewis’ mind about talking. I knew she had moved back to Maryland, so I traveled there to do some old-fashioned door-knocking, meet some folks who knew Lewis and get a direct, handwritten message to her (my ProPublica business cards hadn’t been printed yet!).

While I was sitting in my hotel room, she called.

She still didn’t want to go on the record, but we talked for hours that day and hours the next. I told her why I wanted to tell her story, and she began to piece it together for me. I learned that she hadn’t even initially applied for that DEI position. Cherokee’s district leadership encouraged her to do it after she interviewed for a job as a coach for teachers. But Lewis still would not go on the record, and she wasn’t too interested in meeting me. She had concerns. Safety and privacy concerns.

My ears perked up when, during our initial call, she mentioned an upcoming school board meeting in her own district. I decided to go sit in the back, to get a feel for the area. I heard some of the same anti-CRT lines in Maryland that I’d heard in Georgia. This time it tied back to the district’s hiring of its first Black superintendent.

Again, the language suggested there was coordination. People don’t learn these things on their own. They’re coached in the ways I’d heard in that recording of the Cherokee County clubhouse meeting.

I left Maryland without an interview I could use in my story. But I kept reporting.

I got more emails from the Georgia districts. I spoke to school employees in Cherokee and Cobb counties; they defended Lewis and felt sorry these things happened to her. Most of them said they thought of her often. One, who was disappointed I’d tried to visit Lewis, thinking it was a step too far, was especially protective of her. She didn’t want me to cause her further harm, and I had no interest in doing that.

I also attended a Cherokee County School Board meeting, standing in a long line waiting to get through the metal detectors that had been installed because of the uproar over Lewis and CRT a year earlier. In that line, women were passing around what they called evidence of lewd material in school library books. There was an informal circle of people forming around me. Some knew one another. Some were introducing themselves, knowing they shared a common goal in book banning. One woman declared that a parent leader was a “Marjorie,” as in a follower of controversial Georgia Congresswoman Marjorie Taylor Greene, who is not afraid to say anything, anywhere. Another raised her hand and proudly said, “I’m a Marjorie, too.”

Everyone in my immediate vicinity was passing around material provided by a blond woman: laminated pages of books she felt should be banned from school libraries. Well, almost everyone. No one handed them to me. Nor did anyone hand them to the Black mother standing behind me with her high school daughter.

As I continued reporting in the weeks to come, it became apparent that none of the blowback Cecelia Lewis faced in Georgia was actually about Cecelia Lewis. She happened to land in the wrong job in the wrong state at the wrong time. And yes, based on the details you’ll find in the story I ultimately wrote, the wrong skin color.

(In response to a detailed list of questions covering all aspects of Lewis’ experience in the Cherokee County School District, its chief communications officer responded that “we have no further comments to add.” In response to similar questions to the Cobb County School District and its school board, a spokesperson responded: “Cecelia Lewis was employed by the Cobb County School District during the summer of 2021, voluntarily submitted her letter of resignation in early fall of 2021, and like every Team member, her contributions and work for students was greatly appreciated.”)

In late April, Lewis agreed to take another call from me, this time via Zoom, where we could actually see each other for the first time. By then, we were inching toward the year anniversary of her resignation from Cherokee County. When I told her what I’d learned through records and interviews — and how my colleague, ProPublica research reporter Mollie Simon, found examples of educators across the country who faced similar backlash — she said she’d consult her family, her district and her pastor and pray on making a decision as to whether she’d talk to me on the record.

A few days later, my phone lit up with a call from her. She wanted to share her experience — so that it may help people understand the extraordinary challenges so many educators are facing.

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by Nicole Carr

A Sheriff’s Captain Called Our Investigation an “Entertaining Piece of Fiction.” An Inspector General Disagrees.

2 years 11 months ago

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

Los Angeles County sheriff’s deputies disproportionately contact, cite and arrest Black students in the Antelope Valley, according to a new report by the county Inspector General’s Office. And those students are also disproportionately suspended and expelled at higher rates than other racial groups, the report said.

The analysis was spurred by a yearlong investigation into allegations of racial discrimination in Antelope Valley high schools by LAist and ProPublica. Reviewing data for the 2018-19 school year, our investigation found that Black teenagers accounted for 60% of deputy contacts in Lancaster high schools, although they made up only about 20% of the enrollment in those schools.

Inspector General Max Huntsman’s office reviewed Sheriff’s Department data for the 2019-20 school year and said its findings corroborated the news organizations’ investigation. In addition, it said the problem may be worse than the numbers indicate, due to flaws in the department’s data-collection system.

The report also slammed the Sheriff’s Department for failing to provide any evidence for claims it made that challenged the validity of our analysis.

“The practice of making public denials without factual support is fundamentally inconsistent with California law controlling the conduct of law enforcement officers,” investigators wrote. “The ProPublica analysis appears fundamentally correct.”

In an emailed statement, the Sheriff’s Department told LAist that it couldn’t provide immediate comment because it had not yet fully reviewed the report.

“What we can say is Sheriff Alex Villanueva takes allegations of misconduct very seriously and we will provide a more detailed response once we review these findings,” the department wrote.

The Inspector General’s Office presented its findings to the Civilian Oversight Commission on Thursday. This was the same body that had asked the Inspector General’s Office to look into the matter in the wake of the news organizations’ report.

Just after the article was first published last fall, Capt. John Lecrivain, the head of the Lancaster sheriff’s station, told commissioners that the investigation was “a very entertaining piece of fiction.” He struck a different tone at the Thursday meeting.

“This is a serious concern to the department, and we relish the opportunity to be involved in the discussion and find some solutions,” he said, adding that the department had looked back at its data and “we did find that there was some disparity in the contacts with the students.”

Assistant Inspector General Mahdi Mohamed said at the meeting that the Sheriff’s Department also did not comply with investigators’ request from nine months ago for information — including body-worn camera video — related to an incident at Lancaster High School in which a 16-year-old student, MiKayla Robinson, was body slammed by a sheriff’s deputy.

Mohamed said the lack of information from the Sheriff’s Department made it hard to “investigate the reason for the deputy’s contact with the student.” He said the office finally received the body camera video in the past few days.

Robinson’s attorney, Lisa Bloom, said she filed a complaint in May against both the Antelope Valley Union High School District and the Sheriff’s Department, alleging civil rights violations. Neither the school district nor the Sheriff’s Department has responded.

“The findings of this new report that Black students are cited, arrested, suspended and expelled at disproportionately higher rates than other students should be a wake up call,” Bloom said in a statement. “Immediate action must be taken to protect Black students from further harm.”

In 2015, the U.S. Department of Justice and Los Angeles County Sheriff’s Department entered into a court-ordered consent decree, agreeing to reforms that included protections against racial profiling. That agreement grew out of findings from a two-year DOJ Civil Rights Division investigation, which found, in part, that deputies routinely racially profiled Black residents in the Antelope Valley.

Underreported Data

The data examined by the Inspector General’s Office and by LAist and ProPublica came from the Sheriff’s Automated Contact Reporting system.

Huntsman’s office analyzed nearly 17,000 contacts by Lancaster station deputies — who are assigned to Antelope Valley high schools as school resource officers — during the 2019-20 school year. Roughly 400 of those contacts were conducted at or around 11 high schools in the valley.

Investigators said the SACR system “is inaccurate and significantly underreports significant data.” In a report issued this month, the office found the Sheriff’s Department underreported more than 50,000 stops and more than 70,000 arrests between 2018 and 2019.

“Any findings based upon this review of SACR data likely understates the issues identified in this report, particularly those relating to racial disparities,” investigators wrote. They called on the Sheriff’s Department to improve the system’s accuracy.

The analysis by the Inspector General’s Office found Black students experienced a disproportionately higher number of contacts with deputies than any other racial group. (Courtesy of the Inspector General’s Office)

The inspector general’s analysis found that Black students made up about 67% of the contacts made by Lancaster station deputies but only about 18% of total school enrollment.

In comparison, Latino students — who make up the majority of the school’s population, about 64% — accounted for only 26% of deputy contacts.

Black Students Cited and Arrested More

The inspector general’s analysis also showed that Black students were issued nearly 70% of all citations resulting from contact with deputies. Black students also made up nearly 60% of all arrests resulting from contact with deputies.

The report said these findings were consistent with the news organizations’ previous reporting.

Sheriff’s Deputy Justin Ruppert, team leader of the Lancaster station’s school safety unit, told LAist and ProPublica that the vast majority of deputies’ contacts on campuses are based on referrals from school staff and administrators — rather than being initiated by law enforcement. At the time of the original story, Antelope Valley Union High School District administrators did not respond to interview requests or to a list of written questions.

The inspector general’s office, though, found “the majority of school contacts were self-initiated by deputies.” However, it noted that deputies may not be coding calls correctly.

The analysis by the Inspector General’s Office found the majority of contacts with high school students were self-initiated by deputies. (Courtesy of the Inspector General’s Office)

Huntsman’s office also found that Black and Latino high school-age youth had fewer recorded contacts with deputies outside of school than inside.

Notably, white students had more contact with deputies outside of school than inside.

The Inspector General’s Office found that Black and Latino students were contacted by deputies more at school than outside of school. (Courtesy of the Inspector General’s Office)

Additionally, the Inspector General’s Office found that Black students made up 54% of total suspensions in the 2019-20 school year.

About 1 in 7 Black students at the high schools have been suspended, a rate more than twice the statewide average.

Black and Latino students each made up about 47% of expulsions, though Black students were expelled at a disproportionately higher rate given that their share of the student population is so much lower.

A Call for Transparency and Training

At the 2021 protest in Lancaster. (Bethany Mollenkof, special to ProPublica)

The office listed a number of recommendations “aimed at increasing the transparency, accuracy and efficacy of oversight of School Resource Deputies and the safety of community youth.”

The investigators also recommended that the Sheriff’s Department expand its training curriculum “to educate all patrol-related deputies on their opportunity to act as informal counselors and gateways for at-risk youth to non-criminal County services.”

Last June, the Los Angeles County Board of Supervisors passed a motion requiring the county CEO to report back on a plan to collect and publish data relating to deputy contacts with youths.

The news organizations’ investigation last fall profiled Barron Gardner, a high school history teacher working for Antelope Valley district. Gardner had become a reluctant spokesperson for a growing movement, driven primarily by Black and Latino residents, to get LASD deputies off school campuses.

On Thursday, Gardner said over the phone that he believed the numbers in the inspector general’s report “aren’t any surprise” to school staff and Antelope Valley residents.

“I could have guessed those numbers off the top of my head,” he said.

Gardner also said he wished the inspector general’s report — in addition to recognizing that his Black students were overpoliced — gave more context for the issues that his Black students face. He listed some: “homelessness, foster care, parents and prisons” — and systemic racism. Gardner said all are factors that prevent Black students from accessing socio-emotional and mental health resources.

“This is what we think is the best way to deal with it — with cops,” he said.

by Emily Elena Dugdale, KPCC/LAist

“Big Lie” Vigilantism Is on the Rise. Big Tech Is Failing to Respond.

2 years 11 months ago

ProPublica is a nonprofit newsroom that investigates abuses of power. Sign up to receive our biggest stories as soon as they’re published.

Update, June 21, 2022: Spokespeople for Facebook, TikTok and Twitter said they would remove posts flagged by ProPublica for violating their respective community standards policies. This story has also been updated to include comment from True the Vote, which the organization sent after our story published.

The dummied-up flyer bore the hallmarks of a real WANTED poster. A grainy photo of a woman outside an election office in the suburbs of Atlanta stamped with the word “WANTED.” An image of a sheriff’s badge and the phone number for the Gwinnett County Sheriff’s Office. The implication was clear: The woman was being sought by the local sheriff for voter fraud.

The flyer was fake, and though the sheriff’s office eventually called it out, the false poster went viral, amassing tens of thousands of shares, views and threatening comments on Facebook, Twitter and TikTok and raising fears that harm could come to the unidentified woman.

Stolen-election activists and supporters of former President Donald Trump have embraced a new tactic in their ongoing campaign to unearth supposed proof of fraud in the 2020 presidential race: chasing down a fictional breed of fraudster known as a “ballot mule” and using social media to do it.

Inspired by a conservative documentary film that has won praise from Trump and his allies — and debunking from critics including former Attorney General William Barr — self-styled citizen sleuths are posting and sharing photos of unnamed individuals and accusing them of election crimes. They are calling on their followers to help identify these “ballot mules,” who are accused of having violated laws against dropping off multiple absentee ballots during the 2020 election. A state lawmaker in Arizona has even encouraged people to act as “vigilantes” and catch future “mules.”

Promoting such false information violates the policies of Facebook, Twitter and TikTok. Facebook’s “Community Standards” says its policy is to remove content that incites harassment or violence or impersonates government officials. Twitter and TikTok have similar rules and guidelines for what can and can’t appear on their platforms.

(Screenshot captured and redacted by ProPublica)

ProPublica identified at least a dozen additional posts on Twitter, Facebook and TikTok that accuse unnamed individuals of being “ballot mules” and engaging in allegedly illegal activity. Some of these posts echo the “WANTED”-style language seen in the Gwinnett County meme, while others include similar calls to action to identify the individuals.

None of the posts reviewed by ProPublica include evidence that any of the people depicted in the posters engaged in illegal activity. Yet the social media companies have reacted slowly or not at all to such posts, some of which clearly violate their policies, experts say.

Disinformation researchers from the nonpartisan clean-government nonprofit Common Cause alerted Facebook and Twitter that the platforms were allowing users to post such incendiary claims in May. Not only did the claims lack evidence that crimes had been committed, but experts worry that poll workers, volunteers and regular voters could face unwarranted harassment or physical harm if they are wrongfully accused of illegal election activity.

So far, there is no sign that any of the people depicted have been identified or suffered any threats.

Emma Steiner, a disinformation analyst with Common Cause who sent warnings to the social-media companies, says the lack of action suggests that tech companies relaxed their efforts to police election-related threats ahead of the 2022 midterms.

“This is the new playbook, and I’m worried that platforms are not prepared to deal with this tactic that encourages dangerous behavior,” Steiner said.

Spokespeople for Facebook, TikTok and Twitter said they would remove posts flagged by ProPublica for violating their respective community standards policies.

Thirty-one states allow a third party to collect and return an absentee or mail-in ballot on behalf of another voter. These laws help voters who are disabled or infirm, live in spread-out rural areas or reside on tribal lands with limited access to polling places or ballot drop boxes. In states with a history of absentee voting, both Democratic and Republican operatives have engaged in organized ballot-collection drives.

Critics, labeling the practice “ballot harvesting,” have sought to restrict its use, warning about the potential for fraud. However, incidents of proven fraud related to ballot collection are extremely rare. A database maintained by the conservative Heritage Foundation identifies just 238 cases of “fraudulent use of absentee ballots” since 1988. One high-profile case of fraud involving absentee ballots occurred in a 2018 North Carolina congressional race. A Republican operative engaged in a ballot-tampering scheme involving hundreds of ballots. The state election board later threw out the election result and ordered a redo. It was likely the first federal election overturned due to fraud, according to historians and election-law experts.

The phrases “ballot mules” and “ballot trafficking” — with their intentional echoes of the language of drugs and cartels — started to gain traction online in 2021, according to Mike Caulfield, a misinformation researcher at the University of Washington’s Center for an Informed Public. An analysis by Caulfield and his colleagues found that prominent Republicans including House Minority Leader Kevin McCarthy and Republican National Committee Chairwoman Ronna Romney McDaniel invoked “ballot trafficking” last spring.

But it wasn’t until conservative provocateur Dinesh D’Souza and a discredited conservative group called True the Vote last fall began to tease findings that would later appear in D’Souza’s movie “2000 Mules” that uses of “ballot trafficking” and “ballot mules” shot up, according to Caulfield’s research.

The “2000 Mules” film claims that a network of thousands of people illegally stuffed ballot boxes in swing states to steal the presidency for Joe Biden. It draws heavily on the work of True the Vote, which purported to use surveillance footage and geolocation data to make its claims of illegal ballot activity.

Numerous fact-checks of the film have cast serious doubt over its central premise. In a deposition with the Jan. 6 select committee, Barr said he found the conclusions of “2000 Mules” far from convincing. “My opinion then and my opinion now,” he said, “is that the election was not stolen by fraud, and I haven’t seen anything since the election that changes my mind on that, including the ‘2000 Mules’ movie.”

True the Vote founder Catherine Engelbrecht said her group had never spoken with Barr and disputed the notion that True the Vote had not proven its claims about voter fraud. “I do think that when 80%+ of America is concerned about election integrity, something must be done to address the situation,” she said. “It is the failure of leaders across all branches of government, who have allowed lawlessness to be the new law, that we find ourselves where we do.” D’Souza did not respond to a request for comment.

Despite its flimsy conclusions, “2000 Mules” found an enthusiastic audience in Trump and his supporters. In early May, Trump screened the film at his Mar-a-Lago private club. The film has since earned nearly $1.5 million at the box office, according to Box Office Mojo. In a recent 12-page letter responding to the public hearings organized by the Jan. 6 select committee, Trump cited “2000 Mules” nearly 20 times.

As the film’s dubious claims have spread online, stolen-election activists are creating and sharing online content purporting to reveal more “mules” and accusing those individuals of illegal behavior without actual evidence of wrongdoing.

The most striking example is the meme that depicts an older white woman leaving a ballot drop box in Georgia’s suburban Gwinnett County. The word “WANTED” appears above her head as does the image of a sheriff’s badge labeled “Gwinnett County” and the sheriff office’s phone number.

“Ballot mule,” the meme says. “If you can ID her, call Gwinnett Co. sheriff’s office.”

A spokeswoman for the Gwinnett County Sheriff’s Office says the meme is fake. The sheriff’s office hasn’t received calls purporting to identify the woman. The spokeswoman said that the office was investigating who created the meme.

ProPublica was unable to identify the woman in the “WANTED” meme. A spokesman for the Gwinnett County elections office confirmed that the name tag worn by the woman in the meme matched those worn by county election workers in 2020. He also verified that the drop box in the video was located outside of the county’s election headquarters.

The origins of the woman’s photo in the “WANTED” meme appear to point back to a Georgia businessman and self-described election-fraud investigator named David Cross.

For months Cross has posted short clips of surveillance footage showing people depositing ballots at drop boxes in Gwinnett County. Cross sometimes narrates these videos and makes unverified accusations of illegal ballot harvesting. In a clip that Cross posted online on May 3, an older white woman — the same woman in the “WANTED” meme — deposits multiple ballots into the drop box outside the headquarters for Gwinnett County’s elections office. In his narration, Cross accuses the woman of depositing as many as 35 ballots, though it’s not at all clear from the video exactly how many ballots the woman deposited. “Totally illegal,” he says in the video. (Cross did not respond to requests for comment.)

Georgia law prohibits many third parties from submitting a ballot that’s not their own. However, the law makes exceptions for caregivers for the elderly and the disabled, immediate family members, members of the same household, in-laws, nieces, nephews, grandchildren and more.

Cross, the Georgia activist, has filed complaints with the State Election Board and secretary of state’s office alleging illegal ballot deliveries and citing his surveillance footage clips. Last month, the State Election Board dismissed three complaints alleging “ballot harvesting” after an investigation by the secretary of state’s office found that the alleged “mules” were voters dropping off ballots for themselves and family members.

A spokesman for Georgia Secretary of State Brad Raffensperger told ProPublica that the office has a pending investigation into the woman in the “WANTED” meme. The spokesman, Walter Jones, stressed that no one should assume that an individual shown in a video delivering multiple ballots is automatically guilty of a crime, nor would the ballots in question be invalidated even if someone had violated the state’s ballot-collection law.

The video published by Cross of the woman at the Gwinnett County drop box spread rapidly online. Twitter users accused the woman of being one of the “2000 mules” and urged their followers to “MAKE HER FAMOUS!” — in other words, reveal her identity and share it widely.

One Twitter user shared the woman’s image with the “WANTED” text and the fake Gwinnett County sheriff’s badge. “Once we find out who paid these people the whole story will become clear,” the account wrote. That tweet amassed more than 9,000 retweets and more than 14,000 likes before Twitter removed it.

The “WANTED” post spread across Twitter, Facebook and TikTok. A Facebook group called “Celebrities for Trump” shared it. “We need more if [sic] these,” the post said, referring to the WANTED sign. “Keep your eyes open. Report them all it is a crime.”

Several days after the “WANTED” flyer surfaced and reached a large audience, the Gwinnett County sheriff stated that the post was “false.” Yet despite the post impersonating a law-enforcement agency, social-media companies have been slow to remove it.

While Twitter removed dozens of posts with the “WANTED” sign, ProPublica was able to find instances of it still on the platform.

Disinformation researchers tell ProPublica that they also identified posts accusing people of being ballot mules in other states with laws that restrict third parties from submitting people’s ballots. “Mule right here in PA,” one TikTok post read. “Make this Upper Dublin resident famous #2000Mules #2000MulesDocumentary #2000MulesTheMovie.”

In Arizona, a Republican state senator named Kelly Townsend has encouraged people to camp out at ballot drop boxes and write down license plate numbers of people deemed to be suspicious. “I have been so pleased to hear of all you vigilantes that want to camp out at these drop boxes,” Townsend recently said. “So, do it. Do it.”

Even if “2000 Mules” were accurate — which experts stress it almost certainly is not — the ballot-trafficking theory put forward by the film would not change the result of any election. Rick Hasen, a professor and election-law expert at the University of California, Irvine, says he believes the rigged-election message in “2000 Mules” is just the latest attempt to more broadly lay the groundwork for challenging and overturning the outcome of a future election.

“If you believe the last election was stolen, you’re going to be more likely to take steps to steal the next one back,” Hasen said. “It’s pretty obvious that what’s going on here is using false claims of fraud as a potential pretext to engage in election subversion in 2024 or another future election. That’s very dangerous for American democracy.”

Help ProPublica Investigate Threats to U.S. Democracy

Do you have information about election disinformation, voter suppression or other threats to democracy? We want to hear from you. Fill out our questionnaire or contact reporter Andy Kroll directly at andy.kroll@propublica.org or via Signal or WhatsApp at 202-215-6203.

by Andy Kroll

The Tax Scam That Won’t Die

2 years 11 months ago

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For the past six years, government officials have tried ever harder to kill a type of tax avoidance scheme that the Internal Revenue Service has branded “abusive” and among “the worst of the worst tax scams.” The IRS has pursued tens of thousands of audits and warned of hefty penalties facing anyone who exploits it. The Justice Department has targeted top promoters of what it calls “fraudulent” deals with criminal charges and civil lawsuits, yielding several guilty pleas and a civil settlement. In Congress, Democrats and Republicans have united to sponsor legislation to abolish the practice.

But the industry has fought back with a coterie of lobbyists, including a onetime member of Congress long viewed as a liberal lion, Henry Waxman. The battle shows how even on those rare occasions when both parties agree to take action, well-funded interests can frustrate a solution.

The result: The use of the scheme continues unabated. Along the way it has cost the U.S. Treasury billions in lost taxes, according to the IRS.

“There is a tax shelter gold mine here, and they’re fighting very hard to protect it,” Oregon Sen. Ron Wyden, chair of the Senate Finance Committee, said. “There are enormous sums of money to be made as long as the number of transactions keeps increasing. This is a textbook case of the power of lobbyists.”

The government is targeting a tax deduction that goes by the cumbersome name “syndicated conservation easement,” which exploits a charitable tax break that Congress established to encourage preservation of open land. Under standard conservation easements, landowners who give up development rights for their acreage, usually by donating those rights to a nonprofit land trust, get a charitable deduction in return. When conservation easements are used as intended, both the public and the owner of the property benefit. A piece of pristine land is preserved, sometimes as a park that the public can use, and the donor gets a tax break.

The syndicated versions are different. Instead of seeking to protect a bucolic reserve for wildlife or humans, profit-seeking intermediaries have turned the likes of abandoned golf courses or remote scrubland into high-return investment vehicles. These promoters snatch up vacant land that till then was worth little. Then they hire an appraiser willing to declare that it has huge, previously unrecognized development value — perhaps for luxury vacation homes or a solar farm — and thus is really worth many times its purchase price. The promoters sell stakes in the donation to individuals, who claim charitable deductions that are four or five times their investment. The promoters reap millions in fees.

ProPublica first investigated the booming syndicated conservation easement business, which initially took root in Georgia, back in 2017. Efforts to shut it down were then already underway, led by the Land Trust Alliance, a trade association whose 950 members administer traditional conservation easements. As longtime advocates of the charitable tax break, Alliance leaders were horrified to see it exploited, in their view, by “brazen” profiteers claiming bogus deductions.

Fearful that this would jeopardize the conservation deduction altogether, the Alliance barred its members from accepting easement donations from syndicated deals and prodded the IRS to begin a crackdown. By 2020, that effort was underway in earnest.

But the syndicators flummoxed their opponents by refusing to back down, despite IRS audits and enforcement efforts, which had shut down other tax schemes in the past. The syndicators had formed their own Washington trade group, called the Partnership for Conservation (or P4C). They began spending millions on lobbying Congress and public relations. P4C argues that syndicated deals offer conservation and profit, and it rues what it has called the “chilling effect” of the government efforts to crack down.

Today, the fight has taken on a grinding quality. By the IRS’ most recent reckoning, the use of syndicated easements grew from 249 deals in 2016, generating $6 billion in charitable deductions, to 296 deals in 2018, producing $9.2 billion in deductions. (By contrast, more than 2,000 nonsyndicated easement deductions have resulted in about $1 billion in annual deductions.)

The trend continues today, IRS Commissioner Charles Rettig told the Senate Subcommittee on Financial Services and General Government last month. He was visibly frustrated. “Notwithstanding our efforts,” Rettig testified, “we have not had an impact on essentially slowing the volume of these transactions that we receive currently. We need Congressional help. We need a statute to help us curb this activity.”

A bipartisan group of influential lawmakers has tried. Democrat Wyden and Iowa Sen. Charles Grassley, the finance committee’s ranking Republican, jointly released a 151-page investigative report in 2020 that referred to syndicated easements as a “dollar machine” for wealthy taxpayers. “You simply insert the dollar bill and then watch the Dollar Machine return two dollar bills to you,” the report explained. “But it was not the promoters who gave back the two dollars; it was the Federal government by way of foregone tax revenue, and the only risk involved was whether or not the transaction would lead to an audit.”

Others looking to rein in syndicated deals include Montana Republican Sen. Steve Daines, Michigan Democratic Sen. Debbie Stabenow and House members Mike Thompson, a California Democrat, and Mike Kelly, a Pennsylvania Republican. Together, several of these lawmakers introduced the Charitable Conservation Easement Program Integrity Act of 2017 — and have reintroduced it, in updated form, in one congressional chamber or the other, eight times since, most recently a year ago.

The legislation aims to put an end to syndicated deals by eliminating their profitability, with a bar on taxpayers claiming easement deductions that exceed 2.5 times their investments. Closing this loophole would generate $12 billion in additional tax revenue through 2027, according to the Office of Management and Budget. But the legislation has never gotten far — and lawmakers say that’s no accident.

Since 2017, syndicators have spent $11 million on lobbyists, according to publicly filed lobbying disclosures. P4C has paid for more than $6 million of that. EcoVest Capital, a big promoter based in Atlanta that is now facing a Justice Department civil fraud suit, has spent $3.3 million. (By contrast, the Land Trust Alliance has spent $2.4 million on lobbyists during the same time period.)

While recruiting congressional allies to block the Easement Program Integrity Act, syndication advocates have also gone on the attack, pressing Congress (unsuccessfully, so far) to strip the IRS of funds used to enforce the agency’s 2017 listing notice that flags profit-making syndicated deals as abusive and requires participants to report their involvement.

Syndication promoters have actively courted Democratic support, adding Waxman Strategies, a self-described “progressive-minded public affairs firm” chaired by Henry Waxman, 82, the liberal former California representative, to their lineup of heavyweight lobbyists. In April 2018, P4C founder Frank Schuler, whose Atlanta firm was then one of the most prolific promoters, advised top executives at EcoVest about the move. “P4C is about to get the Waxman group underway to work on the D side of things,” Schuler wrote, in an email disclosed in court filings. “They really believe in what we are doing and that was a condition of Waxman’s to undertake the engagement. This is another $23k per month but we are in the thick of the fight and now is the time.”

Since then, Waxman Strategies has earned $485,000 for representing syndicators, with the former congressional representative working on the issue along with others at the firm. “Partnership style conservation easements are an important tool for conserving land that is under development pressure,” Michael Goo, the firm’s managing director and a former staff director for a House environmental subcommittee, told ProPublica in a written response to questions sent to Henry Waxman. “We believe they can be used to mobilize private capital into conserving land that in fact would be developed sooner or later.” The reform legislation, he added, “would effectively remove the incentive for investors to mobilize private capital into conservation easements.”

Unable to move their Easement Program Integrity Act through a divided Congress, supporters managed late last year to get its language included in the “Build Back Better” provisions passed by the House Ways and Means Committee. This raised hopes that it could get enacted along with the spending measure, which would require just a majority vote in the Senate.

Sen. Kyrsten Sinema, the enigmatic Arizona Democrat, who represented a potentially decisive vote in her 50-50 chamber, put an end to that, telling the White House the syndication-killer language was among the provisions she wanted out of the bill, according to press reports. It was removed. That prompted 13 conservation groups to write Sinema on Dec. 7, pleading with her to “stand with us” to “curb abuse and restore the integrity of this cherished and worthy conservation program.”

Sinema, whose objections to the measure remain unclear, was unmoved. “All efforts to persuade the AZ Senator to reconsider her position have failed,” one advocate for the measure told ProPublica in an email. (Sinema’s staff did not respond to ProPublica’s requests for comment.)

Since then, President Joe Biden, signaling his support, has included the measure in his proposed 2023 budget in a section entitled “close loopholes.” But it remains far from enactment.

Rep. Thompson, an original sponsor of the measure, told ProPublica his bill is “a no-brainer. It stops a bunch of individuals who have been taking advantage of the taxpayers and lining their pockets with taxpayer dollars. It’s one degree off criminal what they’re doing, and they’re getting away with it.” Thompson said he’s looking for “other places to put the language. If we can find a vehicle where it works, we’ll put it in. I’d do it today if I could.”

Syndication easement promoters have attacked the measure by claiming it would allow the IRS to “retroactively” disallow transactions that are now legal — even though the agency first warned taxpayers against engaging in syndicated deals back in early 2017, when it identified them in its listing notice as an abusive “tax avoidance transaction.” The IRS has been routinely auditing such deals since then.

P4C has taken up this cry on its web page and Facebook site, where it promotes its members’ work on behalf of “private land conservation” as essential to the survival of the planet. One posting displays an image of two trapped raccoons, next to the words, “Don’t let this happen to our wildlife”; it warns that “retroactive tax hikes will have devastating consequences on our natural lands and wildlife.” Robert Ramsay, the group’s president, told ProPublica that such a “punitive retroactive tax law change” would harm “a large swath of American taxpayers” eager to participate in land conservation, from “a variety of walks of life.”

Andrew Bowman, CEO of the Land Trust Alliance, called the fairness argument “a canard.” As he put it, “People were on very clear notice that the federal government was saying this was abuse. They haven’t seen the need to stop.” This, he said, is why congressional action is necessary: “The IRS has thrown everything they have at it.”

In 2020, after warning that it planned to audit every taxpayer return claiming a deduction for a syndicated easement, the IRS announced a “limited-term” settlement offer, allowing individual investors to pay back taxes with a reduced penalty. Few took the agency up on its offer. In an internal IRS management review last year, agency officials lamented the poor response, noting, “Many taxpayers are undeterred and are opting for litigation, clogging up the Tax Court.” (One reason taxpayers are willing to fight: Syndicated easement deals routinely set aside $500,000 or more in advance to handle lengthy audits and tax court fights.)

The IRS is now examining the returns of 28,000 investors in syndicated easements, challenging $21 billion in deductions claimed between 2016 and 2018, according to testimony by Rettig.

For its part, the Justice Department has taken the enforcement fight to the courts, with legal actions shedding light on industry practices. In December 2018, a government civil suit targeted Atlanta’s EcoVest Capital, which built a national client-feeder network of brokers, financial advisors and accountants, who received generous referral fees.

According to an amended DOJ complaint, EcoVest had been involved in 58 syndication deals between 2013 and 2018, generating nearly $3 billion in federal tax deductions — on average, a write-off of $4.39 for every dollar invested. (For a wealthy taxpayer investing $100,000, that would have effectively generated a profit, often in a matter of months, of $60,000 or more.) Fifty-one of those 58 deals, according to the government complaint, relied on what the DOJ called “grossly overvalued” appraisals performed by a single appraiser, Claud Clark III, based in Magnolia Springs, Alabama.

The Justice Department sought to bar EcoVest and five individuals associated with the company, including Clark, from any future easement deals. It has already made some inroads. Defendant Nancy Zak, a syndicated easement pioneer, settled with the government in March 2021. She denied wrongdoing but accepted a lifetime bar from the easement business and agreed to pay an undisclosed settlement. (According to lobbying registrations, it was one of Zak’s firms, called Greenth, that hired Waxman Strategies in 2018, paying $20,000 in fees. Waxman Strategies said it terminated its relationship with Zak immediately after the government sued her. The firm then began getting paid, $465,000 to date, by Red Oak Reserve LLC, a low-profile legal entity that previously listed Zak’s office number in SEC filings. Waxman Strategies’ Michael Goo said Red Oak Reserve was founded by Brian Sullivan, who is a former Nancy Zak associate. Sullivan declined to comment.)

EcoVest’s go-to appraiser, Clark, also now appears to be out of the syndicated easement business. After several complaints to state boards about his methods, Clark has given up all his licenses to perform appraisals, according to a national appraisal industry database. His LinkedIn account now lists him as “Retired.” A recent filing in the DOJ case says he’s currently engaged in settlement talks with the government.

EcoVest’s CEO and Zak did not respond to ProPublica’s requests for comment. EcoVest and Clark (whose lawyer declined comment) have denied any wrongdoing in earlier court filings. Atlanta-based Ornstein-Schuler, another of the biggest syndicated easement promoters, announced in January 2019 that it was getting out of the business.

Criminal investigations of industry practices are reportedly underway in three states. The crackdown’s most sensational case became public in February, when a federal grand jury in Atlanta indicted North Carolina developer Jack Fisher, a major syndication deal promoter and owner of Inland Capital Management. The 135-count indictment charged Fisher and six associates with participating in a conspiracy to sell $1.3 billion worth of illegal tax shelters. The charges against Fisher include wire fraud, conspiracy to defraud the U.S., money laundering and aiding in the filing of false tax returns. He has pleaded not guilty.

The indictment was backed by a string of damning statements attributed to Fisher, including several secretly recorded by an undercover government agent posing as an easement promoter.

The indictment, for example, charged that Fisher’s conservation deals relied on “fraudulent” and “grossly inflated” land appraisals, often valuing the easement properties at more than 10 times what he had paid for them just months earlier. It asserted that Fisher routinely “pre-determined” these valuations before any appraisal was actually performed, telling his two “hand-picked” appraisers what valuation he needed to generate the generous deductions he’d promised investors. In one recorded conversation described in the indictment, Fisher said one of the appraisers simply “puts down whatever we say.” In another, he said he always made sure easement valuations were high enough to make sure investors “can still get a good return on their money,” even if a later IRS audit reduced their charitable deduction.

The government also charged that Fisher frequently orchestrated the illegal backdating of checks and tax documents, allowing him to keep offering unsold stakes in his deals to investors as much as nine months after the year-end tax deadline, after the easement was already donated. In one recording, Fisher acknowledged rewarding partners at an accounting firm with free shares in an easement deal because “they participated in basically backdating all the documents.” After learning he was under investigation, according to the indictment, Fisher told one associate he could claim that backdated checks weren’t deposited until after the close of the tax year because they had been “lost” on someone’s desk.

Both appraisers, now among Fisher’s fellow defendants, have pleaded not guilty. One says on his website that his firm decided in mid-2019 to stop doing conservation easement work “until there is greater clarity from the courts on conservation easements.”

Three accountants who worked closely with Fisher had been criminally charged earlier. One, Herbert Lewis, has pleaded not guilty. Two others, brothers Corey and Stein Agee, pleaded guilty to conspiracy to defraud the United States and are cooperating with prosecutors. According to the government, the Agees each received $1.7 million in fees from promoting the syndicated deals.

Fisher, a CPA himself, once worked for the IRS.

The indictment said he made $60 million personally from the 15 syndicated easement deals he put together between 2013 and 2020. With those funds, the government said, Fisher purchased a $2 million home on the Caribbean island of Bonaire, an airplane, a $450,000 luxury recreational vehicle, a $750,000 show jumping horse and more.

Fisher’s attorney, Russ Ferguson, said in a statement: “Jack Fisher looks forward to defending the allegations brought by the Department of Justice in court and hopes for a speedy trial. Through a congressionally authorized and IRS-approved tax deduction to encourage conservation, Jack Fisher has conserved nearly 10,000 acres of developable, natural land for generations to come. In doing so, Mr. Fisher has not only followed the law but has acted in conformity with IRS regulations, agency guidance and audit guidelines.” The statement said Fisher stopped promoting easement donations in 2019 because the government “now considers such transactions criminal.”

Paul Kiel and Doris Burke contributed research.

by Peter Elkind