Ambushing Private Equity
Friday, April 18, 2008
Forget the marches and strikes that once defined the union movement. Big labor is relying more on guile and theatrics than blunt force to attack the ascendancy of a new form of corporate ownership: private equity.
And tactics often get personal. Union allies staged a satire outside buyout king Henry Kravis's lavish Long Island home, asking passersby to sign a petition giving him a break on his property taxes. Weeks later, protesters in business suits sneaked into a private-equity conference at the Waldorf-Astoria hotel in New York, where Carlyle Group co-founder David M. Rubenstein was giving a speech. They sought to shame him with a banner that read: "Why does he pay taxes at a lower rate than the hotel's doorman?"
Then on Halloween, union members wearing Rubenstein masks paraded in front of Carlyle's offices, handing out Sugar Daddy suckers.
The unorthodox protests are part of a campaign by the Service Employees International Union and its allies to position themselves as a check on what they regard as a new economic order, one dominated by the big private buyout firms.
Those firms have swept up hundreds of companies in recent years. As the economy softens, union leaders say they increasingly worry that private-equity firms will try to salvage their investments by pressuring management to cut jobs or benefits. And those dealmakers are in New York or Washington, away from where most of the employees actually work.
"We are up against the Masters of the Universe here, so we've got to be smart about what we do," said Dan Cantor, executive director of a public interest group called the Working Families Party.
Executives at the private-equity firms say that they have been responsible stewards of the companies in their portfolios and note that the unions themselves have invested in private-equity funds.
One of the SEIU's chief targets has been Carlyle. On a February morning, the SEIU's private-equity team plotted a new attack from the union's headquarters on Massachusetts Avenue in Northwest Washington.
Five union activists led by Stephen Lerner, the campaign's field general, ringed the conference table in the glass-walled room. The plan: Tie America's biggest buyout firms to Middle Eastern investment funds. The goal: Scare Americans into thinking their security is threatened by Middle Eastern investments in firms such as the District-based Carlyle Group, which often invest in companies that do important business for the U.S. government.
"We have put our hand into a beehive," Lerner said to his staff. "Carlyle has proven us right. Carlyle is an influence peddler."
The SEIU, which represents 1.9 million janitors, security guards, health care workers and others, has marshaled a big chunk of its membership and resources (it won't say how much it is spending). On this day, it planned demonstrations around congressional hearings looking into links between private equity and Middle East oil money, also known as sovereign wealth funds.
The union identified friendly politicians in Washington and in state capitals to contact. Like-minded public interest groups such as ACORN, the Working Families Party and United Students Against Sweatshops were enlisted as allies. Advertising campaigns were brainstormed. Talking points were formulated.