Prison food is the latest target in a campaign to divest holdings
A labor-backed nonprofit is pushing state and local pensions to reconsider their ties to H.I.G. Capital LLC, a $34-billion private equity firm that owns one of the nation’s largest providers of food services to prisons.
”If you want to get a return and you haven’t been meeting the actuaries’ guesses in the public markets, you think about the private markets,” said Joshua Gotbaum, a guest scholar at the Brookings Institution and former director of the Pension Benefit Guaranty Corp. “It’s a challenge, because it used to be that people said to pension funds, ‘we don’t care what you do with the money as long as you make a profit.
In fact, Sen. Elizabeth Warren, who’s running for the Democratic presidential nomination, signed onto a letter sent at the end of September to a group of private equity firms, including H.I.G., expressing concerns about a business model they say often delivers poor services for high fees to a customer base that’s literally “captive.”
The drive for returns remains an obstacle to convincing public funds to drop private equity holdings in prison companies. And the legal structures in the contracts between private equity firms and the funds gives the pensions little control over what kind of companies the firm is invested in. They can’t simply require a private equity firm to sell its prison holdings.The most a pension fund could do is use a promise of a future investment as leverage to get changes, said Larry Laubach, chairman of the corporate practice group at Cozen O’Connor.
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