Statements on Introduced Bills and Joint Resolutions

Floor Speech

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Ms. BALDWIN. Mr. President, I rise to speak in support of legislation that I have recently joined Senator Warren in introducing. It is called the Stop Wall Street Looting Act, and it concerns some of the practices and the business model of what I would describe as predatory private equity firms.

Now, before I dive into the details, I want to say that there are very good private equity companies that invest in the businesses they have purchased and the communities and the workers.

But, unfortunately, this is something that I have firsthand knowledge of, the impact of predatory private equity businesses on workers and communities in my home State of Wisconsin. Several historic Wisconsin companies have been driven into bankruptcy or had their facilities moved overseas by the private equity funds and companies that acquired them.

The first company that I want to talk about is ShopKo. For those who weren't in the ShopKo footprint in the United States, ShopKo is a retailer that was founded in 1961 in Ashwaubenon, WI. ShopKo was bought by a private equity firm, after many profitable years of existence, back in 2005. The firm was Sun Capital Partners.

Sun Capital immediately executed what is known as a sale-leaseback. A sale-leaseback is a textbook private equity maneuver in which the fund sells the company's real estate right out from under it. Real estate and the facilities were the most major asset that ShopKo had.

Certainly, they also had inventory and workers, but they owned the real estate, and this private equity firm basically sold ShopKo's 351 locations with hundreds of millions of dollars, and they were sold to a company that would lease the land and buildings back to ShopKo.

Sun Capital promised to reinvest the proceeds of the sale back into the company, but instead it paid out cash to itself in the form of dividends and management fees. Not only was ShopKo prevented from using its cash to reinvest, it was also loaded up with $200 million more in additional debt to fund even more payouts to Sun Capital executives.

After years of being starved of investment, ShopKo was forced into bankruptcy and liquidation in 2019. The 3,000 Wisconsin workers were promised severance pay in exchange for working through the company's final days.

I mean, if you think about that, you have a retail store. You don't want everybody to--the day they find out that store is ultimately going to close--to go out and find other jobs or you don't have the way to wind down your business. So they were promised severance pay in exchange for working through the company's final days. But when the time came to pay the workers, Sun Capital said it didn't have any money.

When I met with these ShopKo workers, I remember meeting Kristi Van Beckum. She said to me:

I always felt proud to work at ShopKo because it was a Wisconsin-based company and it invested a lot in the community. But I saw how Sun Capital sold out ShopKo's properties and [literally] destroyed the company, all for their own benefit. They made millions while I didn't even get the severance I was promised. Sun Capital ran a company we loved into the ground.

More recently, I visited with workers at Hufcor, a company that has operated in Janesville, WI, for over 120 years. In 2017, the manufacturer was acquired by a private equity firm called OpenGate Capital.

Wisconsinites are sadly already familiar with OpenGate. This is an L.A.-based private equity fund that bankrupted another Wisconsin firm, Golden Guernsey Dairy, back in 2013, only 2 years after acquiring it, laying off hundreds of workers in Waukesha, WI.

Dairy workers showed up one day to find the doors locked. They were given no notice of their layoff, and they had to fight OpenGate for 8 years just to get their back pay.

This past summer, OpenGate notified the 166 workers at Hufcor that their jobs would be terminated, and the workers soon learned that the manufacturing operations would be moved to Monterrey, Mexico.

When I visited with the workers this summer, I learned this from Michelle, who had worked for Hufcor for 23 years. She told me she is anxious about what training she might need to get another job that will pay what she earned at Hufcor.

Then I also heard from Jesse. He was diagnosed with cancer 2 years ago, and he depends upon the health benefit provided by Hufcor for his treatment.

These workers had great benefits because of their representation by the Communications Workers of America union and because of their employment at Hufcor, but they were left with an uncertain future because OpenGate has decided to move their jobs to Mexico.

These stories illustrate the devastation that the predatory private equity business model has wrought on my State. These workers deserve better. We need to rip up private equity's predatory playbook that enriches looters, but leaves workers with nothing but pink slips.

I was proud to work with Senator Warren to introduce the aptly named Stop Wall Street Looting Act. This legislation will prevent private equity firms from enriching themselves by starving businesses of investment and running them into bankruptcy or shipping their jobs overseas. This bold reform will help rewrite the rules of our economy and protect workers from the predatory practices so that we can start to reward hard work, not just wealth.

Thank you for the opportunity to share the stories from my State, and I look forward to working to pass this important legislation.

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