This post was guest authored by Elisa McCartin.
On May 27, 2021, 166 workers in Janesville, Wisconsin awoke to a nightmare. OpenGate Capital, the private equity firm that owns their employer, Hufcor, announced it was moving its plant out of Janesville, taking those workers’ jobs and livelihoods with it.
After decades of pro-corporate globalization, people numb to its effects might write off Hufcor’s closure as a tragic but ultimately unavoidable consequence of a deadly pandemic and economic upheaval. Wrong. That explanation ignores the blatant injustice done to Hufcor workers, whose woes reflect the influence of predatory private equity, and tells a story of Wall Street run amok.
Hufcor, a market-leading producer of accordion-style doors and mobile room partitions, is one of many companies reeling from the private equity model in which firms acquire businesses and squeeze them for cash, routinely causing bankruptcies. OpenGate Capital, a Los Angeles firm that amassed $5 billion in revenue during its first decade in business, has run exactly that playbook in Janesville since acquiring Hufcor in 2017.
Even though Hufcor was profitable when OpenGate bought it, maintained operations during the worst of the pandemic, and even advertised $16 hourly wages and generous benefits as recently as January 2021, OpenGate has nevertheless decided to relocate just as the pandemic eases.
Confronted with this looming loss, Hufcor employees, Janesville residents and CWA union organizers have rallied against OpenGates’ greedy and exploitative practices. At their side are elected officials who know that the whole country needs tough measures to reform private equity.
“We need to take legislative action in Congress to rip up the predatory playbook that these private equity firms use to leave workers with nothing but pink slips and lost livelihoods,” Sen. Tammy Baldwin of Wisconsin wrote on Facebook.
Senator Baldwin was a co-sponsor of the Stop Wall Street Looting Act, the first major effort to reform the private equity sector, in the last Congress. It would curb the industry’s worst abuses and prioritize people, not private equity profits.
OpenGate Capital has a history of buying companies, only to close operations shortly thereafter, leaving communities across the country in the lurch. To date, OpenGate has laid off 678 California workers from the Pennysaver classified ad magazine, 100 Wisconsin workers at its Golden Guernsey dairy plant, 140 employees of the Connecticut boxboard company Fusion Paperboard, and nearly 200 employees in Texas, Arkansas, and Wisconsin, who worked for Hamilton Scientific, an OpenGate-owned laboratory furniture company.
OpenGate failed to give workers at Pennysaver and Golden Guernsey the 60 days notice of business closure that is required under U.S. labor law. The firm faced six different lawsuits after abruptly laying off Pennysaver employees in the middle of a work day without giving workers their final paychecks for several days or compensation for unused vacation days. Similarly, employees at Golden Guernsey learned the company was closing when they showed up to work only to find the doors locked. OpenGate also faced numerous lawsuits stemming from its dealings at Hamilton Scientific, including not giving employees adequate notice of its Texas plant closure and selling a Mexican plant without disclosing it was harboring a drug cartel.
When OpenGate bankrupted Pennysaver, a court-appointed trustee sued OpenGate for fraudulently siphoning money from the company through a variety of shady tactics: billing it for non-existent tax payments, loaning money to another OpenGate company at knockdown rates, and putting non-working OpenGate employees on its payroll.
The firm shut down its Fusion Paperboard plant just three years after acquiring it, 18 months after signing a 10-year loan from the state to remain operational, and only a few months after entering into a six-year contract with the local steelworkers union.
Even as hundreds of American workers have suffered from OpenGate’s schemes, Andrew Nikou, the OpenGate founder and CEO, has not faced any meaningful financial or social consequences for repeated business failures at the hands of his firm.
Nikou instead tries to generate goodwill as a philanthropist and has even started his own foundation, which boasts of a “mission driven by values” empowering “individuals and communities.” Nikou still sits on numerous boards, including that of the Hammer Museum in Los Angeles. He was also in talks about a reality TV show built around his private equity business. Likewise, OpenGate itself has continued to raise millions since bankrupting its previous companies, enabling these practices to continue unabated.
Too often, private equity firms like OpenGate extract cash from the companies they acquire and walk away richer, regardless of what happens to workers and communities. Hufcor employees will not be the last to suffer at the hands of OpenGate, and nothing will change unless the firm is held accountable for its ruthless profiteering.