BrightSpring Health, Alex Jones, Florida, and Elon
BrightSpring Health Services is one of the nation’s largest group home operators. These group homes provide alternatives to institutional housing for people with severe mental and sometimes physical disabilities. They’re mainly funded by Medicaid, regulated by the states, and are considered a humane way for someone to live who can’t easily integrate with society. Many patients are severely disabled and may not have family.
In 2019, BrightSpring was bought by private equity giant KKR, the firm most famous for the RJR Nabisco LBO, memorialized in Barbarians at the Gate. KKR has a long track record of buying companies, loading them up with debt and slashing costs, and selling them off at a profit. So what happened at BrightSpring?
But a yearlong BuzzFeed News investigation found that KKR focused on expanding the business even as a crisis mounted in its group home division, where conditions grew so dire that nurses and caretakers quit in droves, a state prohibited the company from accepting new residents, and some of the most vulnerable people in its care suffered and died.
Overseen by KKR’s handpicked board of directors, BrightSpring executives in many cases kept wages lower than those at competing facilities or Walmarts, despite pleas from local managers that they were unable to safely staff the homes. Some managers resorted to making employees work three days straight or threatening to have them arrested if they tried to leave. In several cases, state inspectors arrived at homes and found no staff at all.
Ah, of course! And, because BrightSpring’s customers are vulnerable patients and not, say, grocery or toy shoppers, the damage from KKR’s mismanagement was inflicted on some of society’s most vulnerable. It’s not as if the challenges of running group homes came as a surprise to KKR executives, they were well aware of BrightSpring’s problems before they bought it:
During internal discussions about whether to make the purchase, high-level executives were told about instances of abuse, neglect, and staffing shortages under its prior owner, a Canadian private equity firm called Onex, according to a person familiar with the deal.
And states had been sounding the alarm about BrightSpring for years, which only got worse under KKR’s stewardship:
From the time KKR took over BrightSpring in March 2019 through the end of 2021, its homes were cited for dangerous conditions at a rate well above the average for such facilities, according to a first-of-its-kind analysis by BuzzFeed News.
The analysis focused on intermediate care facilities, the type of group home with the most comprehensive state inspection reports, in the seven states with the most for-profit homes. In those states, KKR owns only 16% of the homes but racked up 40% of the serious citations — more than 500 in total.
In West Virginia - a state not known for aggressive regulation - things got so bad regulators essentially shut BrightSpring’s operation down:
The situation in West Virginia spiraled so far that in July 2020, the state forced BrightSpring to stop accepting new clients. After continued failings, West Virginia and BrightSpring reached a settlement in which the company did not admit to wrongdoing but had to close or sell a fifth of its federally certified homes in the state.
Patients in group homes often require near constant supervision - their disabilities can make them prone to falls, choking, or any number of other injuries. BrightSpring’s focus on revenues and profits - making sure beds were filled while slashing staffing costs - meant employees were poorly trained, overworked, and it was hard to hire when people inevitably quit:
“The staffing issue was the root cause for every problem I encountered while I was there,” said Perry McAfee, a manager who oversaw about 60 homes around Houston. “If you pay $7.50 an hour, you’re not going to get a lot of people when they can go to Walmart and make $10.”
In 2020, the company reported paying Texas direct care staff a starting wage of just $8 an hour, $1.50 less than most other group home businesses in the state, according to government records.
Eight dollars an hour to treat some of the most challenging patients does not sound like a good job. Not to mention, BrightSpring management pressured employees to work crazy hours to fill staffing gaps:
State inspection reports document several instances in which staff had to work more than 16 hours and sometimes as long as three days straight without leaving the home. Some BrightSpring managers resorted to threatening employees, telling them they could be charged with criminal neglect if they left at the end of their shift, two staff members told BuzzFeed News.
Some homes went entirely unsupervised:
Five times, inspectors showed up at homes in Texas and found no staff at all.
And this is only what state inspectors found when visiting the homes. I will spare you the stories of the horrific injuries patients suffered due to staff inaction or apathy, but the stories are truly tragic. We have talked about what goes on at nursing homes, one of the many places in American society we other-ize the weak and needy. Group homes, like nursing homes, are a place we can put people who can’t be a part of society, and forget about them. Unfortunately, BrightSpring executives and employees did literally forget about many of them.
So what was going on at the top of the company? Well, things were great! KKR and BrightSpring went on a buying spree:
Meanwhile, the KKR-controlled board approved a plan for BrightSpring to take on more than a billion dollars in debt, secured by the company’s assets, to buy more companies. It now operates in 50 states serving over 350,000 people daily across its different healthcare divisions.
BrightSpring went on to purchase hospices and home healthcare companies and moved further into services for “waiver homes” — residences for people with disabilities that are sometimes subject to fewer government inspections.
While the company was being essentially shut down by West Virginia and racking up hundreds of violations across its group homes, it was buying hospices and home health care companies. Cool!
KKR had saddled BrightSpring with more than a billion dollars in debt, paid itself millions in fees, and bought up a bunch of other companies serving the needy and dying. Now, it’s ready to cash out:
BrightSpring’s revenue grew from $2.5 billion in 2018 to $5.6 billion by the end of 2020, the most recent information available.
Last October, the company filed paperwork with the Securities and Exchange Commission announcing its intention to go public. The documents paint a rosy picture of BrightSpring’s financial status and its “essential” role in American healthcare.
Private equity has been pouring trillions of dollars into buying for-profit healthcare companies in the last decade, especially those that serve vulnerable populations who - critically - are less likely to demand good care, or complain when things go wrong. Some PE stewards may actually care about patients, but health care is expensive, and providing good services while hiring the best talent is pricey, and at odds with the PE business model of buying something, squeezing all the cash out of it, and dumping it on the next investor. It is, unfortunately, a natural extension of this country allowing finance vultures to be in charge of providing critical care to some of the most needy.
Alex Jones has made a lot of money over the years using his radio and Internet presence to peddle snake oil. After years of claiming victims of mass shootings were ‘crisis actors’ Jones’s rhetoric finally caught up to him in the form of multiple lawsuits from family members of the Sandy Hook massacre. He lost one case by default because he refused to turn over documents. Which makes sense, because he’s still on the air, even if he’s been kicked off some online platforms. Turning over documents revealing how much money he has would be bad for him, considering he’s facing multiple civil lawsuits that could result in large awards.
Facing monetary damages for smearing the families of Sandy Hook shooting victims, Mr. Jones last week filed for emergency relief in federal bankruptcy court, a move that a monitor from the Justice Department’s bankruptcy unit, Kevin Epstein, called potential “abuse of the bankruptcy system.”
In Jones’s case, he’s also using the old fashioned tactic of trying to hide his money:
This month, lawyers for the families in Texas filed a separate lawsuit claiming that with the trials looming, Mr. Jones “conspired to divert his assets to shell companies owned by insiders like his parents, his children and himself,” while claiming heavy financial losses. The suit accuses Mr. Jones of drawing $18 million out of Infowars between 2018 and 2021, plus his $600,000 annual salary, and funneling $54 million to shell companies, moves “designed to siphon off the Jones debtors’ assets to make them judgment-proof.”
Jones’s own lawyer estimates his companies make over $50 million dollars a year. He’s trying to get the bankruptcy court to approve a $10 million dollar settlement fund and protect the rest of his assets while he trashes the judges and plaintiffs on his show.
Compounding his problems are his central role in the January 6 insurrection, for which he’s now offering to turn snitch:
Days later, Mr. Jones reached out to the Justice Department, looking to share what he knows about the Jan. 6, 2021, Capitol riot in exchange for immunity from prosecution. An immunity deal seems unlikely, two people familiar with Mr. Jones’s offer said.
Because everything is absurd and nothing matters, Jones continues to use his syndicated radio show to attack the people he’s trying to negotiate with:
Even as he described his offer to cooperate, Mr. Jones unleashed a barrage of false claims against the government. “My god!” he said on his show last week. “The F.B.I. and Justice Department’s fingerprints are all over this damn thing, and you want to come ask me about it? You want to find out what really happened, why don’t you look in the damn mirror and you can tell me!”
The sort of people who listen to Jones’s rants and buy his Brain Force pills will probably not be deterred by his actions, but hopefully the plaintiffs are able to make a dent in his fortunes, if they can’t shut his terrible operation down entirely.
What would happen if the governor of a state decided to spend nearly all of his time doing things to impress Fox News? They’d look a lot like Ron DeSantis:
Gov. Ron DeSantis of Florida and state lawmakers have revoked a 55-year-old arrangement that gave Disney a special tax status and allowed it to essentially self-govern its 25,000-acre Disney World complex. The loss of that designation is the latest development in an ongoing battle between Mr. DeSantis and the state’s largest private employer over a recently passed education bill.
Here is an abbreviated timeline of what happened:
Florida passed a bigoted “Don’t Say Gay” bill. Disney, one of the state’s most influential companies, initially didn’t come out against it, but eventually did (tamely) after public outcry. Florida Republicans, and DeSantis especially, took this mild criticism as a nuclear escalation in the culture war, and voted to revoke a truly wild special tax status Disney had carved out for itself in the 1960s.
Except! It turns out Disney pays for a lot of things in its special district, like roads and other public services, and there is a $1 billion dollar bond outstanding. If the state really did dissolve Disney’s private kingdom, two Florida counties would be on the hook for the money, and have to raise taxes significantly to maintain all the services Disney currently pays for. Disney would get a huge tax and cost decrease as a result.
DeSantis finds himself in an unusual situation - normally his meaningless proclamations don’t put him at odds with a massive media conglomerate that is wildly popular in his state. That said, it doesn’t seem to be hurting his reelection chances, because right wing politics is full-time culture war now, and his willingness to harm his own voters is, well, popular with them? I don’t know.
Just in case, though, he’s created an election fraud police force to help his chances in November.
Well, he’s done it. Elon Musk has found the money to buy Twitter, and they have a sale agreement that includes very normal stipulations like the one saying Musk can Tweet all he wants about the deal as long as he doesn’t disparage Twitter or its employees. He made it three days before he violated that one. Thing is, Twitter’s board isn’t going to sue him or pull out of the deal over that, even though they’d potentially earn a billion dollar payday thanks to a release clause.
Much has been written about what Musk will do to the company, or the damage that will very likely be done to marginalized groups currently on the platform. Instead, let’s look at what Musk has risked to do this deal, and how it could very easily backfire on him.
The deal for Twitter is unusual - typically in a leveraged buyout (LBO) the buyer uses debt borrowed against the assets or revenues of the company they’re buying. In this case, Musk has taken $13 billion worth of loans against Twitter itself, debt that will cost the company around $1 billion a year to service. The rest of the $46.5 billion dollar purchase price will come from loans against Musk’s assets - $12.5 billion against a third of his Tesla shares, and another $21 billion in miscellaneous loans against his assets (he’s trying to find other people to take on some of that bit of the debt, which he can probably do because he’s rich, etc).
So Twitter, a company that makes around $5 billion a year in revenue and booked a net loss of $220 million last year, is now going to be on the hook for $1 billion a year in interest payments. Elon is going to be paying the same amount out on his personal loans simply to own the company. You may be saying hey, the guy worth more than $200 billion can afford to pay a $1 billion dollar tax to be an Epic Memelord online, it’s his money! Well, sure, but if Tesla’s stock falls below a certain share price Musk will have to pay his $12.5 billion dollar loan off entirely (or put up more stock, if the banks allow it) and Tesla’s stock is already down 18% over the last five days after news of the deal broke. The sale won’t close for up to 6 months, and a lot of things can happen in that time. If Tesla stock drops far enough to put Musk’s loans in jeopardy, he’s going to have to decide whether he’s willing to put up more collateral, or walk away. I am not sure his pride would allow the latter option.
Also! If the deal does happen, Musk has to run Twitter, which is a complicated software company that isn’t particularly good at making money. Considering the company’s overhead is billions a year, if he were to, I don’t know, let the website become incredibly toxic and drive brands away, he could be facing huge losses that, as the owner of a private company, he and his fellow investors would be on the hook for.
Matt Levine points out that an unrealized expense for Musk will be employee pay:
In the first quarter, Twitter’s cash flow from operations was $126 million, and its stock-based compensation expense was $177 million. If it had to pay all of that compensation in cash, its cash flow would be negative, which does not leave a lot of money to service the debt. I guess getting rid of some employees would help with this.
Twitter may not be good at making profits for investors, but the people who run it are doing okay for themselves. Musk hasn’t run a software company since 2002, and is famously belligerent towards employees, which may clash with Twitter’s SV workforce. The allure of building cool stuff like EVs or rockets won’t help Musk if significant numbers of Twitter employees quit (or he fires them) because who in their right mind would want to work at the most toxic social media site and put up with an abusive boss?
So is there a business goal here or is Musk simply a whimsical billionaire who wants to be able to use his favorite website however he wants? One theory I find somewhat compelling is Musk has seen the writing on the wall, and knows the endless growth in Tesla’s share price is about to come to an end for a few reasons:
Other carmakers are finally building good EVs
The tax credit bonanza that provides Tesla with all its profits can’t last forever
The company is under multiple ongoing investigations by regulators who, under Biden, seem more interested in making sure Tesla obeys things like safety rules
I will grant that Musk has extremely good opportunistic instincts - his massive, crazy Tesla incentive package that has made him into the world’s richest man seemed insane in 2018, before the stock went up 1000% - and he may see a way out of his current situation by lumping all his various diverse-and-not-profitable companies together into a big Super Company that will have so much hype the stock price will just go up forever. What remains to be seen is what happens if Tesla’s stock comes back down to earth, because Musk has now leveraged a significant amount of his shares, at significant interest rates, and the banks will not accept retweets as payment.
Maybe it will be different this time, and maybe Musk can just meme his way to infinite wealth, but he’s tied up a huge chunk of his assets buying a company that could potentially cost him billions a year just to keep the lights on. Musk’s trajectory feels like it’s reached its peak - he’s probably received his last massive bonus payout from Tesla - and despite being worth a lot of money on paper, a few things going wrong could bring his whole house of cards down. Sometimes the difference between a fraudster and a business genius really is timing.
WaPo - “North Korean hackers who last month carried out one of the largest cryptocurrency thefts ever are still laundering their haul more than a week after they were identified as the thieves.”
The Verge - “Apple is working with anti-union lawyers at Littler Mendelson in an escalating fight with retail workers in Atlanta who have filed for a union election.”
Yahoo! News - “"I feel I was scammed by Starlink," Sbi said. "This is not fair business practices. The company had my money for over a year, I need that money back, there shouldn't be any conditions on how to receive my money back."”
ARS Technica - “Insteon ends its statement by saying, "We hope that the Insteon community understands the tireless efforts by all the employees to serve our customers, and [we] deeply apologize to the community."”
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