Blackstone execs during child labor scandal still there
March 18, 2024
One year later, Blackstone execs who served on Packers Sanitation board during child labor scandal are still there
A year ago, in February 2023, Blackstone Group-owned Packers Sanitation (PSSI) paid a $1.5 million fine to settle charges by the US Department of Labor (DOL) that it employed at least 102 children at 13 plants across eight states in conditions of “oppressive child labor.”[i]
The children were working overnight shifts with hazardous chemicals and cleaning meat processing equipment including back saws, brisket saws and head splitters. Investigators learned at least three minors suffered injuries while working for Packers Sanitation.[ii]
The investigation found that children had been working at PSSI since at least 2019.[iii]
“These findings represent a systemic failure across Packers Sanitation’s entire organization to ensure that children were not working in violation of the law,” said the DOL.[iv]
“There is no way this was just a mistake, a clerical error, a handful of rogue individuals getting through. This was the standard operating procedure,” a DOL investigator told 60 Minutes.
In April 2023, following Packers Sanitation’s $1.5 million settlement with the DOL, Blackstone replaced PSSI CEO Dan Taft with Tim Mulhere, a former Ecolab executive.[v] PSSI also terminated some local plant managers.[vi]
But it is still unknown what if any action Blackstone has taken regarding its own executives’ role at Packers Sanitation.
Blackstone Senior Managing Directors Peter Wallace[vii], David Kestnbaum[viii], and Vikram Suresh[ix] and Blackstone Operating Partner Jeffrey Overly[x] serve or recently served on Packers Sanitation’s board.
Blackstone acquired Packers Sanitation in 2018 and despite dramatic health and safety issues at the company[xi], quickly extracted over $430 million in dividends from Packers, adding debt to PSSI’s balance sheet to pay itself.[xii]
See our March 2022 report, Profit Over Safety: Private Equity’s Leveraged Bet on Packers Sanitation
Surprisingly, three of the executives who served on Packers Sanitation’s board during the period of the company’s child labor violations appear to still serve on company’s board.
Blackstone executives’ role in a board of directors that failed to adequately oversee Packers Sanitation. As a result of the investigation, PSSI lost contracts with three of its largest clients, Tyson, Cargill, and JBS, and the value of the company’s debt dropped dramatically. PSSI faced downgrades by both Moody’s and S&P in late 2023.
A year later, what action has Blackstone taken against its own executives for their role in the Packers Board’s failed oversight?
Peter Wallace, Blackstone Senior Managing Director, Global Head of Core Private Equity
Son of longtime Fox News (and now CNN) journalist Chris Wallace and grandson of 60 Minutes investigative journalist Mike Wallace[xiii], Blackstone Senior Managing Director Peter Wallace perhaps did not expect the investment he oversees in Packers Sanitation would itself be the focus of a 60 Minutes investigation of child labor at the company.
Wallace has been with Blackstone for more than 25 years and leads Blackstone’s private equity investments in the services, leisure, and consumer/retail sectors.[xiv]
Wallace has served on Packers Sanitation’s board since at least 2021.[xv] Despite the DOL child labor charges, Wallace continues to serve on Packers Sanitation’s board.[xvi]
Packers Sanitation is not the only Blackstone portfolio company of which Wallace is a board member where there have been labor violations during Blackstone’s ownership.
Wallace also serves as a director of Servpro, a disaster restoration company that Blackstone acquired in 2019.[xvii] Servpro’s business is in the difficult work of rebuilding communities after disasters, which is largely done by immigrants and US-born people of color.
(See PESP’s and Resilience Force’s August 2023 report, Private Equity Profits From Disaster, on private equity investments in disaster recovery companies including Servpro.)
In 2019, workers at a Servpro franchisee reported issues of wage theft, resulting in the franchisee paying back wages. During the period that Blackstone has owned Servpro, ServPro franchisees have faced several OSHA citations for health and safety violations, including violations related to respiratory protection, bloodborne pathogens, asbestos, electrical hazards, and hazard communication.
Wallace also served as a director of Service King Collision Repair Centers[xviii], which Blackstone owned from 2014 until 2022.[xix] During Blackstone’s ownership of Service King, the DOL fined the auto body chain for dozens of wage & hour violations.[xx] Service King also faced over two dozen OSHA citations for health and safety violations while owned by Blackstone.[xxi]
In 2019, Service King agreed to pay $2.35 million to settle an environmental protection lawsuit brought by several California District Attorneys that alleged the mishandling of hazardous waste and materials.[xxii]
David Kestnbaum, Blackstone Senior Managing Director
Blackstone Senior Managing Director David Kestnbaum began serving on Packers Sanitation’s board in 2018, the year Blackstone acquired the company.[xxiii] Kestnbaum served as a PSSI director until March 2023.[xxiv] He appears to no longer serve as a director.[xxv]
Kestnbaum leads Blackstone private equity investments in the Media & Entertainment, Communications, and Business Services sectors.[xxvi]
Beyond Packers Sanitation, some other investments on which Kestnbaum sits as a board member have also faced fines for labor violations while Blackstone has owned them. Like Peter Wallace, Kestnbaum also serves as a director at Servpro. Servpro or its franchises have faced DOL wage theft and health and safety citations (see above).
Kestnbaum also serves as a director Tradesmen International, a labor broker focused on the construction industry.[xxvii] Since Blackstone acquired Tradesmen International in January 2017[xxviii], the company has faced several wage theft complaints, paying over $100,000 in back wages to dozens of employees.[xxix]
In 2022, Tradesmen International agreed to pay a $287,000 fine and signed a consent decree with the Washington State Attorney General for illegally entering into non-compete agreements that prevented workers that Tradesmen provided to worksites from finding permanent positions.[xxx]
Tradesmen International has also faced several OSHA citations for violations during Blackstone’s ownership.[xxxi] In October 2022, a Tradesmen employee in California died from complications of a traumatic brain injury due to a blunt force head injury at work. Tradesmen is contesting the OSHA citation for the employee death.[xxxii]
Vikram Suresh, Blackstone Senior Managing Director
Blackstone Senior Managing Director Vikram Suresh also began serving on Packers Sanitation’s board in 2018, the year it was acquired by Blackstone.[xxxiii] Despite the DOL child labor charges, Suresh continues to serve on Packers Sanitation’s board.
Packers is not the only investment on which Suresh serves as a director that has faced fines for labor violations.
Suresh previously served on the board of Cloverleaf Cold Storage, which Blackstone acquired in 2017 and sold in 2019.[xxxiv] Cloverleaf faced multiple OSHAcitations for health and safety violations during the period that Blackstone owned it.[xxxv]
Jeffrey Overly, Blackstone Operating Partner
Jeffrey Overly, an Operating Partner for Blackstone since 2008, continues to serve on Packers Sanitation’s board.[xxxvi] As an operating partner for Blackstone, Overly served as “Blackstone’s lean specialist,” helping the private equity firm wring process improvements out of its portfolio companies.[xxxvii]
“When I am talking about ‘lean,’ I am talking about how do we eliminate waste in the process, how do we eliminate or reduce non-value-added activities in the process,” Overly said in a 2017 podcast produced by Blackstone.
Blackstone should explain what action it will take regarding its executives who were members of a board of directors that failed to properly oversee and respond to labor risks at Packers Sanitation.
[i] https://www.dol.gov/newsroom/releases/whd/whd20230217-1
[ii] https://www.dol.gov/newsroom/releases/whd/whd20230217-1
[iii]https://www.cbsnews.com/news/government-investigation-into-slaughterhouse-cleaning-company-that-hired-children-60-minutes-transcript-2023-05-07/
[iv]https://time.com/6256728/meatpacking-child-labor/
[v]https://www.businesswire.com/news/home/20230405005609/en/PSSI-Announces-Leadership-Transition
[vi]https://www.pssi.com/pssi-corrects-the-record-on-recent-60-minute-segment/
[vii]https://www.blackstone.com/people/peter-wallace/ accessed Mar 9, 2023.
[viii] Alight, Inc. Form 424B3, Nov 14, 2022. https://www.sec.gov/Archives/edgar/data/1809104/000119312522283580/0001193125-22-283580-index.html
[ix]https://www.blackstone.com/people/vikram-suresh/, accessed Mar 9, 2023.
[x] Performance Food Group director profile, Jeffrey Overly, accessed Nov 25, 2022. https://investors.pfgc.com/governance/board-of-directors/person-details/default.aspx?ItemId=71a0b914-acc8-4925-a11f-271312613e91
[xi]https://www.bloomberg.com/news/features/2017-12-29/america-s-worst-graveyard-shift-is-grinding-up-workers
[xii]https://www.moodys.com/research/Moodys-affirms-Packers-Holdings-B3-CFR-following-dividend-recap-outlook-Rating-Action–PR_401554, https://www.moodys.com/research/Moodys-says-Packers-Holdings-term-loan-add-on-is-credit-negative-Announcement–PR_436355
[xiii]https://www.nytimes.com/2004/06/27/style/weddings-celebrations-jennifer-breheny-peter-wallace.html
[xiv] https://www.blackstone.com/people/peter-wallace/
[xv]https://web.archive.org/web/20210522204852/https://www.blackstone.com/people/peter-wallace/https://www.sec.gov/Archives/edgar/data/1713952/000119312521123691/d286592ddef14a.htm
[xvi]https://www.blackstone.com/people/peter-wallace/ accessed Jan 13, 2024.
[xvii] https://www.blackstone.com/news/press/servpro-leading-franchisor-of-residential-and-commercial-property-damage-restoration-services-announces-recapitalization-and-long-term-partnership-with-blackstone/
[xviii]https://www.sec.gov/Archives/edgar/data/1713952/000119312522106921/d230246ddef14a.htm
[xix]https://www.blackstone.com/news/press/blackstone-to-acquire-majority-stake-in-service-king-collision-repair-centers/, https://www.repairerdrivennews.com/2022/06/01/service-king-secures-200m-in-new-capital-sheds-500m-in-debt-in-deal/
[xx] DOL wage & hour enforcement data, https://enforcedata.dol.gov/views/data_summary.php
[xxi]https://www.osha.gov/ords/imis/establishment.search?p_logger=1&establishment=%22service+king%22&State=all&officetype=all&Office=all&sitezip=&p_case=all&p_violations_exist=all&startmonth=07&startday=23&startyear=2014&endmonth=06&endday=01&endyear=2022
[xxii]https://countyda.sccgov.org/news/news-release/service-king-collision-repair-chain-settles-hazardous-waste-case-california
[xxiii]https://www.sec.gov/Archives/edgar/data/1753676/000095012318009611/filename1.htm
[xxiv]https://www.sec.gov/Archives/edgar/data/1809104/000119312523056533/d433676d424b3.htm
[xxv]https://www.blackstone.com/people/david-kestnbaum/
[xxvi]https://www.blackstone.com/people/david-kestnbaum/
[xxvii]https://www.blackstone.com/people/david-kestnbaum/
[xxviii]https://www.blackstone.com/news/press/blackstone-to-acquire-tradesmen-international-from-wellspring-capital-management/
[xxix] DOL wage & hour enforcement data, https://enforcedata.dol.gov/views/data_summary.php
[xxx]https://www.atg.wa.gov/news/news-releases/ag-ferguson-shuts-down-tradesmen-international-s-illegal-use-non-compete
[xxxi] https://www.osha.gov/ords/imis/establishment.search?p_logger=1&establishment=tradesmen+international&State=all&officetype=all&Office=all&sitezip=&p_case=all&p_violations_exist=all&startmonth=01&startday=03&startyear=2017&endmonth=05&endday=29&endyear=2023
[xxxii] https://www.osha.gov/ords/imis/establishment.inspection_detail?id=1626802.015
[xxxiii]https://www.sec.gov/Archives/edgar/data/1753676/000095012318009611/filename1.htm
[xxxiv]https://www.blackstone.com/news/press/cloverleaf-cold-storage-announces-recapitalization-led-by-blackstone/, https://www.blackstone.com/news/press/blackstone-closes-sale-of-cloverleaf-cold-storage-to-americold-realty-trust/
[xxxv]https://www.osha.gov/ords/imis/establishment.search?p_logger=1&establishment=Cloverleaf+Cold+Storage&State=all&officetype=all&Office=all&sitezip=&p_case=all&p_violations_exist=all&startmonth=11&startday=13&startyear=2017&endmonth=05&endday=29&endyear=2023
[xxxvi] Performance Food Group director profile, Jeffrey Overly, accessed March 18, 2024. https://investors.pfgc.com/governance/board-of-directors/person-details/default.aspx?ItemId=71a0b914-acc8-4925-a11f-271312613e91
[xxxvii]https://blackstone.podbean.com/e/episode-1-transformational-change-lean-process-with-dave-calhoun-and-jeff-overly/
