When meatpackers stop production for the day, they depend on sanitation crews to clean their factories before the next shift, and Packers Sanitation Services, known as PSSI, often describes itself as the leading company to do that type of work.
Although it is relatively unknown compared to its publicly traded clients, like Tyson Foods and Pilgrim’s Pride, PSSI, which is privately held, has been watched by investors since 2007, when it was first sold to a private equity fund called Blue Point Capital Partners. PSSI has been owned by a series of different private equity funds ever since — it was subsequently sold to Harvest Partners, then to Leonard Green & Partners for $1 billion, and, most recently, in 2018, it was sold for an undisclosed sum to Blackstone, the largest private equity fund in the world.
Under its private equity owners, PSSI has merged with competitors and nearly doubled its selling price: It was sold for $540 million to Harvest Partners before it sold again just three years later for $1 billion. But even as PSSI has found success in finance, its worker safety record remains troubling. Three PSSI workers have died on the job since Blackstone took over in 2018, including one who was decapitated cleaning a chicken chiller, and four others had accidents that resulted in amputations, according to Occupational Health and Safety Administration records highlighted in a new report by a watchdog group.
Worker safety advocates say that any fatality or amputation in the workplace is unacceptable, but particularly so when a business is bringing millions of dollars to investors, as private equity-owned companies are meant to do. They also say that the hefty profits from private equity ownership should ensure that its workplaces are much safer than average.
Instead, a new report points to PSSI, one of three companies cited in connection with last year’s fatal nitrogen leak at a Georgia poultry plant, as evidence that private equity isn’t making workplaces safer.
“This is just the latest in a long line of health and safety violations at [PSSI], which is currently owned by the Blackstone Group, and serves as an example of the destructive impact that can come from the private equity industry,” according to the report by the Private Equity Stakeholder Project, a nonprofit organization founded in 2017 to research the impact of the private equity industry.
The group, which advocates for regulation of the industry, has also tracked and criticized private equity investments in coal, retail, oil and hospital chains, among the other industries private equity firms invest in, often with damaging results. The group’s executive director has testified before Congress about rising evictions in private equity-owned rental housing.
Blackstone, which the group has criticized in the past, vehemently disagreed with the findings.
“The so-called ‘report’ — which is riddled with errors and misinformation — is from a fringe, biased anti-private-equity shell group,” Blackstone spokesperson Matthew Anderson said in a statement. With regard to four total deaths at PSSI that were recorded by OSHA since 2018, Blackstone added, “In those cases: one was clearly determined to be a non-work-related death; in the second OSHA did not issue a citation to PSSI or otherwise fault our company; and in the other two matters existing PSSI safety protocols were not followed.”
Records show OSHA cited PSSI for two of the deaths, the decapitation and another fatality in a chicken chiller. PSSI and Blackstone did not comment specifically on the four amputation reports, which NBC News provided to PSSI to review.
“While lockout/tagout requirements should never be ignored, there are unfortunately occasions like the ones you point out when employees do not follow PSSI’s safety protocols,” PSSI said.
The lengthy statement added that “worker safety at PSSI has been the highest priority since day one of our 2018 investment — and over the last four years the company’s safety investments increased by nearly 80%, helping produce an over 50% reduction in its OSHA recordable injury rate.”
Leonard Green, PSSI’s previous private equity owner, also said it has improved safety: “During the time of LGP’s investment in PSSI, the company invested significantly in its safety programs. These investments, which included hiring dedicated field safety specialists and establishing programs holding plant management directly accountable for safety outcomes, resulted in OSHA recordable rates that improved more than 35%, providing employees safety levels far superior to industry averages when we sold our investment in 2018.”
Blue Point Capital Partners and Heritage Partners did not reply to messages seeking comment.
The private equity industry, which buys businesses to sell them at a profit, has invested in nearly every sector of the economy in recent years and has attracted scrutiny from policy-makers including the White House for its short-term focus. Blackstone declined to say when it may sell PSSI but said it has invested in the company through what it calls a long-hold private equity vehicle, “which is designed to hold industry-leading companies for longer periods than traditional private equity.”
Private equity firms often take out debt on behalf of the companies they own, which is meant to generate larger profits down the line, but in the short term may reduce the available resources of a company like PSSI. Those resources can be spent on needs like payroll, the size of a workforce or worker safety.
Private equity firms have added debt to PSSI’s books and used the money to pay themselves through an industry practice known as debt-funded dividends, or dividend recapitalizations. Leonard Green had PSSI take on $340 million in debt to pay investors, according to the report by the Private Equity Stakeholder Project, which analyzed public reports from credit rating agencies. In 2019, Blackstone paid its investors $135 million with cash and debt from PSSI. And in November 2020, PSSI used $297 million in debt to make another dividend payment to Blackstone’s investors, the report found.
Blackstone responded that “dividends deliver returns and distributions to our investors.” As of February 2021, PSSI had debt in excess of $1 billion, but it’s unclear when the debt would have been incurred because the terms of PSSI’s sale to Blackstone are not public. Blackstone said the “vast majority” of the debt “was already in place prior to our funds’ investment.”
A massive industry experiencing rapid growth
Private equity has had unprecedented growth in recent years. The industry as a whole manages nearly $7.4 trillion in assets, according to a report by McKinsey & Co. The American Investment Council, an industry trade group, says private equity-owned companies employ more than 11.7 million workers in the U.S., or about 7 percent of the workforce.
In many cases in the past, loading a company with debt has enriched investors hoping to recoup their costs, but it also put financial risks squarely on the company. Toys ‘R’ Us famously went bankrupt after it was unable to pay off the billions of dollars in debt its private equity owners placed on it, resulting in 30,000 workers losing their jobs in 2018 and calls for industry-specific regulation. In addition to the debt, bankruptcy documents showed that the retailer paid its owners $470 million in fees, interest and other payments.
“Leveraging that wealth extraction, how is that affecting the ability to keep those workers safe?” asked Alisha Volante, a researcher for the Private Equity Stakeholder Project, who wrote the new report on PSSI. “You’re pulling dollars out of the company, but you still need to do the same amount of work. How are you doing that?”
There is no easy way to answer those questions, she said, because the business operations are not public.
“Private equity doesn’t care that much if their private subsidiary companies go bankrupt, whereas for a public company it is embarrassing,” said Matt Stoller, the research director at the American Economic Liberties Project, a nonprofit organization that advocates for breaking up large corporations. The group’s executive director is a former Treasury Department official.
In general, the report by the Private Equity Stakeholder Project said, private equity firms cut costs with a “low road approach” that involves reducing wages, benefits and staffing, “with devastating consequences to millions of workers, their families, and their entire communities.”
That view is shared by David Michaels, who was the head of OSHA in the Obama administration. Michaels, who was not involved in the report and had not reviewed it, said that private equity firms are known to maximize profits, often by cost cutting.
“Safety is among the first to go in cost cutting efforts,” he said. “When I see a company taken over by private equity, I certainly worry about the safety of workers.”
Private equity firms have been drawn to PSSI because of its large list of clients and potential to bring on more.
“The management team said it was awesome — our data team helped swing the deal,” Lionel Assan, the head of European private equity at Blackstone, said at an industry meeting several years ago.
The meatpacking industry has proven to be especially dangerous, even compared to other types of manufacturing work, and advocates say that industry investors should prioritize worker safety.
“We recognize this mission-critical work for our nation’s food supply can present potential hazards,” Blackstone said.
In a joint statement with PSSI, the firm said it has more than tripled the number of full-time safety personnel, along with “conducting more than 4 million hours annual safety training, expanding their zero-tolerance policy for lockout/tagout and fall protection procedures, implementing new worker safety bonuses, recruiting former OSHA professionals and other safety experts to advise on best practices, and installing additional industry-leading safety monitoring equipment.”
“Academic research has shown private equity ownership increases worker safety and lowers injury rates as a key part of delivering value to their investors,” Blackstone added, referring to a study that found lower injury rates in private equity-owned companies that used to be publicly traded.
But the study’s co-author Jonathan Cohn pointed to several caveats that he said would make it difficult to draw a conclusion between his research and PSSI, which was never publicly traded. The majority of companies that private equity has purchased are smaller, privately held companies, he added.
“What the overall implications of private equity are for employees and customers and these sorts of things, I still think is a murky picture at this point,” Cohn said.
Cohn also noted that past research has found higher consumer prices after private equity takeovers of healthcare and higher education. Health care workers have expressed concern to NBC News about private equity’s investment in hospitals and medical staffing groups. A previous report on private equity takeovers of physician-owned dermatology practices found that they often prioritize revenue over the quality of care.
The Private Equity Stakeholder Project focused on PSSI for its latest report because “its track record goes back years,” said the group’s executive director, Jim Baker. “It’s been controlled by a string of different private equity firms that have used it, literally, to pay themselves hundreds of millions of dollars, while workers are getting injured and dying.”
It is not the first time that PSSI’s safety has been called into question. Last year, OSHA cited PSSI for 17 violations for failing to train workers about the dangers of liquid nitrogen after a nitrogen leak killed six people who worked for the Foundation Food Group at a poultry plant in Gainesville, Georgia. Those killed were not employees of PSSI, but PSSI was responsible for cleaning the plant and for making sure its own workers were safe there, OSHA said.
PSSI spokesperson Gina Swenson said: “PSSI employees were not onsite and were no way involved with this tragic incident. We are also not involved in the production process or mechanical maintenance of this equipment. While we cooperated with OSHA during the review, we are forcefully contesting their claims and will be vigorously making our case.”
A 2017 analysis by the National Employment Law Project, an advocacy group, found that PSSI has some of the worst rates of workplace injuries in the country. PSSI described the report as flawed.
When they are hired by PSSI, workers sign paperwork assuming the risk of death and injury on the job, NBC News reported last year. Many of its employees have felonies on their records and had difficulty finding work elsewhere — which advocates like the Private Equity Stakeholder Project argue discourages workers from reporting dangerous conditions out of fear that they could lose their jobs.
According to a Department of Labor report that NBC News obtained through FOIA last year, OSHA opened inspections into PSSI 56 times in a span of five years, from 2015 through 2020, and issued 38 citations against the company.
Some PSSI workers previously interviewed by NBC News say they no longer work there. One who does said they were unaware it had been cited last year in connection with the fatal nitrogen leak.
Volante said that since 2007, none of the private equity firms have owned PSSI for longer than four years, which has minimized what she described as their headline risk, or the risk of being connected to a company when it makes headlines. “There’s a little bit of accountability that is lacking with this type of private equity ownership,” she said.
CORRECTION (April 6, 2022, 9:45 a.m. ET): A previous version of this article misspelled the last name of the co-author of a study on private equity. He is Jonathan Cohn, not Cohen.