Jeffrey Epstein's Mystery Bank Came Alive After His Deat
Matthew Goldstein and Steve Eder


In the years after Jeffrey Epstein registered as a sex offender, he closed his money management firm and started a business to develop algorithms and mine DNA and financial databases.

© Provided by The New York Times

Then he set up a bank.

In a banking license application reviewed by The New York Times, Mr. Epstein described himself as one of the investing world’s “pioneers” and said he wanted to pursue the “dynamic discipline of international banking.”

Officials in the Virgin Islands, the United States territory where Mr. Epstein set up most of his businesses, approved a license for him in 2014 to run one of the territory’s first international banking entities, a specialized bank that can do business only with offshore clients. The approval was unusual, given Mr. Epstein’s status as a convicted sex offender.

The bank, Southern Country International, renewed its license for each of the next five years, but it’s unclear whether it conducted any business or had any customers. Mr. Epstein, who died while in federal custody last summer following his arrest on sex trafficking charges, does not appear to have done any marketing for the bank or hired much staff.

The bank was created under a territorial law that lacked many of the oversight requirements banks are usually subject to, and its regulatory file is largely empty. A lawyer for Mr. Epstein told officials in the Virgin Islands in 2018 that Southern Country had not commenced operations. And regulators in the territory said they did not exercise oversight of the bank because it did not appear to be doing any business.

And yet, after Mr. Epstein’s death, his estate transferred more than $12 million to Southern Country, according to court documents.

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On Tuesday, at a court hearing in the Virgin Islands on motions involving Mr. Epstein’s estate, a magistrate judge, Carolyn Hermon-Purcell, questioned the estate’s lawyers about the transfers to Southern Country, saying the disclosure was not satisfactory. The judge said she did not know why Southern Country would be receiving checks from the estate. “There’s no explanation for it,” she said.

A lawyer for the estate responded that some of the payment had been made in error, but the judge was not satisfied with his response and asked him to follow up with a fuller accounting.

The checks — listed in the estate’s transactions for routine payments such as cable-TV bills and phone service for Mr. Epstein’s many properties — stand out. The list of payments were filed with Judge Hermon-Purcell, who is overseeing his $635 million estate, including the possible establishment of a compensation fund for his victims.

That Mr. Epstein was able to get a banking license in the first place is unusual.

His 2008 conviction in Florida on a charge of soliciting prostitution from an underage girl required him to register as a sex offender. Most bank operators doing business in the United States are required to undergo rigorous background checks, and most banking institutions are subject to oversight by the arm of the Treasury that investigates suspicious financial transactions. Neither was required by the Virgin Islands when Mr. Epstein submitted the application in 2013.© Gabriella N. Baez for The New York Times Jeffrey Epstein started Southern Trust to develop sophisticated algorithms to mine DNA and financial databases.

The territory had passed its international banking entity law a year earlier, in hopes of enticing investment from overseas. It modeled its law on that of Puerto Rico, where international banking entities have existed for three decades.

Such organizations are attractive to offshore investors because the banks are able to offer more favorable tax treatment than the investors’ own countries can. In return, the territories expect residents to manage the banks, even though they cannot use the banks’ services.

These specialized banks have drawn scrutiny because of their potential for abuse, including money laundering. The Federal Reserve Bank of New York describes international bank entities in the Virgin Islands and Puerto Rico as “high-risk” institutions. Last year, it temporarily suspended applications for them to obtain financial services from the Fed until it can issue stricter rules for them.© Joe Schildhorn/Patrick McMullan, via Getty Images The real estate tycoon Andrew Farkas, left, in 2007 with John de Jongh, the Virgin Islands governor at the time.

Mr. Epstein was carefully evasive in answering a question on the application that was meant to reveal information about an applicant’s criminal record. His response mentioned his guilty plea to state charges in Florida, but it played down other elements of the case.

“For a relatively brief period, in what has otherwise been a productive and accomplished life,” the application said, Mr. Epstein “did face some legal difficulties relating to matters alleged to have taken place seven years ago.” The application noted that a federal investigation had been “discontinued.”

But that answer was misleading, said Richard Scott Carnell, a former assistant secretary for financial institutions at the Treasury Department. The application did not reflect that Mr. Epstein’s plea deal included an agreement with federal prosecutors, who promised not to bring their own charges. The agreement acknowledged that federal authorities had compiled a long list of other possible underage victims.

“Bank regulators expect applicants to be candid,” said Mr. Carnell, now an associate professor at Fordham Law School. “You’d never suspect there was a nonprosecution agreement. As a bank regulator, I’d be outraged to learn that an applicant had misled me in that way.”

In his application, Mr. Epstein listed as references James E. Staley, the chief executive of Barclays who had cultivated a relationship with Mr. Epstein while at JPMorgan Chase. Another reference was Andrew Farkas, a New York real estate tycoon and co-owner of a marina and office complex on St. Thomas with Mr. Epstein. Spokesmen for both men said they had been unaware they were listed as references, along with JPMorgan and FirstBank, a Puerto Rico-based lender with branches in the Virgin Islands that long held some of Mr. Epstein’s accounts.

The application was submitted by Erika A. Kellerhals, a longtime tax lawyer for Mr. Epstein in the Virgin Islands. She did not return requests for comment.

Southern Country had not commenced doing business as of April 2018, according to correspondence between Ms. Kellerhals and the territory’s banking department. Regulators said the bank was a “self-reporting” company and did not require additional regulatory oversight if it was not operational.

But court documents show Southern Country was active for some of last year.

Records filed by the estate on Friday indicate that Southern Country had $693,157 in assets when Mr. Epstein died on Aug. 10. Then, in mid-December, the estate transferred $15.5 million to Southern Country in two checks. Southern Country sent back $2.6 million, leaving the total it received at $12.9 million. The documents filed by the estate do not give a reason for the transfers.

It’s also not clear what Southern Country did with that money. Two weeks later, the year-end value of Southern Country’s assets was $499,759, according to the estate’s filings.

The estate has told officials in the Virgin Islands that it does not intend to renew the bank’s license again.

Around the time the territory granted Mr. Epstein his banking license, it also gave a lucrative tax break to Southern Trust, a company Mr. Epstein said was developing sophisticated algorithms to mine DNA and financial databases. The tax break came from the territory’s Economic Development Authority, which was approved by the territory’s former governor, John de Jongh Jr., while his wife, Cecile, worked for Mr. Epstein. Neither Ms. de Jongh nor her husband returned messages seeking comment.

The tax break, granted in 2013, was a boon for Mr. Epstein. Southern Trust generated about $300 million in profit in six years, and he paid an effective tax rate of about 3.9 percent. The source of Southern Trust’s revenue is not clear; the bare-bones corporate filings made by the company in the Virgin Islands do not list any clients.

Although the Virgin Islands was long a place where Mr. Epstein got his way, it has lately cast itself as one of his victims.

In a lawsuit last month, the attorney general of the Virgin Islands, Denise N. George, said Mr. Epstein had sullied the territory’s reputation with his conduct. She sued Mr. Epstein’s estate, seeking to seize his private islands and dissolve what she said were shell companies acting as fronts for his sex-trafficking enterprise.

The suit seeks to intervene in the administration of Mr. Epstein’s will to safeguard assets for dozens of his victims, claiming the coexecutors may have a conflict of interest because they were officers in many of Mr. Epstein’s companies, including Southern Country and Southern Trust. The coexecutors, Darren Indyke and Richard Kahn, did not return requests for comment.

Judge Hermon-Purcell, the magistrate judge overseeing the administration of Mr. Epstein’s will in the Virgin Islands, heard arguments on the attorney general’s request at the hearing on Tuesday. The judge said she would issue a ruling at a later date.

© Rick Friedman/Rick Friedman Photography/Corbis/Getty Images Billionaire Jeffrey Epstein in Cambridge, MA on 9/8/04. Epstein is connected with several prominent people including politicians, actors and academics. Epstein was convicted of having sex with an underaged woman.

Freeman Rogers contributed reporting.

'Blue collar boom'? Not quite, Mr. President

IRINA IVANOVA and STEPHEN GANDEL 

In his State of the Union address on Tuesday, President Donald Trump declared that ordinary workers have seen a "blue-collar boom" during his tenure. That's partly true. But his suggestion that the bottom 50% of income-earners are faring better financially than the top 1% does not hold up to scrutiny.

The average wealth of a worker making the median wage or less has risen by a total of $4,000 in the three years since Mr. Trump took office. The average wealth increase for those in the top 1%? That's up $2.2 million.

Another claim from Mr. Trump in the State of the Union: Wages for lower paid workers have risen 16% since his election. That's true. But most of that increase owes to other factors, including a move by many states to hike their minimum wage.

Mr. Trump's speech depicted the economy as firing on all cylinders, especially for working-class Americans. That description is off the mark for the manufacturing sector, historically a key source of employment for less-educated workers.

After booming in 2018, manufacturers narrowly avoided a recession last year, hurt by Mr. Trump's trade fights with China and other countries. Since he entered office in 2017, the number of manufacturing jobs also has expanded more slowly than the broader labor market. The result: Manufacturers today account for a slightly smaller share of employment than they did in 2016.

Those jobs are also paying less. A decade ago, the average manufacturing job paid $1 an hour more than jobs overall. Today, those same jobs tend to pays less that most other kinds of work, according to figures from the Bureau of Labor Statistics.
About those wealth gains

Mr. Trump is right to say the wealth of lower-income Americans is rising. And it's rising faster than under Barack Obama, when the wealth of the bottom half was essentially flat for the entirety of his two terms in office. But it's still not rising as fast as the wealth of the top 1%, who got a much bigger boost from Mr. Trump's 2017 tax cuts than average Americans did.


When Mr. Trump was elected a little over three years ago, the top 1% had a collective net worth of $22.5 trillion. That's risen 21% to $27.3 trillion, according to the most recent Federal Reserve data. Meanwhile, the lower 40% of wage earners saw their combined net worth rise 12%, to $6.5 trillion from $5.8 trillion.

But even that gain is smaller than it seems, said Gabriel Zucman, a University of California at Berkeley economist who is one of the leading researchers on wealth inequality. He said the net wealth of the bottom half of wage earners in America is actually close to zero because of debt, making any apparent increase appear larger than it really is.
Pay hikes — thanks largely to individual U.S. states

Average pay around the U.S. is rising faster today than when President Trump took office three years ago, though it is slower than its peak in February 2019, when hourly earnings grew 3.4% on a year-over-year basis.

For lower-wage workers, the good news is they are capturing much of those gains after decades of muted wage growth. Since 2015, the lowest-paid quarter of workers has seen a higher percentage increase in pay than the top 25%, according to the Federal Reserve Bank of Atlanta.


Some research has found that this increase is partly driven by states increasing their minimum wages. States that raised their minimum wage between 2013 and 2018 saw pay for their lowest-paid workers grow more than 50% faster than those that didn't, according to an analysis from the left-leaning Economic Policy Institute. The trend continued in 2019, said Elise Gould, senior economist at EPI.

"Year after year, we've seen states increase their minimum wage, either through indexing [for inflation] or legislation, and we have seen faster wage growth at the bottom in those states that have increased their minimum," she said.

Nearly half of U.S. states and many cities are boosting their minimum wage this year. Meanwhile, the federal minimum wage has remained at $7.25 since 2009 — the longest stretch without a hike in baseline pay. The House of Representatives in July voted to raise the minimum wage to $15, but the bill has stalled in the Senate, and Mr. Trump has not addressed the issue.



How's your 401(k)?

Mr. Trump likes to point to the stock market as a sign of the economy's health. He has done well on that account, presiding over a 43% increase in the S&P 500-stock index in the three years since his inauguration — better than George W. Bush for a similar period, but behind the blue-chip stock index's performance under both Bill Clinton and Barack Obama.


Still, a hot stock market doesn't mean all workers are doing better. Richer Americans hold a far greater portion of the nation's wealth, with the top 10% of income earners owning nearly 85% of the value of all stocks.

"People who own shares have definitely done well, but most middle-class workers, they can't afford to put away an appreciable amount for their retirement," said Paul Sonn, director of the National Employment Law Project Action Fund.
"Slow and steady"

Despite the modest economic growth, the longest expansion in U.S. history, which started in 2009, shows few signs of winding down 11 years later. Perhaps even more important, data suggest a broader swath of Americans are benefiting: More people have come off the sidelines and found jobs. As a result, the proportion of Americans in their prime working years (ages 25 through 54) who are employed is now higher than before the Great Recession.

Another boon is that the moderate growth has meant that, at least so far, the economy isn't showing evident signs of excess akin to the housing bubble that led to the 2008 financial meltdown.

"This expansion has been slow and steady, but it could run for a few more years," Ryan Sweet, an economist at Moody's Analytics, told the Associated Press. "There's no reason that it needs to die. Sometimes slow and steady does win the race."

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An Amazon Prime Air partner is laying off nearly 3,000 workers as Amazon brings more jobs in-house

Hayley Peterson BI

© Sinéad Baker/Business Insider
Pinnacle Logistics, which services Amazon's Prime Air fleet, is laying off 1,374 workers in Illinois.
This is in addition to more than 1,600 previously reported layoffs at Baltimore-Washington International Airport.
Amazon has offered jobs to Pinnacle Logistics' hourly workers, a spokesperson told Business Insider.
Visit Business Insider's homepage for more stories.

A company that services Amazon's Prime Air fleet is laying off nearly 3,000 workers in Illinois and Maryland as Amazon shifts more jobs in-house.


Texas-based Pinnacle Logistics plans to lay off 1,374 workers in Rockford, Illinois near Chicago Rockford International Airport, the company said in a notice filed in January with the state of Illinois.

The layoffs will take effect in mid-May, according to the notice.

This is in addition to more than 1,600 previously reported layoffs impacting Pinnacle Logistics workers at Baltimore-Washington International Airport.

Both actions come as Amazon plans to hire more employees directly for its flight services, as opposed to relying on contractors.

Amazon has offered jobs to Pinnacle's hourly employees, a spokesperson told Business Insider.

"Amazon has been an active member of the greater Chicago area business community for several years, and are excited to grow our direct employee base in the area to now include our Rockford Air Gateway," the spokesperson said Thursday. "The hourly Pinnacle Logistics employees have been offered roles as an Amazon associate at their current location."

Pinnacle Logistics did not immediately respond to a request for comment.

Within the past several months, several other logistics providers that work with Amazon have also announced layoffs.

Greenwich Logistics, Letter Ride, Inpax, Urban Mobility Now, and Sheard-Loman Transport have announced upward of 2,400 layoffs since October. All five companies deliver Amazon packages to customers' homes.

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Opinion: How McKinsey destroyed the middle class

Daniel Markovits, professor at Yale Law School

Technocratic management, no matter how brilliant, cannot unwind structural inequalities.

© The LIFE Picture Collection / Getty / The Atlantic

When Pete Buttigieg accepted a position at the management consultancy McKinsey & Company, he already had sterling credentials: high-school valedictorian, a bachelor’s degree from Harvard, a Rhodes Scholarship. He could have taken any number of jobs and, moreover, had no obvious interest in business. Nevertheless, he joined the firm.

This move was predictable, not eccentric: The top graduates of elite colleges typically pass through McKinsey or a similar firm before settling into their adult career. But the conventional nature of the career path makes it more, not less, worthy of examination. How did this come to pass? And what consequences has the rise of management consulting had for the organization of American business and the lives of American workers?

John McWhorter: The woke attack on Pete Buttigieg

The answers to these questions put management consultants at the epicenter of economic inequality and the destruction of the American middle class. The answers also explain why the Democratic Party’s left wing is so suspicious of the nice and obviously impressive young man who wishes to be president.

Management consultants advise managers on how to run companies; McKinsey alone serves management at 90 of the world’s 100 largest corporations. Managers do not produce goods or deliver services. Instead, they plan what goods and services a company will provide, and they coordinate the production workers who make the output. Because complex goods and services require much planning and coordination, management (even though it is only indirectly productive) adds a great deal of value. And managers as a class capture much of this value as pay. This makes the question of who gets to be a manager extremely consequential.

In the middle of the last century, management saturated American corporations. Every worker, from the CEO down to production personnel, served partly as a manager, participating in planning and coordination along an unbroken continuum in which each job closely resembled its nearest neighbor. Elaborately layered middle managers—or “organization men”—coordinated production among long-term employees. In turn, companies taught workers the skills they needed to rise up the ranks. At IBM, for example, a 40-year worker might spend more than four years, or 10 percent, of his work life in fully paid, IBM-provided training.

Mid-century labor unions (which represented a third of the private-sector workforce), organized the lower rungs of a company’s hierarchy into an additional control center—as part of what the United States Supreme Court, writing in 1960, called “industrial self-government”—and in this way also contributed to the management function. Even production workers became, on account of lifetime employment and workplace training, functionally the lowest-level managers. They were charged with planning and coordinating the development of their own skills to serve the long-run interests of their employers.

The mid-century corporation’s workplace training and many-layered hierarchy built a pipeline through which the top jobs might be filled. The saying “from the mail room to the corner office” captured something real, and even the most menial jobs opened pathways to promotion. In 1939, for example, all save two of the grocery chain Safeway’s division managers had started their careers behind the checkout counter. At McDonalds, Ed Rensi worked his way up from flipping burgers in the 1960s to become CEO. More broadly, a 1952 report by Fortune magazine found that two-thirds of senior executives had more than 20 years’ service at their current companies.

Middle managers, able to plan and coordinate production independently of elite-executive control, shared not just the responsibilities but also the income and status gained from running their companies. Top executives enjoyed commensurately less control and captured lower incomes. This democratic approach to management compressed the distribution of income and status. In fact, a mid-century study of General Motors published in the Harvard Business Review—completed, in a portent of what was to come, by McKinsey’s Arch Patton—found that from 1939 to 1950, hourly workers’ wages rose roughly three times faster than elite executives’ pay. The management function’s wide diffusion throughout the workforce substantially built the mid-century middle class.

At the time of Patton’s study, McKinsey and other management consultants still played a relatively minor role in how American companies were run. The earliest consultants were engineers who advised factory owners on measuring and improving efficiency at the complex factories required for industrial production. The then-leading firm, Booz Allen, did not achieve annual revenues of $2 million until after the Second World War. McKinsey, which didn’t hire its first Harvard M.B.A. until 1953, retained a diffident and traditional ethos—requiring its consultants to wear fedoras until President John F. Kennedy stopped wearing his.

Things changed in the 1960s, with McKinsey leading the way. In 1965 and 1966, the firm placed help-wanted ads in TheNew York Times and Time magazine, with the goal of generating applications that it could then reject, to establish its own eliteness. McKinsey’s competitors followed suit, as when the Boston Consulting Group’s Bruce Henderson took out ads in the Harvard Business School student newspaper seeking to hire “not just the run-of-that-mill but, instead, scholars—Rhodes Scholars, Marshall Scholars, Baker Scholars (the top 5 percent of the class).”

A new ideal of shareholder primacy, powerfully championed by Milton Friedman in a 1970 New York Times Magazine article entitled “The Social Responsibility of Business is to Increase its Profits,” gave the newly ambitious management consultants a guiding purpose. According to this ideal, in language eventually adopted by the Business Roundtable, “the paramount duty of management and of boards of directors is to the corporation’s stockholders.” During the 1970s, and accelerating into the ’80s and ’90s, the upgraded management consultants pursued this duty by expressly and relentlessly taking aim at the middle managers who had dominated mid-century firms, and whose wages weighed down the bottom line.

Daniel Markovits: How life became an endless, terrible competition

As the business journalist Walter Kiechel put it in his book Lords of Strategy, consultants openly sought to “foment a stratification within companies and society” by concentrating the management function in elite executives, aided (of course) by advisers from consultants’ own ranks. Management-consulting firms deployed a panoply of branded processes against middle management. Another account of the industry, The Witch Doctors, explains that the Computer Sciences Corporation’s consulting arm, working with the Sloan School of Management at MIT, developed corporate “reengineering” to “break an organization down into its components parts,” eliminate the redundant ones, namely middle managers, and then put the remaining parts “together again to create a new machine.” GTE, Apple, and Pacific Bell would all cite reengineering as responsible for their downsizing. McKinsey framed its path to downsizing, which the firm called “overhead value analysis,” as an answer to the mid-century corporation’s excessive reliance on middle management. As McKinsey’s John Neuman admitted in an essay introducing the method, the “process, though swift, is not painless. Since overhead expenses are typically 70% to 85% people-related and most savings come from work-force reductions, cutting overhead does demand some wrenching decisions.”

Management consultants thus implemented and rationalized a transformation in the American corporation. Companies that had long affirmed express “no layoff” policies now took aim at what the corporate raider Carl Icahn, writing in the The New York Times in the late 1980s, called “corporate bureaucracies” run by “incompetent” and “inbred” middle managers. They downsized in response not to particular business problems but rather to a new managerial ethos and methods; they downsized when profitable as well as when struggling, and during booms as well as busts. The downsizing peaked during the extraordinary economic boom of the 1990s. The culls, moreover, were dramatic. AT&T, for example, once aimed to cut the ratio of managers to nonmanagers in one of its units from 1:5 to 1:30. Overall, middle managers were downsized at nearly twice the rate of nonmanagerial workers. Downsizing was indeed wrenching. When IBM abandoned lifetime employment in the 1990s, local officials asked gun-shop owners around its headquarters to close their stores while employees absorbed the shock.

Production workers did not escape the whirlwind, as companies—again with help from consultants— stripped them of their residual management functions and the benefits that these sustained. Corporations broke their unions, and jobs that once carried bright futures became gloomy. United Parcel Service, long famous for emphasizing full-time workers and promoting from within, shifted to part-time work in 1993. Its union—the Teamsters—struck in 1997, under the slogan “Part-time America won’t work,” but lost the strike. UPS has since hired more than half a million part-time workers, with just 13,000 advancing within the company.

© Provided by The Atlantic Bureau of Labor Statistics

Overall, the share of private-sector workers belonging to a union fell from about one-third in 1960 to less than one-sixteenth in 2016. In some cases, downsized employees have been hired back as subcontractors, with no long-term claim on the companies and no role in running them. When IBM laid off masses of workers in the 1990s, for example, it hired back one in five as consultants. Other corporations were built from scratch on a subcontracting model. The clothing brand United Colors of Benetton has only 1,500 employees but uses 25,000 workers through subcontractors.

The shift from permanent to precarious jobs continues apace. Buttigieg’s work at McKinsey included an engagement for Blue Cross Blue Shield of Michigan, during a period when it considered cutting up to 1,000 jobs (or 10 percent of its workforce). And the gig economy is just a high-tech generalization of the sub-contractor model. Uber is a more extreme Benetton; it deprives drivers of any role in planning and coordination, and it has literally no corporate hierarchy through which drivers can rise up to join management. As ever, consultants are at the forefront of change, aiming to disrupt the management function. A new breed of management-consulting firms now deploys algorithmic processing to automate not the line workers’ or sales associates’ jobs, but the manager’s job.

In effect, management consulting is a tool that allows corporations to replace lifetime employees with short-term, part-time, and even subcontracted workers, hired under ever more tightly controlled arrangements, who sell particular skills and even specified outputs, and who manage nothing at all.
Read: The 9.9 percent is the new American aristocracy

The management function has not been rendered unnecessary, of course, or disappeared. Instead, the managerial control stripped from middle managers and production workers has been concentrated in a narrow cadre of executives who monopolize planning and coordination. Mid-century, democratic management empowered ordinary workers and disempowered elite executives, so that a bad CEO could do little to harm a company and a good one little to help it. Today, top executives boast immense powers of command—and, as a result, capture virtually all of management’s economic returns. Whereas at mid-century a typical large-company CEO made 20 times a production worker’s income, today’s CEOs make nearly 300 times as much. In a recent year, the five highest-paid employees of the S&P 1500 (7,500 elite executives overall), obtained income equal to about 10 percent of the total profits of the entire S&P 1500. 

© Provided by The Atlantic CEO-to-worker-compensation ratio chart.

Management consultants insist that meritocracy required the restructuring that they encouraged—that, as Kiechel put it dryly, “we are not all in this together; some pigs are smarter than other pigs and deserve more money.” Consultants seek, in this way, to legitimate both the job cuts and the explosion of elite pay. Properly understood, the corporate reorganizations were, then, not merely technocratic but ideological. Rather than simply improving management, to make American corporations lean and fit, they fostered hierarchy, making management, in David Gordon’s memorable phrase, “fat and mean.”

Running a company on a concentrated model requires a cadre of managers who possess the capacity and taste to work with the intensity demanded of top executives today. At the same time, corporate reorganizations have deprived companies of an internal supply of managerial workers. When restructurings eradicated workplace training and purged the middle rungs of the corporate ladder, they also forced companies to look beyond their walls for managerial talent—to elite colleges, business schools, and (of course) to management-consulting firms. That is to say: The administrative techniques that management consultants invented created a huge demand for precisely the services that the consultants supply.

This is where the recent history of American management intersects with Pete Buttigieg’s life story.

Read: The secret shame of middle-class Americans

Whereas a century ago, fewer than one in five of America’s business leaders had completed college, top executives today typically have elite degrees—M.B.A.s as well as bachelor’s degrees—and deep ties to management consulting. Many executives have consulting backgrounds themselves. McKinsey alone counts 70 Fortune 500 CEOs among its alumni, including the current CEOs or COOs at Google, Facebook, and Morgan Stanley. I

Indeed, a greater share of McKinsey employees become CEOs than any other company’s in the world. Management consultants who stay with their firms also do very well. The three most elite management consultancies—McKinsey, Bain & Company, and the Boston Consulting Group—regularly boast double-digit revenue growth and today generate nearly $20 billion in revenues and employ nearly 50,000 people.

These facts give management consulting a powerful charisma for students and recent graduates of elite colleges and universities. Today, management consulting sits beside finance as the most popular first job for graduates of Harvard, Princeton, and Yale. (Stanford graduates choose among consulting, finance, and tech.) Harvard Business School, which sent zero graduates to McKinsey prior to 1953, now regularly sends nearly a quarter of its graduating class into consulting, while Wharton graduates are 10 times more likely to work in consulting than in manufacturing.

The incomes that management consultants secure renders these numbers unsurprising. McKinsey pays B.A.s nearly $100,000 and newly minted M.B.A.s nearly $200,000, and although the firm does not release information about profits, industry insiders believe that partners might command incomes in the millions. McKinsey’s charisma, however, is not just economic. The firm continues to perform its own eliteness, with the application process involving famously rigorous analytic interviews—which test formal problem-solving skills but no substantive knowledge (certainly not of any concrete industry or business)—so that getting hired has in itself become a mark of accomplishment at top colleges. McKinsey also continues aggressively to recruit the most elite graduates, treating Rhodes or Marshall Scholarships as equivalent to M.B.A.s for the purpose of rank and pay, and boasting, “We are the largest employers of Rhodes scholars and Marshall scholars on the planet, outside of the United States government.”

Meanwhile, the firm expressly emphasizes its internal meritocracy. McKinsey’s mission statement promises to “create an unrivaled environment for exceptional people” and the firm boasts of its “university-like capabilities,” which give its consultants proprietary analytic powers that no other business advisers can match. A recent survey of business-school graduates found that it demands longer hours than any employer of M.B.A.s other than Goldman Sachs and Barclays. And it embraces an “up or out” promotion regime, under which people who stop advancing through the firm are asked to leave.

Consulting, like law school, is an all-purpose status giver—“low in risk and high in reward,” according to the Harvard Crimson. McKinsey also hopes that its meritocratic excellence will legitimate its activities in the eyes of the broader world. Management consulting, Kiechel observed, acquired its power and authority not from “silver-haired industry experience but rather from the brilliance of its ideas and the obvious candlepower of the people explaining them, even if those people were twenty-eight years old.”

Pete Buttigieg fit the McKinsey profile perfectly. “I went to work at McKinsey because I wanted to understand how the world worked,” he has said, adding that “they were willing to take a chance on me even though I didn’t have an M.B.A.” He believes that the lessons the firm teaches apply widely, not just across industries but to government as well: In an interview with The Atlantic, he said that McKinsey was “a place where I could learn as much as I could by working on interesting problems and challenges in the private sector, the public sector, in the nonprofit sector.” Perhaps he was right. He became—without any prior governmental experience—the youngest mayor in South Bend’s history; and now he aspires to become—without ever having held national or even statewide office—the youngest president in American history.

Yet Buttigieg’s association with McKinsey also exacerbates the left’s skepticism of his candidacy. The firm’s clients—which include ICE, opioid manufacturers, and authoritarianregimes—generated the first doubtful headlines, as people wanted to know whether Buttigieg would disclose his McKinsey client list. Buttigieg answered, “I never worked on a project inconsistent with my values, and if asked to do so, I would have left the firm rather than participate.” He probably wouldn’t have had to leave, because McKinsey allows its employees to refuse to work for particular clients that they regard as unconscionable. It is therefore no surprise that when Buttigieg eventually did disclose his clients, the companies were indeed benign.

A deeper objection to Buttigieg’s association with McKinsey concerns not whom the firm represents but the central role the consulting revolution has played in fueling the enormous economic inequalities that now threaten to turn the United States into a caste society.

Meritocrats like Buttigieg changed not just corporate strategies but also corporate values. Particular industries, and still more individual companies, may be committed to distinctive, concrete goals and ideals. GM may aspire to build good cars; IBM, to make typewriters, computers, and other business machines; and AT&T, to improve communications. Executives who rose up through these companies, on the mid-century model, were embedded in their firms and embraced these values, so that they might even have come to view profits as a salutary side effect of running their businesses well. When management consulting untethered executives from particular industries or firms and tied them instead to management in general, it also led them to embrace the one thing common to all corporations: making money for shareholders. Executives raised on the new, untethered model of management aim exclusively and directly at profit: their education, their career arc, and their professional role conspire to isolate them from other workers and train them single-mindedly on the bottom line.

Buttigieg carries this worldview into his politics. Wendell Potter, at The Intercept, observes that “a lot” of Buttigieg’s campaign language about health care, including “specific words” is “straight out of the health-insurance industry’s playbook.” The influence of management consulting, moreover, goes far beyond language to the very rationale for Buttigieg’s candidacy. What he offers America is intellect and elite credentials—a combination that McKinsey has taught him and others like him to believe should more than compensate for an obvious deficit of directly relevant experience.

This is a dangerous belief. Technocratic management, no matter how brilliant, cannot unwind the structural inequalities that are dismantling the American middle class. To think that it can is to be insensible of the real harms that technocratic elites, at McKinsey and other management-consulting firms, have done to America. Such obliviousness may not be malevolent; but it is clueless.

And emphasizing private virtue or personal ethics—including the ethics that would have led Buttigieg to reject distasteful clients—only protects structural inequalities, by creating scapegoats to absorb moral scruples and redirect outrage away from systemic injustice. American democracy, the left believes, cannot be rejuvenated by persuading elites to deploy their excessive power somehow more benevolently. Instead, it requires breaking the stranglehold that elites have on our economics and politics, and reempowering everyone else.

Daniel Markovits is the Guido Calabresi Professor of Law at Yale Law School and the author of The Meritocracy Trap.

© Reuters / CHARLES PLATIAU
Related video: Buttigieg says criticism of former employer McKinsey 'well deserved' (provided by MSNBC)

What The Victoria’s Secret Harassment Allegations Teach Us About Retaliation



Elana Lyn GrossContributor ForbesWomen
I cover leadership news with a focus on women



Ed Razek, the former CMO of L Brands Inc., center, hugs Kelly Gale, left, and Jasmine Tookes, right, ... [+ © 2014 BLOOMBERG FINANCE LP.

Victoria’s Secret has long been criticized for a lack of diversity and objectification of women in its advertisements and on the runway of its now-canceled annual fashion show. A new report found that the work environment, from the top down, was misogynistic and rife with sexual harassment and bullying.

The New York Times interviewed more than 30 current and former executives, employees, contractors and models and reviewed court filings and other documents. Their reporting found that Ed Razek, the former CMO of L Brands, the parent company of Victoria’s Secret, was the subject of multiple complaints of inappropriate conduct. He reportedly tried to kiss models, asked them to sit on his lap and touched one woman’s crotch before the 2018 Victoria’s Secret fashion show. (Razek said the allegations against him were “categorically untrue, misconstrued or taken out of context.”) Executives said that they told Leslie Wexner, the billionaire founder and CEO of L Brands, about Razek’s behavior but that their messages seemed to be disregarded.

“What was most alarming to me, as someone who was always raised as an independent woman, was just how ingrained this behavior was,” Casey Crowe Taylor, a former public relations employee at Victoria’s Secret told the New York Times. “This abuse was just laughed off and accepted as normal. It was almost like brainwashing. And anyone who tried to do anything about it wasn’t just ignored. They were punished.”
Today In: Leadership

In the U.S., Title VII of the Civil Rights Act prohibits employers from discriminating on the basis of sex, race, color, national origin and religion. The law defines harassment as illegal when, “enduring the offensive conduct becomes a condition of continued employment,” or “the conduct is severe or pervasive enough to create a work environment that a reasonable person would consider intimidating, hostile, or abusive.” The Equal Employment Opportunity Commission (EEOC) investigates workplace harassment in the U.S. People have a right to report harassment, participate in a harassment investigation or lawsuit, or oppose harassment, without fear of retaliation.

When someone files a complaint with human resources or a manager, employers are legally obligated to stop the conflict, protect the employee who reported and launch an investigation which usually includes interviews and collecting evidence. At the end of the investigation, the employer should determine if disciplinary action should be taken such as firing the individual who was found to be creating a hostile or unsafe work environment.

However, one of the difficulties is that the investigation process is not always followed. Even though retaliation for reporting is illegal, it is the most common discrimination charge filed with the EEOC. Richard B. Cohen, an employment discrimination lawyer at the law firm FisherBroyles, explains that retaliation is any adverse action ⁠— such as being demoted, fired or sidelined ⁠— that happens after someone reports discrimination. “It's much easier to prove than the underlying discrimination,” says Cohen. “All you have to show is that you, in fact, made a claim or filed a complaint, that you suffered some adverse action at work and that there was some nexus between the two.” Although he says that there is no way for an employee to prevent retaliation, he recommends taking detailed notes about what happened and keeping any evidence like emails or text messages.

When reports of harassment are neglected, toxic behavior persists. Having harassment policies in place is meaningless if they are not enforced. “Rules are great, but if you don't have the skills to follow the rules, then the rules fall apart,” says Sarah Beaulieu the author of "Breaking the Silence Habit: A Practical Guide to Uncomfortable Conversations in the #MeToo Workplace." “If you announce rules and then everybody walks out of the announcement back to a culture of silence, then really what that's doing is it's empowering people who are perpetrating sexual harassment and leading them to believe accurately that they'll continue to get away with their behavior.”

What happens when misogynistic behavior and harassment is pervasive and starts at the top? “It's very hard as a company to do anything but clean house,” says Cohen. That may be in motion at Victoria’s Secret. Wexner is reportedly considering stepping down after 57 years as chief executive officer of L Brands and exploring strategic options for Victoria’s Secret including a possible sale. In the meantime, L Brands seems to be distancing itself from the lingerie company: this week the main photo on the investor relations website was changed from scantily clad Victoria’s Secret models to a picture of scented soap.

Follow me on Twitter or LinkedIn. Check out my website or some of my other work here.


Elana Lyn Gros
I cover leadership news with a focus on women. My book, "What Next?: Your Five-Year Plan for Life after College" will be published by Adams Media, an imprint of Simo...

The company that botched the Iowa caucus was formed only months ago


Alexis C. Madrigal App makers respond to critics, claim data transmission was the issue

It’s all fun and games until someone’s app messes up the Democratic Iowa caucus.

Before Monday's debacle, “Shadow” was merely a playful name. A small team of political technologists had given it to their company when it launched early last year, largely as a reference to their primary product: Lightrail, which is supposed to make moving data among different campaign tools easier. Light and Shadow, get it?

That might have been clever in a conference room. But now the name seems sinister. After problems with an app made by Shadow, the Iowa Democratic Party had to postpone announcing the results of Monday's caucus, throwing the presidential race into chaos, enraging Democrats and Republicans alike, and birthing a ton of conspiracy theories about hacking and other malicious interventions.


To damp down fears about the integrity of the data, the Iowa Democratic Party has emphasized the existence of a paper trail, a key facet of election integrity. “Because of the required paper documentation, we have been able to verify that the data recorded in the app and used to calculate State Delegate Equivalents is valid and accurate,” Price said


How could this have happened? At this early juncture, the Shadow situation seems like a testament to the faith that people place in technology and political insiders. Shadow incorporated only in September, meaning that a crucial piece of the Iowa caucus was in the hands of a company that was technically five months old. Despite serious warnings from experts, Iowa’s Democratic Party handed part of its election infrastructure to a highly networked start-up with a handful of engineers building an entirely untried app. The resulting mess shows the deeply interconnected nature of political operatives and the risks of chasing the newest new thing.

In preparation for the caucus, the Iowa Democratic Party wanted to update its reporting infrastructure, moving away from a system in which the state’s precincts would phone in results to the state party and introducing an app the precincts could use to simply upload the information. The party paid Shadow $60,000 over the past few months to develop an app called IowaReporterApp, according to financial disclosures. In principle, this is not a complicated application. It must send the results from 1,700 precincts to a central office for tabulation. The caucus runners had to take and upload a picture of their results, which were then supposed to be captured by the app.

[Read: Who needs the Russians?]

But something or somethings went wrong. Vice detailed failed attempts to log in to the app, and noted that very little testing could have been completed on the app, because of the short development period. In cases when precinct chairs were able to log in, according to CNN, the Shadow app struggled at the final step of the results-reporting process. A precinct chair told CNN that after the precinct chairs uploaded the photo, “the app showed different numbers than what they had submitted as captured in their screenshot.”

The Iowa Democratic Party appears to have confirmed that this is what went wrong. “While the app was recording data accurately, it was reporting out only partial data. We have determined that this was due to a coding issue in the reporting system,” the party’s chair, Troy Price, said in a statement this morning. “This issue was identified and fixed. The application’s reporting issue did not impact the ability of precinct chairs to report data accurately.”



Over the past 20 years, small technology companies like Shadow have become an important piece of what it is to run for office. You need websites, digital advertising, and voter-data handling, as well as fundraising and voter outreach via text and email. While large campaigns can afford their own tech teams, most candidates and pieces of the party infrastructure rely on outside vendors, which supply them with software. Before this week, Shadow had highlighted only one client: the Hampden Township Democratic Club, in New Jersey.

 

© Jordan Gale / The New York T​imes Caucus-goers in​ Des Moines, Iowa

The company’s core team, led by CEO Gerard Niemira, is made up of veterans of Hillary Clinton’s campaign for the presidency in 2016. Niemira was that campaign’s director of product, working on voter-outreach tools. One staffer who worked closely with Niemira described him as “an exceptionally nice guy who knew what he was doing,” and said that the email and text-messaging tools his team built worked well. (The staffer requested anonymity for privacy reasons.)

Even if someone is not a grifter or a shady character, if you look anywhere in political tech, you’ll find a dizzying web of connections. The reason is that campaigns are short-term affairs, so people jump from one job to another, sometimes founding consultancies or small companies. Shadow has precisely that profile. It’s sold its text-messaging platform to many political organizations, including Pete Buttigieg’s and Joe Biden’s campaigns.

[Read: Why the Iowa caucus birthed a thousand conspiracy theories]

It seems clear that Shadow will take the fall here, even if the behind-the-scenes story of what went wrong with the app is probably complicated. The company fell on its sword on Twitter, apologizing. One crucial piece is what role another new and well-funded nonprofit called Acronym (another cheeky name!) played in the Iowa debacle. Acronym has received massive funding ($75 million) from Silicon Valley technologists and other wealthy individuals to build campaign tech for progressives. According to Niemira’s profile on LinkedIn, he was the CTO of Acronym until the spring of 2019, while also serving as the founder and CEO of a separate company, Groundbase, until Shadow spun up. (Both Shadow and Acronym have not responded to requests for comment.)

Acronym has muddied the waters by repeatedly revising how it describes its relationship with Shadow. In January 2019, Acronym’s founder, Tara McGowan, tweeted that her organization had “acquired Groundbase, the best CRM + SMS tool on the political market, along with their incredible team led by @gjniemira + are launching Shadow, a new tech company to build smarter infrastructure for campaigns.” It also appears that McGowan was, at some point, operationally involved: She invited interested parties to direct message her about the company’s “roadmap.”

Then, as the debacle unfolded, Acronym put out a statement running from the flaming wreckage. “Acronym is an investor in several for-profit companies across the progressive media and technology sectors,” the company said. “One of those independent, for-profit companies is Shadow, Inc, which has other private investors.” Sometime between last night at 2:34 a.m. eastern, when I took a screenshot, and this morning, Acronym changed the language on its website from saying that it “launched Shadow” to saying that it “invested in Shadow.”

Things happen with campaign technology. People are building fast with shoestring budgets. The apps don’t get enough testing. The volunteers don’t get enough training. “There was never any training on how to use the app or real-time getting the users in a room and seeing if they could log in,” said Sean Bagniewski, the chairman of the Polk County Democrats. “A lot of people were only getting the ability to download in the last couple of days.” Bagniewski also said that it wasn’t just the reporting app that failed. Much of the technology that the state party rolled out did not work correctly, he said, noting a glitchy online-accessibility request form.

Democrats had a famous flameout with software called Houdini in 2008. Mitt Romney’s campaign had similar problems with tech it called Orca. “We had time. We had resources,” Harper Reed, who ran the technology team for Barack Obama in 2012, told me at the time. “We had done what we thought would work, and it still could have broken. Something could have happened.”

But how the decision was made to select Shadow, what the Iowa Democratic Party asked for, and what the company delivered all merit scrutiny. The biggest question is: Why and how did an unproven company end up building this one-off caucus app, which seems entirely distinct from its primary work?

That’s one reason clarifying the relationship between Shadow and Acronym is important. McGowan’s husband, Michael Halle, was Hillary Clinton’s lead organizer in Iowa, and has deep links to the state-party infrastructure. For those upset by the caucus situation—particularly Bernie Sanders supporters who have long had beef with the Democratic hierarchy—the fact that Halle is now a Buttigieg adviser won’t do anything to tamp down their anger. Ben Halle, Michael’s brother, is Buttigieg’s Iowa communications director, who made waves tweeting out caucus result sheets that had an as-yet-unexplained pin number written on them. (I’ve reached out to Halle for comment and will update the piece if I hear back.)

Before the caucus mess, the Iowa Democratic Party had kept the app under tight wraps, refusing to disclose any details about it. Now the only way it can restore trust in the integrity of the process will be to come clean about how it settled on this app developer.

The problem with conspiracy theories, though, is that they assume high levels of coordination and competence. Look around and that seems far-fetched.

Jeremy Bird, a star field director with the Obama campaign, has noted that the problems with the caucus reporting went far beyond the app itself. People were downloading the app on the day of caucus itself, not far in advance. “That is a training/planning/organizational problem,” Bird tweeted. “Should have had multiple dry runs & zero people should have been downloading anything on caucus night.”

As is often the case, the technology that gets deployed doesn’t solve problems. It reveals them.

ROBOTS AT WORK AND PLAY A PHOTO ESSAY
https://www.theatlantic.com/photo/2020/02/photos-robots-work-and-play/606196/

GLOBAL
Democracy Drives Labor in a Hyper-Capitalist City


Growing numbers of people are joining unions in Hong Kong to pressure the authorities to respond to their demands.   

TIMOTHY MCLAUGHLINFEBRUARY 6, 2020

TYRONE SIU / REUTERS

HONG KONG—Angel was scrolling through the messaging app Telegram late last year when she saw a notice advertising a new union for health-care employees; her interest was piqued. As a 25-year-old nurse in the surgery department of a major Hong Kong hospital, she works long hours and sees how the facility consistently struggles with a shortage of workers. Nurses in busy wards skip their holidays and time off to cover shifts, and Angel worries about the quality of care patients receive. The nursing association she was a member of advocated for better working conditions, but the results were minimal: The main benefits were discounts on food and travel packages. “It wasn’t exactly about political issues,” she told me of the group.

So Angel—who asked to be identified by her first name to avoid punishment from her employer—signed up for the Hospital Authority Employees Alliance (HAEA), an upstart organization born out of the prodemocracy protests that have carried on here for months. The sustained demonstrations have led to a surge of interest in organized labor: Numbers from the city’s labor department show that one dozen unions were established in the final two months of 2019, the HAEA among them. In the past year, at least 23 unions formed and were recognized by the labor department. Their organizers and members hope to diversify protest tactics, adding the possibility of industrial action to demonstrators’ growing tool kit for civil disobedience. At a New Year’s Day march, union representatives courted new members with flyers and banners playing on popular protest slogans and memes. “Resist tyranny, join a union” was added to the chorus of chants.

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Hong Kong is a hyper-capitalist city whose government regularly touts its ease of business as one of its finest accolades. Unions here do not have collective bargaining power, and the largest labor group, the Hong Kong Federation of Trade Unions, is fervently pro-Beijing. But the city also has a history dotted with labor strikes and organizing, events that have played a pivotal role in its development. The renewed enthusiasm and interest point toward an invigorated labor movement. Until recently, though, it was unclear how the uptick in members and organizations could be wrangled and deployed.

Read: Hong Kong’s perfect crisis

This week provided an early indicator that the fledgling unions will likely be a formidable new challenge for an already beleaguered, deeply unpopular government. Thousands of members of the HAEA have gone on strike to pressure authorities to close the border with mainland China, disrupting health services at public hospitals across the city. The workers believe that the measure is necessary to stop the spread of the new coronavirus, which has radiated out from China, creating a global health crisis.


Thus far, the health-care workers have received widespread support: 60 percent of respondents to a recent poll conducted by the Public Opinion Research Institute said they backed the strike, while numerous other labor organizations, some also only recently formed, have signaled their interest in expanding the strike, potentially adding bus drivers, aviation workers, and educators to the mix. The prospect of a widening labor push rooted in the prodemocracy demonstrations would be another formalization of a movement that the government has been keen, but unable, to stamp out. Leung Po-lung, the author of A History of Early Hong Kong Workers and the Labor Movement, told me that these unions mark the beginning of a new wave of labor activism in Hong Kong. “These people that are forming labor unions, it means that they have hope,” he said. “The labor unions are utilizing their power against a government that is refusing to respond.”

The question remains, however, whether this movement will grip the city to the same extent that past strikes did, most notably in 1967. Then, routine labor disputes at a cement factory and artificial-flower plant quickly snowballed into larger grievances against the British colonial government that ruled Hong Kong. Buoyed by the gathering strength of the Cultural Revolution in China, left-wing labor unions pitted themselves against what the academics Benjamin Leung and Stephen Chiu have described as “the symbols of imperialist and capitalist authorities in Hong Kong.” Numerous labor actions, coordinated in part by the Hong Kong Federation of Trade Unions, spiraled into citywide violence. Leftists resorted to guerrilla tactics, carrying out assassinations and a deadly bombing campaign. Police officers killed several rioters and at one point staged a raid by helicopter. By the time the riots were put down, 51 people had died and more than 800 had beene injured. The Hong Kong Federation of Trade Unions faced a temporary setback for its role in the riots. But in the decades that followed, it deftly maneuvered along shifting political winds, aligning itself with the Chinese government in Beijing, and has largely been absolved of its role in the riots by the Hong Kong government. A prodemocracy rival, the Hong Kong Confederation of Trade Unions, emerged in 1990.

During Hong Kong’s current protests, calls have been made for a general strike, but such actions—unlike the demonstrations themselves—have been largely underwhelming and limited. The continued refusal by Carrie Lam, Hong Kong’s chief executive, to close the border with China, however, has spurred backlash. Her resistance comes despite overwhelming public support for the move, with 80 percent of people polled by the Public Opinion Research Institute saying they are in favor of it. Lam has argued that a full closure is not in line with World Health Organization regulations and could be seen as discriminatory toward mainland residents. As the strike, limited to nonessential workers, began on Monday, Lam softened her stance, announcing that she would close all but three border crossings. She said the strike played no role in her decision, adding that the effort would not succeed, and warned against people resorting to extreme measures. The partial border closing failed to quell the sense of unease and darkness on Hong Kong’s streets, though, and the mood worsened Tuesday, when the first death in the city from the virus was recorded.

Work-from-home orders and the cancellation of school until March have made Hong Kong’s normally packed sidewalks noticeably quieter. Supermarket shelves have at times been left empty by panic buying, as people fill carts with bags of rice, vegetables, and frozen dumplings. Lines for limited supplies of hand sanitizer and face masks stretch for blocks, with an estimated 10,000 people waiting in one such queue. Prison inmates who produce masks have been put on around-the-clock rotation to increase output. Riot police have been dispatched to stop angry residents protesting the border remaining open and plans to keep those possibly infected in nearby housing estates. Officials recently unveiled electronic monitoring devices to be worn by people under quarantine, a measure that seems pulled from a dystopian film. Some district councillors attempted to set up their own health checkpoint, and police say an unsuccessful bombing was linked to the border dispute. Every government that moves to bar arrivals from China—a list that now includes regional countries such as Singapore as well as nations farther afield such as the Federated States of Micronesia—brings new exasperation. Some are now concerned that Hong Kong’s refusal to shut the border means it will be cut off by airlines and foreign governments as they expand their own restrictions.

Much of the anger with the Hong Kong government about the coronavirus dovetails with grievances raised during the demonstrations started in response to a now-withdrawn bill that would have allowed extraditions to mainland China. Lam, a career bureaucrat, has faced a string of familiar accusations in recent weeks—that she has placed servitude to Beijing over the well-being of Hong Kongers, that she has acted too slowly to stem the unfolding health crisis, that she has remained stubbornly resistant to popular demands despite opinion being overwhelmingly against her. These frustrations are the same as those that helped fuel progressively confrontational protests last year. “No matter how much we protest and try to speak to the government, they don’t seem to care about citizens’ health,” Angel told me. (Lam’s position is not helped by her unwavering support for the police, who have arrested and belittled medical workers during the prodemocracy protests, and whom doctors have protested against for excessive use of force.)

Read: Hong Kong’s protesters finally have (some) power

On Tuesday morning, thousands of hospital staff in pastel-colored surgical masks snaked through the Kowloon area of Hong Kong as they waited to drop off their strike slips for day two of a planned five-day action. The HAEA is calling for barring any non–Hong Kong residents from entering the city via China. In line, Sam Chan, a physiotherapist, was, like almost everyone else I spoke with, surprised by the turnout. “Originally, I thought maybe a few colleagues would be willing to join, because this may sacrifice our careers,” the 25-year-old told me. “We expect the government to punish us in the future.”

According to the union, more than 7,000 workers took part that day, representing about 10 percent of all Hospital Authority staff. Yesterday afternoon, Lam announced another round of restrictions, requiring all travelers from mainland China entering Hong Kong, including the city’s residents, to be quarantined for 14 days, meeting another demand of the union. The announcement came as Lam warned that the city was entering a “crucial period” to stop the spread of the disease, which has infected 21 people here so far.

Though the Hospital Authority says the strike has disrupted numerous services, including cancer treatments and work in neonatal intensive-care units, Ng Sek Hong, an expert on labor law at the University of Hong Kong, says the government’s reaction to it has been filled with theatrical press conferences of little substance. Government authorities, he told me, “expressed every contempt to listen to, not to mention to discuss with, the striking union on their grievances and demands,” he told me.

Holding a red-and-white sign reading save hk now, Eugene, a 25-year-old nurse who works in a hospital gynecology department, told me that Lam was a “slave of Xi'' who refused to listen to public demands, referring to Chinese President Xi Jinping. She expressed the anti-mainland sentiment that has crept into some discussions about the border closure, saying that mainland residents would be untruthful about their medical conditions and travels in China. “All of the Chinese always tell lies and cross over into Hong Kong, and they can spread the virus,” she said. The prodemocracy demonstrations, she added, had the unintended consequence of dissuading many mainland travelers from visiting the city, possibly thwarting a larger outbreak. “We are very lucky because of the protests last year,” she said. “They think that we are so violent and they didn’t come here.”

Additional reporting by Anna Kam.

TIMOTHY MCLAUGHLIN is a Hong Kong–based contributing writer at The Atlantic.
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