Bald eagle numbers soar to new heights in this state

The bald eagle population in Wisconsin has made a huge comeback in the last 45 years.

© STOCK PHOTO/Getty Images A bald eagle sits in a nest in this stock photo.

According to new data released by the Wisconsin Department of Natural Resources, the state has shown a dramatic increase in the total number of active bald eagle nests since 1974.MORE: Researchers ask public to help find bald eagle nests in Ohio

"The success of bald eagles in Wisconsin is a comeback story fueled by the national ban on the pesticide DDT, added protections under state and federal endangered species laws, river cleanups under the Clean Water Act and public support of nest monitoring and protection efforts," the WDNR wrote on Facebook.MORE: 3 adult bald eagles watch over 3 eaglets in nest along Mississippi River

"Part of that public support includes donations to the Endangered Resources Fund via Wisconsin state income tax forms, purchases of an Endangered Resources license plate and citizen reports of bald eagle nests or nest-building activity."

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After Disasters, Puerto Ricans Are Left With $1.6 Billion in Unpaid Insurance Claims

When the ground shakes in Puerto Rico and it is time to head for higher ground, the people in the northwestern coastal city of Aguadilla find out the old way: the shrill of whistles.

© Erika P. Rodriguez for The New York Times A tsunami siren in Aguadilla, P.R., that broke during Hurricane Maria has yet to be repaired.

Aguadilla is one of two dozen cities on the island that do not have emergency alert sirens, even as hundreds of earthquakes have rattled Puerto Rico for weeks. The sirens were destroyed during Hurricane Maria in 2017, and insurers still have not paid long-pending claims that would allow the cities to install new warning equipment.

“I’ve seen people in town with a whistle hanging around their necks,” said Carlos Méndez Martínez, who retired as mayor last month after almost 25 years of running the city.

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More than two years after Hurricane Maria descended, destroying power poles, public buildings, homes, roads and other infrastructure from one end of the island to the other, an estimated $1.6 billion in insurance claims — particularly high-dollar claims filed by cities and condominium associations — remain unresolved.





Torres del Parque Condominium in Bayamón, P.R., is still waiting for repairs.Next Slide
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1/4 SLIDES © Erika P. Rodriguez for The New York Times

Torres del Parque Condominium in Bayamón, P.R., is still waiting for repairs.

Emergency facilities, hospitals, stadiums, basketball courts, convention centers and other government properties around the island are still in shambles, waiting for repair because private insurers have not paid claims.


Hurricane Maria exposed an important deficiency in the process of Puerto Rico’s disaster recovery: underfunded private insurers, who are subject to few regulations.

While blame has been directed at the federal government for not providing timely disaster relief, less attention has been paid to the private companies that had a contractual responsibility to help clients who had paid premiums, many of them for years. Two insurers went out of business after Maria, and many of those that did not collapse offered pennies on the dollar. In many cases, insurers nearly doubled premiums after the hurricane while continuing to fight what the companies described as exorbitant and fraudulent claims.

Hundreds of lawsuits have been filed.

Aguadilla was left with no compensation for more than the tsunami sirens. The city sued its insurer, MAPFRE Insurance, after the Spanish company paid out $2 million for a destroyed coliseum that experts said would cost up to $20 million to replace, the former mayor said. Also left unusable were a water park, an ice-skating arena and an oceanfront boardwalk.

“Obviously the only way to attack this is with lawyers — without that, they don’t pay,” said José Alfredo Londoño, president of the Astralis condominium association, a 210-unit complex in the Isla Verde neighborhood near San Juan. “They are not going to pay.”

His complex’s damages totaled more than $13 million, he said, but MAPFRE offered $1 million.

“Ridiculous,” Mr. Londoño said.

Out of an estimated $8.5 billion in insurance claims filed since Hurricane Maria, $6.9 billion have been paid, said Javier Rivera Ríos, who was Puerto Rico’s insurance commissioner throughout the wake of the storm. The remaining $1.6 billion, he said, were more complex cases that were taking longer to resolve.

The insurance battles on the island put a spotlight on the work of public adjusters, often hired by clients who suffer damages to help make their case to insurance companies. The nature of their job is to carefully read policies to determine everything a business, homeowner or municipality is owed. But in Puerto Rico, some of the insurance companies have accused public adjuster firms of pumping up claims in a quest for higher recoveries.

Alexis Sánchez Geigel, president of MAPFRE Puerto Rico, now the largest insurer on the island, said the company had paid more than $1 billion in claims. He said that nine of the 22 municipalities it covers have not been fully paid, and that seven of those use public adjusters.

“We have settled 99 percent of our claims,” he said, adding that company policy does not allow him to discuss pending claims. “Some of the allegations we have made are public.”

MAPFRE took an unusual and aggressive stance by suing two of its clients. The company took the cities of Cabo Rojo and Barceloneta to court, accusing them of submitting grossly inflated and fraudulent insurance claims.

MAPFRE offered Cabo Rojo $611,648 for its damages, while the city’s Mississippi-based public adjuster firm submitted a claim that surpassed $62 million, according to the lawsuit. In one multistory building, the adjuster said that every sink, toilet, urinal, soap dispenser and garbage can needed to be replaced, even though all of them, according to MAPFRE’s lawsuit, were in “perfect condition” and undamaged by the storm.

This was just one example of the kinds of inflated claims that insurers have been dealing with, Mr. Sánchez said. “Time will tell who did the right thing and if it was done properly or not.”

Cabo Rojo’s mayor, Roberto Ramírez Kurtz, said that he had not seen the claims before the public adjuster, Scott M. Favre, submitted them, and that was disturbed to learn the city’s claim was so high.

“I was bothered by that, and canceled the contract with the public adjuster,” Mr. Ramírez said. “It’s been a year with a new adjuster and we haven’t moved one inch forward. We have always acted in good faith. MAPFRE has not acted in good faith with us, and instead are punishing the people.”

Pedro Ortiz Álvarez, a lawyer who represents Barceloneta and several other cities, said insurance companies were using complaints about public adjusters as a red herring to distract from their own failure to make good on policies they wrote.

“They have used the subject of the public adjusters as an excuse,” he said.

The adjusters’ claims are often accompanied by matching estimates prepared by the Federal Emergency Management Agency, he said.

Mr. Favre, the public adjuster accused in MAPFRE’s lawsuit of inflating claims, said the insurance companies that have contested his claims cannot explain why so many experts agree with his damage estimates.

“When the estimate is greater than theirs, the insurance company calls that fraud,” Mr. Favre said. “But the disparity is often 1,000 percent.”

One municipal building he handled had panels blown off the roof, was flooded and lost all its windows.

“The carrier came up with $131,000,” he said. “And then let’s say I go out there and go with experts and came up with $3.8 million, FEMA says $4.9 million and then another contractor says $4 million. The carrier says, ‘You must be committing fraud.’”

Mr. Favre’s company came under fire when it was revealed that the firm, which has secured at least 40 government contracts, used consultants closely linked to the ruling New Progressive Party.

Six complaints have been filed against Mr. Favre by both clients and insurance companies, the insurance commissioner’s office said.

Mr. Rivera, the former insurance commissioner, said in an interview before his resignation last month that the protracted claims process showed the need to reform existing insurance laws. Puerto Rico has recently adopted some measures to help consumers through the claims process, including mandatory arbitration to settle disputes.

“I think that I have to recognize it could have been a better response, and for that we have new regulations,” Mr. Rivera said. “Consumers learned a lot: They have to purchase insurance seriously and understand what they are buying. There is a mix of high expectations and bad insurance.”

But Mr. Rivera will not be overseeing any additional reforms; after a series of accusations of conflict of interest involving personal loans and other matters, he stepped down from his post last month.

In the interview, Mr. Rivera said that, on average, customers received about 60 percent of the amounts they submitted on their claims, and that the majority were settled within 10 months. Some who got nothing from their insurance had to settle for payouts from a government catastrophe fund, while others are waiting for assets of the failed insurance companies to be distributed. Every insurance company on the island was fined for some deficiency or another, Mr. Rivera said.

He said his office sued several insurers for delaying claims until after the statute of limitations for a customer to file a lawsuit, an issue that was addressed with the new legislation. Puerto Rico’s nonvoting representative in Congress, Jenniffer González-Colón, said the continuing problems and series of new disasters highlighted the need for better federal oversight over insurers.

Iraelia Pernas, executive director of the Puerto Rico Insurance Companies Association, said that some customers were not sufficiently insured, and that the companies also saw a lot of fraud, such as pictures of the same broken window that were submitted for all the units in a building.

“Condominiums have similar windows; we can compromise on that,” she said. “But it is not possible that every apartment had the same air-conditioner, the same things on the table.”

A few public adjusters were asking for more than the policy limits, and some overestimated prices, claiming that a sink cost $600, she said.

“It’s a public restroom,” she said. “We are not talking about marble.”

While the cases wind through the courts, people like Luis M. Rodríguez Rivera, a 54-year-old disabled diabetic, are left in the lurch. Hurricane Maria soaked Mr. Rodríguez’s home in Guayama, cracking the floor and leaving it covered in mold.

“It’s as if it sprouted cracks and is exploding,” he said.

Mr. Rodríguez, a former school technology specialist, now alternates between staying with his mother or — when he does not want her to see him weeping — in his car. The law firm he hired estimated that his house needed $92,000 in repairs; MAPFRE gave him an $8,000 check his lawyers told him not to cash.

“It’s like I’ve fallen into a trap,” Mr. Rodríguez said. “You don’t know when you’re going to get what is owed to you to fix your house and live with dignity.”

Edmy Ayala contributed reporting from San Juan, P.R.

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Bumblebees are going extinct in a time of ‘climate chaos’

Bumblebees, among the most important pollinators, are in trouble. Fuzzy and buzzy, they excel at spreading pollen and fertilizing many types of wild flora, as well as crucial agricultural crops like tomatoes, blueberries, and squash.

© Photograph by Clay Bolt, Minden Pictures
Bumblebees like this species (Bombus impatiens) are vital for their role as pollinators, but many species are imperiled by extreme heat and other factors.

But their numbers are dropping. New research using a massive dataset found that the insects are far less common than they used to be; in North America, you are nearly 50 percent less likely to see a bumblebee in any given area than you were prior to 1974.© Photograph by Antoine Morin

Bumblebees pollinate many wild plants, as well as important crops like tomatoes, squash, and many types of berries.

Moreover, several once-common species have disappeared from many areas they were once found, becoming locally extinct in those places. For example, the rusty patched bumblebee, which used to flourish in Ontario, is no longer found in all of Canada—in the U.S., it’s endangered.

In a new paper published this week in the journal Science, researchers used a complex modeling process to suggest that their decline is driven in large part by climate change.

Specifically, the scientists found that in areas that have become hotter in the last generation, or have experienced more extreme temperature swings, bumblebees are less abundant. In Europe, they are 17 percent less plentiful than they were in the early 20th century. The scientists examined the abundance of 66 species across the two continents.

The approach suggests “climate chaos” is a primary driver of the drop in bumblebees, says study leader Peter Soroye, a doctoral student at the University of Ottawa.








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THIS MALE ANDRENA PERPLEXA WAS CAUGHT IN MARYLAND ON MAY 16.


“These declines are linked to species being pushed beyond temperatures they haven’t previously had to tolerate,” Soroye says. Their disappearance from a region means that they’ve either moved elsewhere or died.

Cool specialists

It has long been known that bumblebees are more suited to cold weather, with their fuzzy bodies and ability to generate heat while flying, which often allows them to be the first bees out in the spring. Exactly how vulnerable they are to heat waves and weather fluctuations still isn’t clear for most species, though this study suggests there’s a limit to their adaptability.

And it is indeed warming up. The last five years were the hottest ever recorded in the 139 years that the U.S. National Oceanic and Atmospheric Administration has tracked global heat.

There are several mechanisms at play, says study co-author Jeremy Kerr. The insects can simply overheat, as lab experiments have shown, but there may also be indirect impacts on vegetation and flowers that could lead to the bees starving, he adds.

Bumblebees only live one year at most, and queens often spend the winter in leaf litter or in the ground. Here, they are still vulnerable to shifts in temperature, and things like unusually early ice melts and fre-freezes, Kerr says.

The decline is dangerous for the environment since bumblebees’ pollination services are necessary for many flowering plants to reproduce, says Matthew Austin, a Ph.D. student and researcher at the University of Missouri in St. Louis who wasn't involved in the paper.

“As these plants are then used by myriad other organisms, the decline of bumblebees can have cascading ecological [effects] that may collectively cause biodiversity loss.”

There could also be economic costs. By one measure, bees contribute more than $15 billion to the U.S. economy by pollinating crops.
Other drivers of decline

Climate change is not the only factor behind the insects’ decline. They are also threatened by pesticides like neonicotinoids—which are extremely toxic to all bees—destruction of habitat by development and conversion of wildlands into agriculture, the spread of pathogens, and the release or non-native bees for commercial pollination.

“This study will be impactful in drawing scientists’ attention more to the role climate may play in the declines of these bees,” say Heather Hines, a researcher at Penn State University who wasn’t involved in the research. “That said, their data shows that while climate can explain declines to a large degree, it is not the only factor involved in explaining the overall decline in species richness observed over time.”

The authors agree, and note that the paper shows habitat loss was also a driver of local extinction. Kerr stresses that “we’re not arguing against the role of habitat loss and pesticide misuse as [drivers] of decline... we think the case for those things is strong, but just different.”

“What we’re pointing out is that there’s a strong climate change signal,” he adds. “If you ignore the climate change signal, you can’t understand extinction risk clearly.”

“While bees might be able to cope with one stressor alone, the combination of several stressors may bring a population over the tipping point,” says Matthias Becher, an ecologist with Exeter University in the U.K.

Some researchers went further. Jamie Strange, chair of the entomology department at Ohio State University, says that focusing on climate change could be problematic, because it ignores the many other causes of decline.

“My concern is not that their science is wrong, but that this work will draw the focus from some of the issues that desperately need to be addressed to save bee populations,” Strange says, which “are all equally or more pressing than climate change to impacting bee populations worldwide.”
How to help

There is good news, however, Soroye adds.

Since the paper suggests that extreme temperatures can impact the bumblebees, creating more parks or planting trees and shrubs in urban environments—which are often cooler than surrounding built spaces—could give them places to shelter from the heat, he says.

There are also other things people can do to help the bees.

Among the easiest are bee-friendly yard practices like planting native flowers that bumblebees can feed on, and avoiding the use of pesticides like neonicotinoids. Creating flower beds that are continuously in bloom can also help, Austin says, as well as waiting until spring to remove leaf litter, a prime denning spot for the insects.

RELATED VIDEO: Saving bumblebees became this photographer's mission

Acronym, the dark money group behind the Iowa caucuses app meltdown, explained

This isn’t how Acronym wanted to rocket onto the national stage.

Emily Stewart 7/2.2020

 

© Salwan Georges/The Washington Post via Getty Images A staffer stands in the shadow ahead of Sen. Bernie Sanders’ caucus night celebration in Iowa.

The Iowa caucuses debacle drew a lot of attention to a new app made by a company called Shadow that was at the center of many technical failures of the evening. And it’s also putting scrutiny on Acronym — the Democratic group that backed Shadow — which has sought the spotlight in recent months, though probably didn’t hope for this situation.


Acronym is a relatively new Democratic group that launched in 2017 and got active around the 2018 midterms in digital organizing. Its structure is, in a word, complex. Acronym is a nonprofit, but it also has a political action committee — under its nonprofit are for-profit entities that its nonprofit sometimes pays into. It is brazen and ambitious, which is not unique for a political strategy group, but it’s also somewhat shadowy and secretive. And it’s been trying to distance itself from the Iowa debacle, even though it’s really at the center of the storm.
Acronym is a lot of things all at once

If you pay attention to political media, you’ve probably noticed stories about Acronym popping up here and there in recent months.

In November, the New York Times covered its plan to launch a $75 million digital advertising campaign to counter President Donald Trump in 2020, and the Wall Street Journal profiled a former Facebook employee who was embedded in the Trump campaign in 2016 and has since joined Acronym’s ranks. Bloomberg wrote about the Courier Newsroom, a for-profit media company under Acronym’s umbrella that runs multiplelocal sites that deliver left-slanted news, countering a tactic often employed by the right. Acronym’s CEO, Tara McGowan, has quickly become a high-profile figure in Democratic politics and digital strategy.

Acronym talks a big game when it comes to its political strategy prowess — though it’s new enough and opaque enough that it’s not entirely clear what the organization is actually delivering. Now that Shadow, one of the companies affiliated with Acronym, is under the microscope, Acronym is too.

Related video: 48 hours later and Iowa caucuses winner still undetermined (provided by ABC News)
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In the wake of the Iowa caucus debacle, Acronym has tried to distance itself from Shadow. In a statement, spokesperson Kyle Tharp said that Acronym just happens to be an investor in the firm, along with others. “Acronym is a nonprofit organization and not a technology company,” Tharp said.

Except it’s more complicated than that. Shadow is a tech company, and both Acronym and Shadow have described their relationship as an acquisition, not an investment, in the past and on multiple occasions. Acronym and McGowan in the past have touted their work with Shadow — McGowan has often touted it on Twitter and talked about it on a podcast as recently as last month. But now, Acronym has scrubbed its website of mentions of launching Shadow and says it’s just one of multiple investors along for the ride. Acronym’s decision to distance itself from Shadow — or perhaps lying about it altogether — is making the situation worse, not better.

© Alex Wong/Getty Images A precinct chair shows the smartphone app made by Shadow that was at the center of the confusion in the Iowa caucuses.

“I don’t think they’re evil, but in their thirst to take over the world using a bunch of short-term donor money, they leveraged their political connections to get contracts that they didn’t have the expertise to fulfill,” one Democratic strategist told me.
“There’s this whole group of organizations that are feeding each other, and they’re ultimately all controlled by the same group of people”

But there’s a lot more to Acronym than Shadow. Under its nonprofit umbrella are multiple for-profit operations beyond Shadow, including the digital media operation Courier Newsroom and Lockwood Strategy, a digital strategy firm that McGowan runs. Acronym also operates a political action committee called Pacronym and publishes a podcast hosted by McGowan as well as a weekly newsletter.

“There’s this whole group of organizations that are feeding each other, and they’re ultimately all controlled by the same group of people,” another strategist said.

Acronym has for months been building itself up as one of the loudest players in the room in Democratic strategy. Now, people are starting to look under the hood.

Acronym did not return requests for comment for this story. On Wednesday evening, McGowan published a lengthy post on Medium as well as a series of tweets attempting to clarify the situation. She sought to cast Acronym as an investor in many of its projects, though she did acknowledge some “warts” in Shadow’s operations and wrote that “progress requires taking calculated risks and doing things differently.” McGowan also appeared to distance herself and Acronym from Shadow. She did not acknowledge Acronym’s attempts to downplay its relationship with Shadow, including altering its website.
Acronym has been around since 2017 — and its reputation has skyrocketed in recent months

McGowan, 34, has deep ties to the Democratic Party and has worked in Democratic circles for years. She started her career as a journalist and according to her LinkedIn profile got into politics when she worked as press secretary for Sen. Jack Reed of Rhode Island in 2010. Then in 2011, she went over to the Obama White House where she worked as a digital producer, after which she had stints at Tom Steyer’s NextGen America and consultancy Purpose. She later headed digital strategy at Democratic super PAC Priorities USA Action. In early 2017, McGowan founded Lockwood Strategy, a digital strategy firm she still runs. A month later, she launched Acronym.

On its website, Acronym describes itself as a “values-driven organization focused on advancing progressive causes through innovative communications, advertising, and organizing programs.” The organization claims that its affiliated PAC helped get 65 progressive candidates elected in 2018 with “new tech and digital-first strategies to register and turn out voters.”

A handful of traits have marked Acronym’s development in recent years: its intertwining with Facebook, its ability to get good press, and, in turn, its growing popularity with donors.

In September 2019, Ozy profiled McGowan as the Democrats’ “most dangerous digital strategist.” In November 2019, the New York Times ran a splashy story about Acronym’s plan to raise $75 million to push back against President Donald Trump on Facebook. The organization had raised only about 40 percent of that amount at the time.

Trump’s reelection campaign manager, Brad Parscale, has cultivated a public reputation for himself as a political digital guru — which, depending on who you ask, is or is not an accurate portrayal — and Acronym plans to answer that. And it has some big names in tow, the most prominent being former Obama campaign manager David Plouffe, who told the Times that the idea behind the effort was to have a Facebook ads mechanism in place before the Democratic Party’s nominee has been picked.

“Our nominee is going to be broke, tired, have to pull together the party and turn around on a dime and run a race for a completely different audience,” he said.

Weeks later, the Wall Street Journal published a profile of James Barnes, a former Facebook employee who had been embedded with the Trump campaign during the 2016 presidential race. The 2,500-word story cast Barnes as a figure who had seen the light and come over to the Democrats’ side with Acronym to try to undo what he’d done in the last election. Barnes isn’t the only former Facebooker in Acronym’s ranks; earlier in the day on Monday, hours ahead of the caucuses, a former Facebook data scientist announced he was joining the organization.

McGowan herself has become an increasingly common fixture in media stories, often commenting on the issues of the day. (Acronym has spoken with and sent statements to Vox about digital political strategy in the past.) When Google announced it would limit microtargeting around political ads, igniting speculation Facebook might follow suit, McGowan slammed the decision and said it wouldn’t curb disinformation but would instead “hinder campaigns and others who are already working against the tide of bad actors to reach voters with facts.” She said the decision affects Google’s ad inventory as well as inventory across the internet. “They are essentially using their market power to limit how campaigns can speak to voters where they get their information,” she said.

But there are indicators that things within Acronym are not as seamless as they would appear from the outside. One Acronym staffer told the Outline it is “far and away the most disorganized place I’ve ever been a part of.” According to the staffer, leadership says it’s just the “startup environment” of a new company, but it’s unclear how many people work at Acronym, or who they work for. There are a lot of blurred lines between the various Acronym outfits — for example, job links on the Courier News website redirect to Lockwood Strategy.
Acronym has gained popularity with big donors, while some onlookers have expressed skepticism

Acronym is a dark money group. That means donations to its 501(c)(4) nonprofit don’t have to be reported, and we don’t entirely know who their money is coming from — or how much they have.

But Federal Election Commission filings show Acronym’s PAC, Pacronym, is doing pretty well. Billionaire hedge funder Seth Klarman gave $1.5 million to the PAC in the fourth quarter of last year, venture capitalist Michael Moritz $1 million, and director Steven Spielberg $500,000, among others. As Recode’s Teddy Schleifer pointed out this week, the donation was Moritz’s first since 2011, and his largest disclosed political contribution ever.
  

© Michael Kovac/Getty Images for Vanity Fair
Michael Moritz speaks at the Yerba Buena Center for the Arts in San Francisco on October 19, 2016.

To raise that much money and obtain such a high profile, an organization like Acronym has to talk a big game. That’s what some of the four Democratic strategists I spoke with — all on the condition of anonymity so they could speak freely on the matter — see as part of the problem. Acronym knows how to get eager donors, especially those who are eager to get in on the next big thing, to buy into what it’s selling.

“Their pitch is that everyone is doing it wrong, and they’re here to disrupt and innovate,” one Democratic strategist told me. “And they don’t always follow through with that in a successful way.”

“On paper it sounds great,” another strategist said. “Investors want to invest in shiny, new, cutting-edge things, but there’s not a ton of actual evidence there.”

Part of the issue is that Acronym’s structure is complex, unusual, and opaque. Its major plank may be a nonprofit, but the entities under it are not. McGowan runs Lockwood Strategy and is, presumably, paying herself a salary out of the companies coffers, which is not illegal. Shadow and the Courier Newsroom are also private companies. So sometimes, when Acronym makes public pronouncements about what it’s going to do and spend on, it’s not clear where the money is coming from — or where it’s ending up. For example, in October, Acronym said it would spend $1 million on digital impeachment ads in swing states. And its FEC filings show that many independent expenditures for digital ad buys against Trump were filtered through Lockwood Strategies, which McGowan runs. That’s all really hard to track.

“With public pronouncements about things they’re doing that don’t happen, there’s less transparency about why,” one strategist said.

Some observers have also raised questions about the Courier Newsroom, which runs hypertargeted local news with a lean to the left. Last year, McGowan told Bloomberg that Courier Newsroom planned to focus on six swing states — Arizona, Michigan, North Carolina, Pennsylvania, Virginia, and Wisconsin — and “fill the news deserts, deliver the facts favorable to Democrats that [McGowan thinks] voters are missing, and counter right-wing spin.”

While politically unbiased news is hardly a new phenomenon in American politics — look at Fox News and the myriad of right-leaning outlets, for example — the Courier Newsroom launch did raise some eyebrows. If this were a Republican operative declaring its strategy like this, a lot of Democrats probably would have criticized it. So the reaction from the left has been a bit awkward.

Lachlan Markay at the Daily Beast drilled down on what’s so odd about Acronym’s approach:


But in trying to take on such a wide swath of digital political roles, ACRONYM has also been drawn into roles that appear to be in conflict: not just political vendor and vote tabulator, but also ostensibly-independent media mogul and Democratic activist.

Such conflicts have been apparent in ACRONYM’s backing of a handful of state-specific media organs billed as editorially-independent journalistic outfits. Through investment in an entity called Courier Newsroom, McGowan’s group has seeded such outlets in the key swing states of Wisconsin, Virginia, Arizona, Michigan, Pennsylvania, and North Carolina. The left-leaning consulting firm Lockwood Strategy, in turn, has helped staff up the outlets, and in at least one case, Lockwood was on the payroll of the Virginia Democratic Party as an ACRONYM-backed outlet favorably covered the party’s 2019 statehouse candidates.

In other words, one McGowan company was drawing a paycheck from the party as another pumped out news content boosting its election prospects.

Acronym’s founders made a bet that donors are often willing to throw money at vague digital projects, especially amid anxieties about the 2020 elections and concerns Democrats are lagging behind in terms of online and data strategy. And so they’ve built out a complex organization that lets them raise money and spend money — including on themselves — with their actual impact remaining unclear. At least until Iowa.
Acronym’s founders made a bet that donors are often willing to throw money at vague digital projects
Acronym changed its story after the Iowa caucuses screw-up

Sometimes, despite the best of intentions, technologies fail. And when they do, many would argue that the best path forward is for whoever built the tech to own up to the problem and quickly try to fix it. But that has not happened in Iowa.

This is not to say that Acronym is to blame for the meltdown in the Iowa caucuses. However, it’s become increasingly clear that the organization hurried to distance itself from the situation.

After it came out that the Shadow-built app, which according to Vice was called the IowaReporterApp, was at the center of the Iowa caucuses delays, Acronym came out with a statement saying it was just an investor in the tech company. It read, in part:


Acronym is a nonprofit organization and not a technology company. As such, we have not provided any technology to the Iowa Democratic Party, Presidential campaigns, or the Democratic National Committee.

Acronym is an investor in several for-profit companies across the progressive media and technology sectors. One of those independent, for-profit companies is Shadow, Inc, which also has other private investors.

But the tenuous relationship described in the statement above doesn’t appear to accurate. Or at the very least, both Acronym and Shadow have described their relationship differently in the past.

Shadow was initially a tech firm named Groundbase, founded by Hillary Clinton campaign veterans Gerard Niemira and Krista Davis and funded by progressive nonprofit Higher Ground Labs. The company was struggling after its campaign texting platform failed to take off, and Acronym stepped in to inject some cash and keep it from going bankrupt. They launched Shadow from there and new products, including an email app that was supposed to help the Democratic Party centralize its data. In a 2019 article, Shadow described its flagship product as a “universal adapter for political data and technology.” In practice, what that means is pretty indecipherable.

Acronym distancing itself from Shadow is a new development. In 2019, McGowan celebrated acquiring Groundbase and marketed the company openly on Twitter. Acronym put it on its website as well. While Acronym has since clarified it doesn’t own Shadow entirely, the organization has previously said it is “launching” Shadow and described the deal as an acquisition. On LinkedIn, Niemira lists himself as a former Acronym employee.

The problem is, Acronym left a lot of evidence that suggests it used to have a much closer relationship with Shadow than it’s now admitting to. According to the Intercept, for instance, Acronym and Shadow share an office space in Denver, Colorado, and as recently as last month, McGowan said Acronym was the “sole investor” in Shadow.



If you look at Acronym's "About" page today it says "we invested in Shadow" but if you look at the Wayback Machine from last month it's "we launched Shadow" pic.twitter.com/FM5XVddclh— Kate Knibbs ‍♀️ (@Knibbs) February 4, 2020

The, well, shadow around Shadow has been part of what’s so weird about the Iowa debacle. Prior to Monday, Shadow’s involvement in the Iowa caucuses had been kept secret. The Iowa Democrats said they were using a new app, but they wouldn’t name it, arguing that it was a security precaution to keep it from being hacked. Had they not been secretive about it, maybe someone would have noticed the problems with it prior to caucus day. Multiple sources told the Times that the app was under-tested and that caucus volunteers were poorly trained on how to use it.

Curiously, David Plouffe was asked about Acronym and Shadow on MSNBC on Monday as the Iowa caucuses debacle unfolded. Plouffe, seemingly unfamiliar with the app, said he didn’t know about it and had spoken via text with the CEO — presumably McGowan — who confirmed that Acronym was an investor in the tech. “I have no knowledge of Shadow or what’s happening,” he said. It’s entirely possible that Plouffe hadn’t heard of Shadow, as a board member whose main role seems to be to boost the group’s profile and fundraising. The Acronym team seems to have decided to stick with that distancing of ties to the app.

Regardless of the level of Acronym’s involvement, it still remains unclear how Shadow managed to release such a problematic app for such an event as important as the Iowa caucuses. One strategist I spoke with speculated this may have simply been a case of an overly ambitious agreement between Shadow and the Iowa Democratic Party, which reportedly paid just $60,000 for the app. Perhaps there was just too much excitement over the new, shiny thing.

“This has all the markings of a pet project of someone who says, ‘Oh, we can do that,’” the strategist said. “You let a company that has no track record just build the most important thing you’ve probably done in the last decade, and yeah, it was going to fail.”
Was Iowa just a massive screw-up, or is there something more nefarious at foot?

At best, Acronym’s behavior around Shadow could be described as odd. That and the Iowa Democratic Party’s initial secrecy around its relationship with Shadow has led to a number of conspiracy theories around the app malfunction and results delay. Some Bernie Sanders supporters have suggested this is an effort to undermine the Vermont senator, who prior to the caucuses was leading the polls, and boost a more establishment-friendly candidate, namely, Pete Buttigieg. Some on Trump’s side have claimed this amounts to rigging the election as well. And after the Des Moines Register’s Iowa poll was pulled from being released over the weekend, suspicions and conspiracies had already been afoot.

Shadow is raising even more suspicion now that its work with Democratic candidates has also been revealed. Buttigieg, Joe Biden, and plenty of others have paid Shadow for services, and in the past, McGowan has expressed her support for Buttigieg. (McGowan’s husband is also a senior strategist for Buttigieg.) Some Acronym employees have previously worked for Hillary Clinton and Barack Obama and are well-connected among Democratic insiders.

Many on the left — especially Sanders supporters who believe the cards were stacked in favor of Clinton in the 2016 election — are highly skeptical of the legitimacy of the Democratic primary.

During the last election, the Democratic National Committee held few debates and at awkward times, which some alleged was an effort to keep Sanders from getting airtime, and undertook other efforts that appeared to favor Clinton. Superdelegates pledged to her early in the process, seemingly anointing her the nominee. Sanders’s backers believe the Democratic establishment doesn’t want him to win the nomination this time, either (and indeed, some don’t) and worry about what lengths they might go to in order to stop him. Iowa’s big app fail doesn’t appease those concerns, and Acronym’s lack of transparency around its ties doesn’t help.

That there is some bad blood regarding Acronym among Democratic politicos — which is natural in any competitive industry — has become clear in the wake of the Shadow debacle. One strategist told me that the scrutiny on the organization was natural — it’s very young, very hyped, and seems primed for a misstep. Another was more cutting in their assessment of the situation: “People have been waiting for this to blow up and did not foresee that this would blow up in quite a spectacular way.”

The Aflac duck is 20 years old: Here's how he's changed the insurance world


Paul R. La Monica

© Aflac/YouTube

Insurance is boring. You have it because you need it, not because you want it. So it's amazing to think that insurance ads are among the most amusing on TV. And the Aflac duck, who's been quacking the company's name for 20 years, is a big reason why.

The first Aflac duck commercial aired on January 1, 2000. Geico's gecko debuted a few months before the start of the Aflac ad campaign. The pair have since helped turn insurance commercials into 30-second comedic interludes.

If not for the duck and gecko, there may not be a Flo from Progressive, AllState's Mayhem guy, the Liberty Mutual emu and Doug, or Super Bowl winning quarterbacks Peyton Manning, Aaron Rodgers and Patrick Mahomes doing lighthearted ads for Nationwide and State Farm.

Aflac CEO Dan Amos, who's been the head of the company since 1990, told CNN Business he's pleasantly surprised by just how much the duck resonates with consumers. The brand awareness that the ad created is a big reason for the company's success today, he said.

"Within three years of the first ad, our sales in the US doubled and our name recognition went from under 10% to around 90%," Amos said. "We now get texts, emails and calls from people wanting to wear merchandise with the duck on it. We've arrived."

Aflac, which reported its fourth quarter and full year results after the closing bell Tuesday, posted annual revenue of more than $22 billion. The stock has soared 325% in the past 20 years, compared to a 124% gain for the S&P 500.

Amos said the duck was the brainchild of the old ad agency Kaplan Thaler, which is now owned by Publicis. (Aflac has since switched marketing firms.)

Using humor to cut through the clutter of boring insurance ads

At the time, the goal was to try and simply raise awareness of the Aflac name. Amos said many at the company were skeptical about the duck and using humor to sell insurance to cover accidents and illness. Most insurance ads were dead serious. Think about Prudential and its iconic Rock of Gibraltar commercials.

"We knew we were making fun of our name and we were not sure how that would turn out. Nobody was doing humor in financial services ads to a great degree," Amos said. "There was a dead look on everyone's faces when we first showed it. But everyone gets it now."

The duck is such a marketing icon now that it has endured even after Aflac decided to fire its celebrity voice, comedian Gilbert Gottfried, in 2011 after Gottfried wrote a series of insensitive tweets about the March 2011 earthquake and tsunami in Japan that killed more than 15,000 people.

Aflac generates about three quarters of its revenue from Japan, and Amos said that after he first heard about Gottfried's tweets from a reporter, the decision to cut ties with Gottfried was made within minutes.

"We have vowed to never bring him back," Amos said.

Aflac then ran a nationwide search for a new voice, auditioning more than 12,000 people in six cities. The company ultimately decided to hire Minnesota radio station sales manager Daniel McKeague, and he's been quacking "Af-LAC!" ever since.

The duck has even gone high tech to help sick kids. Amos said that the company has already raised more than $145 million for pediatric cancer charities since the start of the ad campaign from the sale of stuffed plush Aflac ducks.

And it now has an interactive robot version of the toy duck that gets donated to children diagnosed with cancer. It's won best in show awards at both the influential Consumer Electronics Show in Las Vegas as well as at South by Southwest.

Amos said he's proud of the recognition for the toy -- and he's thrilled that the duck continues to be a Madison Avenue marketing hit twenty years after its first TV spot. Amos added that there are no plans for the duck to retire anytime soon.

"We were a good company before, but the duck catapulted us into a different category. We have brand recognition like Coke and Nike," he said. "I never really dreamed I would bet my whole career on a duck, but that's the way it turned out."

 

© Mark Lennihan / AP

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.
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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.

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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
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