The Blackstone Bombshell That Just Shook PE Industry

Scott Pelley of CBS 60 Minutes reports from stakeouts to warrants: How federal investigators found more than 100 children cleaning slaughterhouses:

Eighty five years ago, the United States outlawed child abuse in sweatshop labor--a scourge that Franklin Roosevelt called "this ancient atrocity." So, it was a shock in 2022 to learn that an American company, owned by a Wall Street firm, sent children as young as 13 to work in slaughterhouses. The disgrace was more disturbing because the company, PSSI, is vital to national food safety and its owner, Blackstone, claims to be a model of management. Both companies say they had no idea they employed children in eight states. But it was obvious to teachers in Grand Island, Nebraska who noticed acid burns on a child. 

In our story, you will see only two photos of children working in a slaughterhouse. Because of privacy, two, with obscured faces, are all the U.S. Department of Labor would give us. But two may be enough. Their hard hats read "PSSI" for Packers Sanitation Services Incorporated-- the nation's leading slaughterhouse cleaning service with 15,000 workers, in 432 plants, taking in more than a billion dollars a year. Not, it seemed, a likely abuser of children. 

Shannon Rebolledo: It seemed possible, but not necessarily likely. And if it were possible, you know, maybe it was-- someone had slipped through the cracks.

Shannon Rebolledo is a 17-year Labor Department investigator who was skeptical. But she went to Grand Island, Nebraska, last summer, after a middle school told police about acid burns on the hand and knee of a 14-year-old girl. The student explained that she worked nights in this slaughterhouse on the edge of town. 

Scott Pelley: What did the educators at Walnut Middle School tell you?

Shannon Rebolledo: It seemed to be known within the community that minors either are or were working overnight shifts. They told us about children that were falling asleep in class, um, that had burns, chemical burns. They were concerned for the safety of the kids. They were concerned that they weren't able to stay awake and do their job, which is learning in school.

Scott Pelley: Because they'd been up all night.

Shannon Rebolledo: Right. 

'Up all night' at the JBS slaughterhouse--an immense plant that produces 5% of the beef in America. JBS can butcher 6,000 cows a day here, but each night, the plant was turned over to PSSI for cleaning from 11 to 7 am. Shannon Rebolledo staked out the parking lot as JBS left and PSSI came in.

Shannon Rebolledo: And you really noted the difference in the appearance of these workers that were coming to work this late-night shift.

Scott Pelley: What do you mean?

Shannon Rebolledo: They were, they were little. They looked young.

She believed children were washing bloody floors and razor-sharp machines with scalding water and powerful chemicals. So, Rebolledo returned with a team and a search warrant. She says they found nine children at work, a revelation that triggered a national audit of PSSI. 

Scott Pelley: And what did you find?

Shannon Rebolledo: That this was a standard operating procedure. That there were minors employed across the country between the ages of 13 and 17 working the overnight shift.

Scott Pelley: This was not a mistake? 

Shannon Rebolledo: There is no way this was just a mistake, a clerical error, a handful of rouge individuals getting through. This was the standard operating procedure.

Scott Pelley: How many minors did you identify?

Shannon Rebolledo: We were able to identify and confirm 102 minors at 13 different plants in eight different states.

Scott Pelley: Do you believe that 102 is the full extent?

Shannon Rebolledo: Not at all. I believe that the number is likely much higher.

Last November, the Department of Labor filed suit against PSSI. The company responded with this: "PSSI has an absolute company-wide prohibition" against hiring minors. It added, "we will defend ourselves vigorously against these claims." 

The statement said PSSI checks eligibility of employees, including this girl, on a federal database. But that database is well known to be abused in an industry that can struggle to find workers. 

The jobs are grim and dangerous--and so they are often filled by immigrants who are desperate for work. Some immigrants use false papers to routinely beat the federal identification system that is known as E-Verify. Employers have known for nearly 30 years that E-Verify is useless if the applicant has bought, borrowed or stolen an actual ID --which is common. and in the case of the children, E-Verify was especially dubious. 

Shannon Rebolledo: These weren't close calls. In some cases, they were 13-year-olds working and they were identified by PSSI as being in their 30s. It's just not possible. 

In its statement when the suit was filed, PSSI said, in addition to E-Verify, it has "industry-leading, best-in-class procedures..." including "extensive training, document verification, biometrics and multiple layers of audits."

Shannon Rebolledo: The system that they use automatically flags whether or not someone has certified that they are 18 or not. And what we found in our review was that it was regularly ignored if someone didn't certify that they were 18. 

Scott Pelley: Did any of the children tell you how long they had been working at the plant?

Shannon Rebolledo: Yes. 

Scott Pelley: And how long was that?

Shannon Rebolledo: We looked back at a three-year period. So, we can confirm that they had minors working there as early as 2019.

Jessica Lima: People, I know, we need money to survive, to pay bills, to pay rent. But for me, it's not. We just need-- we just need a job. 

Lima worked for PSSI, as an adult, in another plant. She told us it was obvious some co-workers were children. 

Jessica Lima: They have the age from-- like my kids are right now. They should be in a school. They not should be there. For us, like adult, it's hard. You can't imagine for a children. It's not easy.

Scott Pelley: Do you believe that the supervisors at PSSI knew that these were children that they were hiring?

Jessica Lima: They know but they don't say nothing. Because they just need the people to get the job done.

'People to get the job done.' Jessica Lima told us turnover of workers was high in the tough, overnight jobs but there was never a let up in the pressure to get the slaughterhouses open by dawn.

In Grand Island, many are at fault. In county court, two parents have been convicted of child abuse or endangerment for sending kids to the plant. A mother was sentenced to 60 days. And in this audio recording, a stepfather is being sentenced to 30 days by Judge Arthur Wetzel. 

Judge Arthur Wetzel: Obviously, the company that employed this young lady has substantial blame. Forcing young children to work on a kill floor at a beefpacking plant. Taking false identification that the young lady was 22 years of age when in fact she was 14. There's blame to be passed upon the mother who obtained the false documents so her child could work. Also, the elephant in the room, JBS, is at blame for hiring a cleaning company such as this to conduct their affairs in their plant. 

Parents purchased false identities. Children were coached to lie. But it was up to PSSI to ensure its operations didn't create a market for child labor. In its defense, a top PSSI official told us, off camera, "[We] own this." "We know we made some mistakes." "It's inexcusable." PSSI now says it has fired more than three dozen local managers. 

Shannon Rebolledo: The sheer nature, the systemic failures, I've never seen systemic failures like this. The violations across the board at all of these different locations, I've never seen something like that.

For all the years the investigation found child labor, PSSI has been owned by Wall Street's Blackstone--the largest private equity firm in the world. Blackstone told us "extensive pre-investment due diligence showed PSSI had industry-leading hiring compliance..." But it seems, that diligence failed to find what was obvious to investigators watching a shift change in a parking lot. Still, the investment giant says, "a claim of insufficient diligence or oversight is simply false." And yet 102 children labored at 13 slaughterhouses in eight states. 

Jessica Looman: We're really, really outraged and concerned that this is happening in the country today.

Jessica Looman heads the Labor Department's Wage and Hour Division--in charge of enforcement. 

Scott Pelley: In your view, is this billionaires making profits off the sweat of children?

Jessica Looman: This was a systemic problem that was happening at PSSI and we have to think about what this means for our communities, what this means for our economy. And what we at the Department of Labor, and across this administration, are adamant about is that we will never rebuild our economy on the backs of children. 

Scott Pelley: Sounds like the 19th century.

Jessica Looman: This is happening in 2022, 2023 that we have kids working in meatpacking factories. And we should all be outraged.

Scott Pelley: Hard to imagine the callousness that is required.

Jessica Looman: It makes us all question what's going wrong.

Neither Blackstone nor PSSI would make a corporate officer available for an on-camera interview. PSSI offered an attorney, hired after the Labor Department filed suit. But he had no first-hand knowledge of the hiring of children. Today, PSSI has a new CEO. It pledges to, among other things, spend $10 million on the welfare of children.

As for the child workers in Grand Island, privacy laws prevent officials from telling us much. But we do know one child is in foster care and others are with their parents.

Scott Pelley: You know, I wonder after speaking to these children, after exposing what was happening to them, what is your hope for them now?

Shannon Rebolledo: I hope that they're safe. I hope that they have an opportunity to be kids, to go to school and not be tired. And if they're working, I just, I hope that they're able to work in a safe environment.

This is an important story that needs to be properly addressed because as pension funds and other institutional investors plow more money into illiquid private investments via fund investments and co-investments, they need to make sure these private equity funds are upholding their end when it comes to adhering to the responsible investing policies of these pensions.

Clearly that wasn't the case here.

And while this is a PR disaster for Blackstone, I'm glad it was exposed because if it can happen at Blackstone -- arguably the biggest and most coveted alternative investments firm in the world -- it can happen anywhere.

Therein lies the problem.

We are often told that private firms are better at adhering to ESG policies pensions impose on them, and to a large extent that's true.

But private firms are notorious for all kinds of abuses too, and this is another case in point.

Sure, publicly-listed companies aren't perfect but they have a lot of eyes on them, need to disclose a lot of material to regulators, making it hard for them to abuse children to work in dangerous jobs.

Now, I want to be clear here, I doubt anyone at Blackstone knew this was going on.

This too is a problem which exposes serious oversight deficiencies.

But I guarantee you Stephen Scharzman and Jon Gray held an emergency meeting this morning to discuss the blowback from this as their investors clamor to find out what went wrong.

No pension fund wants to invest in private companies that abuse immigrant children. 

Neither does Blackstone and while the former CEO of PSSI was fired and so were a dozen local managers, the truth is Blackstone needs to do a full investigation and release its findings publicly.

What went wrong here? How can this happen? Where did oversight fail?

I used to invest in top global hedge funds back in the day and I trusted nobody.

I still don't and when I see these flagrant abuses at private companies, I'd be even tougher on them, lawyering up and using private investigators extensively.

All I know is if Blackstone cofounder Pete Petersen were still alive, he'd be pissed.

I can't imagine Stephen Schwarzman and Jon Gray are a happy about this.

Everybody watches 60 Minutes, not exactly the publicity they needed or wanted.

But Blackstone will learn from this mistake and come out of it stronger.

Moreover, this is an alarm bell for the private equity industry writ large -- shape up and make sure you do things properly or you too will suffer a similar PR disaster.

As far as those kids, I hope they're safe and not working at night.

The children of poor immigrants go through enough hardship,  maybe the private equity kingpins should set up a scholarship fund to help fund their university studies.

What else? I noticed Mr. Schwarzman recent donation to Oxford has drawn criticism:

Almost a hundred University of Oxford faculty members, alumni and students signed a letter criticizing a major donation to the school from Stephen Schwarzman ’69, echoing a controversy at home when the business mogul endowed a student life hub in 2015.

In June, the University of Oxford named its new humanities center after Schwarzman, following a $188 million gift from The Blackstone Group’s founder. In the letter, members of the university community criticized Oxford administrators for receiving what they believed to be “money amassed through some of the most socially and ecologically destructive practices of the twenty-first century.” The letter also claimed that the recent donation does not reflect investment priorities for the university and criticized Oxford for “already cleaving to Schwarzman’s preferences.”

“The ‘Schwarzman Centre’ will be built with the proceeds of the exploitation and disenfranchisement of vulnerable people across the world,” the letter stated. “Why is a public institution that claims to value the pursuit of truth, and a Humanities Division that claims to value the critical examination of representation and symbolism, willing to disregard Blackstone’s and Schwarzman’s record?”

While 94 Oxford community members — including 23 faculty members, 29 students and 19 alumni — have signed the letter as of Monday evening, their demands to the Oxford administration remain unclear.

In the letter, the signees accused The Blackstone Group of contributing to the global housing crisis and deforestation in the Amazon. Independent Clinical Services, a company owned by Blackstone, was founded to have evaded £3 million in taxes in 2012 alone, the letter said. On March 22, an independent special rapporteur to the Office of the United Nations High Commissioner for Human Rights sent a letter to Schwarzman alleging his company’s practices have “a grave impact on the enjoyment of the right to adequate housing for millions of people across the world.”

In an email to the News, Blackstone spokesman Thomas Clements called the letter’s allegations “blatantly wrong and irresponsible” and said his employer has spearheaded efforts to ameliorate environmental damage and the housing crisis.

The controversy surrounding Schwarzman’s gift to the British university comes amid a renewed debate about the ethics of philanthropy and the implications behind the names of buildings.

In addition to his $150 million gift to Yale for a student life hub in 2015, Schwarzman donated $350 million to the Massachusetts Institute of Technology in 2018 for the Schwarzman College of Computing. Following his donations, many students and faculty members at both institutions demanded their school administrators change the namesake and return the gifts of a donor who they believed to have a controversial history.

Concerns in the recent letter from Oxford community members resonated with those previously raised by Yale and MIT faculty members. According to a News survey from 2017, just 14 percent of faculty viewed the construction of the Schwarzman Center at Yale favorably.

In an email to the News, Oxford spokesman Matt Pickles said the university accepted Schwarzman’s donation after “rigorous due diligence procedures” that took “ethical, legal, financial and reputational issues” into consideration. Prior to the June announcement, Oxford’s Committee to Review Donations approved Schwarzman’s gift according to its procedures, Pickles explained.

“Naming buildings after philanthropists has a long tradition in Oxford,” Pickles told the News in June. “For example, the iconic Sheldonian Theatre, which was built in the 1660s, is named after its main financial backer Gilbert Sheldon.”

Still, Oxford’s geography professor Danny Dorling argued that Oxford’s acceptance of Schwarzman’s donation is an implicit approval of Blackstone’s holdings and actions. By taking money from the Blackstone founder, the university is suggesting to students that “if they are greedy and nasty, they could also be ‘rewarded’ by having their donation accepted,” Dorling said.

In an email to the News, Clements added there is “absolutely no basis for [Dorling’s] slanderous statement” and emphasized Blackstone’s philanthropic efforts.

For her part, Oxford’s Vice-Chancellor Louise Richardson called Schwarzman’s gift “an investment in excellence, an investment in Oxford, an investment in the UK [and] an investment in the belief that understanding what it means to be human is as critical today as it ever was.”

Pickles added that the center will benefit teaching and research in the humanities at Oxford and augment the University’s “world-class capabilities in the humanities.”

When asked about the controversy following his gift to MIT in February, Schwarzman said that philanthropy in higher education regularly encounters “small groups of naysayers.” On Monday, Clements added that a school community’s receptiveness inevitably impacts a donor’s appetite to give. According to a Guardian report, Richardson approached Schwarzman with a proposal about funding a humanities center in 2017.

“This in no way invalidates the initiatives, nor does it mean that minority views shouldn’t be aired,” Schwarzman told the News in February. “It is important to remember that these projects are supported by the administrations and trustees of these institutions — groups which not only have the long-term perspective to understand the profound impact of these gifts, but also the responsibility for stewardship of their respective institutions.”

In an interview with the News in 2017, University President Peter Salovey said there is “a great danger” in creating “political litmus tests around charitable giving.”

“I might be able to imagine some extreme that would be problematic, but even in saying that, there’s the danger of the slippery slope,” Salovey said. “We should be thankful that a Yale alumnus is willing both to be generous to our University, as well as serve our country, whether that service is to someone with whom we agree strongly or disagree strongly.”

Twenty-five percent of all Oxford students pursue studies in the humanities.

All these prestigious universities should be thankful Stephen Schwarzman has donated millions to make them better higher education institutions.

I find it laughable when people go after him or Blackstone and spread total nonsense.

In fact, if I were able to convince Mr. Schwarzman to come to Montreal, I'd personally ask him to donate $250 million to McGill University to fund the Charles Taylor Center for the Humanities.

Charles Taylor is arguably the most important moral philosopher of our time.

In 2007, Taylor won the $1.5M Templeton prize:

Charles Taylor, a Canadian philosopher who says the world's problems can only be solved by considering both their secular and spiritual roots, was named Wednesday as the recipient of a religion award billed as the world's richest annual prize.

Taylor, a professor of law and philosophy at Northwestern University, has won this year's Templeton Prize for Progress Toward Research or Discoveries About Spiritual Realities. The award is worth more than US$1.5 million.

In a career spanning more than four decades, Taylor, 75, has investigated a wide range of issues, including how it is that the search for meaning and spiritual direction can end in violence. He contends that relying only on secular analyses of human behaviour leads to faulty conclusions.

"I believe that the barriers between science and spirituality are not only ungrounded, but are also crippling,'' Taylor said. "The divorce of natural science and religion has been damaging to both, but it is equally true that the culture of the humanities and social sciences has often been surprisingly blind and deaf to the spiritual.''

Taylor, a Montreal native, is professor emeritus in the McGill University political science department and a Rhodes Scholar who earned his doctorate from Oxford. He is the author of more than a dozen books.

They include "Hegel'' (1975), an introduction to Hegel's philosophy; "Sources of the Self: The Making of the Modern Identity'' (1989), described by the Templeton Prize as "an attempt to create a philosophically informed reflection on history''; "Philosophical Arguments'' (1995), a collection of papers; and "A Secular Age,'' to be published this fall.

In 1991 Taylor was CBC Radio's annual Massey lecturer. His talks were later published as "The Malaise of Modernity.''

Honoured as a companion of the Order of Canada in 1995, Taylor has taught at numerous universities, including the University of California, Berkeley; University of Oxford; Carleton University in Ottawa; Queen's University in Kingston, Ont.; University of Frankfurt; Hebrew University of Jerusalem; Stanford University; and Yale University.

Taylor will receive the prize May 2 in a private ceremony at London's Buckingham Palace.

The Templeton Foundation of West Conshohocken, Pa., which sponsors various projects on science and religion, was founded by mutual funds entrepreneur Sir John M. Templeton.

The first Templeton annual award went to Mother Teresa in 1973.

In 2016, Taylor was named the winner of the first Berggruen Prize, which is to be awarded annually for “a thinker whose ideas are of broad significance for shaping human self-understanding and the advancement of humanity”:

The prize, which carries a cash award of $1 million, will be given in a ceremony in New York City on Dec. 1. It is sponsored by the Berggruen Institute, a research organization based in Los Angeles and dedicated to improving governance and mutual understanding across different cultures, with particular emphasis on intellectual exchange between the West and Asia.

Mr. Taylor, 84, is widely regarded as one of the world’s leading philosophers, and a thinker whose ideas have been influential in the humanities, social sciences and public affairs. His many books include “Sources of the Self,” an exploration of how different ideas of selfhood helped define Western civilization, and “A Secular Age,” a study of the coexistence of religious and nonreligious people in an era dominated by secular ideas.

He was chosen for the prize by an independent nine-member jury, headed by the philosopher Kwame Anthony Appiah. The jury cited Mr. Taylor’s support for “political unity that respects cultural diversity,” and the influence of his work in “demonstrating that Western civilization is not simply unitary, but like all civilizations the product of diverse influences.”

Mr. Taylor’s previous honors include the 2015 John W. Kluge Prize for the Achievement in the Study of Humanity (shared with Jürgen Habermas), the 2007 Templeton Prize for achievement in the advancement in spiritual matters and the 2008 Kyoto Prize, regarded as Japan’s highest private honor. Both the Templeton and Kluge prizes also carry cash awards of more than $1 million.

I had the privilege of taking a few courses given by Chuck Taylor when I was an undergrad at McGill University and through him, I learned all about other great thinkers like Isaiah Berlin, Alasdair MacIntyre, John Rawls, Robert Nozick, Michael Walzer, Martha Nussbaum, and many more thinkers who helped me shape my critical thinking capabilities.

The world desperately needs more intellectuals like these in the humanities.

We need to rethink every facet of our social democracy to make sure we strengthen it for future generations.

Alright, I have more to discuss on Blackstone and real estate but that will be in a separate comment.

If Jon Gray and Stephen Schwarzman ever come to Montreal, I'd love to have a private lunch with them.

But right now, my best advice is to do an in-depth investigation in what went wrong with their oversight at PSSI and then publicly release the findings. Never mind the lawyers, do the right thing and set up a scholarship fund specifically for children of immigrants.

That's the right thing to do.

Below, on "60 Minutes," Scott Pelley reported on a federal investigation that found more than 100 minors working to clean slaughterhouses for a U.S. company. Hannah Dreier, an investigative reporter for The New York Times, joins CBS News to discuss her reporting on the issue of child labor.

And Charles Taylor gives his 1991 Massey Lectures. Note, the audio has been slightly edited and improved.

Taylor is an intellectual giant and I do miss his courses on political theory. I hope he is well wherever he is. If I were a multi-billionaire, I would generously donate to McGill to name a center of Humanities under his name now that he's still alive.