Emma Schwartz stories from The Center for Public Integrity

VIDEO: A laborer dies in a gas explosion, safety questions linger

2012-06-17T15:50:00-04:00

On Sept. 3, 2009, contract laborer Nick Revetta was killed in an explosion at U.S. Steel's Clairton Plant near Pittsburgh. Revetta's death and the events that followed reveal the limitations of a federal law meant to protect American workers.

SuperShuttle: A job or a business?

2012-05-18T12:56:29-04:00

Okieriete Enajekpo needs money.

It’s not that the Nigerian-born Maryland resident is unemployed.

But as a driver for the airport van service, SuperShuttle, he must pay the company upwards of $900 a week before he takes home any money of his own.

And going into his fourth day this week in January, Enajekpo is still more than $100 short of paying off his weekly debt and starting to earn cash for himself.

“People back home [in Nigeria] think, ‘Oh you’re in America so you must be doing well,’” he says. “They don’t understand.”

It wasn’t always like this.

Once, drivers of this ubiquitous blue-van airport shuttle service were full-fledged employees, earning a moderate (and dependable) hourly wage. But over the past 13 years SuperShuttle has transformed its cadre of drivers into so-called franchisees — what the company calls independent business owners. In doing so, SuperShuttle has shifted, in its own words, “hard to manage variable costs from the company” to the drivers, making “gross profits more stable and predictable.”

“It was too expensive and, frankly, almost all of our businesses were losing money,” says Thomas LaVoy, chief financial officer of SuperShuttle.

Some drivers say the shift has allowed them greater flexibility and a chance to start their own business. But Enajekpo and hundreds of SuperShuttle drivers across the country say the changes have done more harm than good — and in a series of lawsuits claim the company doesn’t allow them independence and is cheating its drivers out of wages and benefits they should be entitled to as employees.

“It's really a big racket,” says Mack Green, a Minneapolis driver who is also suing SuperShuttle. “It's a good company for someone in the company. But the way they have it operating, they could never lose, because the driver is responsible for everything.”

SuperShuttle disagrees. “We offer an opportunity to independent business people who want to be in business for themselves a solid foundation, a good company, association and the means with which to be successful,” says Judy Robertson, head of franchising at SuperShuttle. “How a franchisee operates a business really is dependent on a franchisee, their drive. But I believe we offer a good arrangement.”

Challenges to the model

Good or bad, SuperShuttle is not alone in its business model. Franchising is a growing sector. It added jobs three-and-a-half times as fast as the overall economy from 2001 to 2005, according to the International Franchise Association. Though it has struggled since the recession, the association projects the business sector to return to pre-recession employment levels this year.

This transformation of employees into franchisees and independent contractors has been going on for decades. But it has led to a legal problem known as employee misclassification. That is when a company classifies its workers as contractors or franchisees without giving them the required independence. When that happens, the worker loses some labor protections, and the company is exempt from tax payments such as unemployment and workers compensation — a financial loss state and federal government are feeling in their tax coffers.

Yet defining the boundary between legal franchisee or contractor and employee isn’t entirely clear. There’s no single definition of employee, which means that various state and federal regulators, and even the courts, may allow different standards for one company.

That’s certainly been the case with SuperShuttle. Federal regulators have largely stayed out the fray, with the exception of the National Labor Relations Board. In 2010, the NLRB’s regional office in Denver found that SuperShuttle drivers were employees. That meant drivers were allowed to unionize, and they are now in the middle of contract negotiations.

But two other groups of SuperShuttle drivers that tried to unionize were rejected. In a case from Dallas, an NLRB official determined the drivers were independent contractors. In Enajekpo’s case in Baltimore, the regional office did not reach that issue, finding that even if the drivers were employees, they had supervisory responsibilities and therefore could not unionize. Both cases are now on appeal.

A few state regulators have made small efforts to clarify the relationship. Two unemployment agencies, in Maryland and California, found that SuperShuttle drivers were employees and therefore eligible for unemployment insurance. SuperShuttle has appealed both cases.

This lack of action is why drivers have turned to the federal courts, but even there they’ve had little clarity. Though separate class action suits have been filed in New York, California, Florida, Arizona, Minnesota and Maryland, most have stalled because of a clause in the franchise agreement requiring drivers individually arbitrate their cases with the company. Cases in Florida and Arizona have already settled. A proposed settlement in New York suggests that, while the company won’t admit any fault, it’s willing to compensate drivers the amount of their franchise by arranging to sell it.

SuperShuttle declined to comment on the litigation but in court filings vigorously denies that it misclassifies workers.

A long day’s work

It’s still dark outside when Enajekpo, a 44-year-old father known to his friends as Ola, emerges from his townhouse in a modern cul-de-sac development in Prince George’s County, Md., on a recent Friday morning.

Dressed in slacks, a blue jacket and shirt imprinted with the yellow SuperShuttle logo, Enajekpo begins his morning routine.

Maintenance inspection. Check. Vehicle clean-up. Check. Next up: find the morning’s first job.

Sitting inside his still-frigid van, Enajekpo turns on his Nextel monitor to see what jobs are available this morning. Already, 32 vans are lined up at the airport waiting for passengers. Enajekpo knows it will be a long wait so he hopes to find a group heading from his neighborhood to the airport.

There’s one job at 7:25 a.m. for $64, just minutes from his house. He tries to bid for it but the monitor won’t let him.

“There’s no reason this job shouldn’t be popping up,” he says. “But this happens all the time.”

He shuts down the system, and reboots it, hoping the gig won’t disappear by the time he logs in again. This morning, he’s in luck.

But after he accepts the job, he finds it comes with a slight hitch: one passenger had a coupon, bringing Enajekpo’s take down to $60 because drivers must take all company discounts.

Still, Enajekpo doesn’t complain too much. Any money will help, especially this week when he already owes SuperShuttle $1,054.36. There’s a $197.59 fee to pay down his franchise purchase, a $179.20 fee for his van lease, $144.31 to cover insurance and a weekly $500 system fee for using the SuperShuttle reservations and equipment. He also has $33.35 in other fees SuperShuttle charges him for customer discounts or additional booking fees the company incurs when passengers sign up through third-party websites like Expedia. Enajekpo also owes SuperShuttle $79 from last week, when he didn’t make enough money to cover his debt. On top of all this, he’ll have a couple hundred dollars to pay the company in revenue sharing fees — 10 percent of fares for runs to the airport and 27.5 percent for runs from the airport, which includes an additional fee paid to the airport.

A world of debt

That’s just this week. Enajekpo’s debt began the day he signed up for SuperShuttle in 2004 and bought a 10-year franchise.

It wasn’t difficult. But it wasn’t cheap either. A 10-year franchise costs drivers between $15,000 and $40,000, depending on location, SuperShuttle’s Robertson says. At Baltimore-Washington International Airport, it costs $25,000.

The problem: virtually no driver has the money to pay up front.

So SuperShuttle, owned by the European giant Veolia Transportation, offers a financing system, usually over a seven-year period. It’s this loan that keeps drivers indebted to the company. The interest rates are fixed at a relatively high rate — between 12 and 15 percent, depending on the market — which means drivers can end up paying the company upwards of $60,000 by the time they’re done. (Baltimore drivers pay 15 percent interest.)

Drivers have several other costs. The first is the van. Many do not own one and instead lease a van from a SuperShuttle affiliate, Blue Van Leasing, where interest on the lease can go to 15 percent. Even if drivers do have their own van, SuperShuttle requires them to get a new one about every five years. Green, the Minneapolis driver, says he’d just paid off his van and was finally making money when SuperShuttle forced him to get a new one. “But it was a good, running van and it passed all these inspections,” he says. “They are in the business of selling vans.”

Drivers then rack up a weekly debt for the all-encompassing system fee, which drivers must pay whether or not they work. (They don’t get sick days or vacation days, but they can hire a relief driver to drive for them.) In Baltimore, that means drivers with a 10-year franchise owe the company a minimum $19,500 per year for the system fee alone.

Robertson, of SuperShuttle, says the system fee is important because most airports require SuperShuttle to make a minimum payment to the airport regardless of how much the company earns — an amount she says ranges from $200,000 at small airports to $1.4 million at Los Angeles International Airport.

These fees from franchisees all add up to big bucks for SuperShuttle. In Maryland alone, the company made about half of its 2010 revenue ($4.9 million) from unit franchise sales. Nearly all the rest came from reservations ($5.2 million), according to franchise disclosure documents.

This model has allowed the company to expand from 20 airports in 1999 to 33 airports in 2012, says SuperShuttle’s LaVoy. He says franchising has helped with turnover, once at 185 percent among drivers and now around 10 to 15 percent.

A pro or a con?

For some drivers, the arrangement works well. Pat Alden, 62, lives in Baltimore County, Md., and has been driving a SuperShuttle van since 2004. Alden started off as a relief driver for another franchisee and soon got her own franchise.

“I’m here because I want to be self-employed,” she says. “I chose this because of the flexibility.”

That flexibility is particularly important for Alden, who has spent most of her life running a series of small businesses. As a single mother of three — two with special needs — she often has to help her now-grown children with errands. Just the other week she was able to log in at the airport to wait in line for a job and still make it to the mechanic to get her son’s car fixed.

“I wouldn’t have been able to do that if it was a short wait,” she says. “So, is that a pro or a con?”

Sitting in her van on a recent morning she points out that even though she’d logged in at 3 a.m., she’d gone home to sleep. And while she’s still waiting in her van near the airport at noon, she’s going over papers for her mother’s estate. “So, am I really working now or not?” she says.

Alden estimates that, after expenses, she takes home around $30,000 a year.

“Nobody promises you how much you’ll make when you’re self-employed,” she says. But, she adds: “I feel fortunate that I’m not looking for work. Many people with all sorts of good degrees are unemployed. It’s a tough environment.”

Michael Adenugba, 53, a Nigerian immigrant, agrees. He began driving a SuperShuttle van eight years ago, but since he paid off his franchise he has a driver working it full-time and is leasing a Cadillac taxi run by SuperShuttle that he now drives instead.

“This is not a job that can make you rich — but just for you to survive,” he says.

A laundry list of rules

But drivers like Enajakpo and others who’ve filed lawsuits argue that the company makes it impossible for them to make enough and be independent.

The job certainly comes with a lot of no-can-dos. Drivers can’t use their van to work for any other company. They can’t advertise their services. They can’t refuse a job when they’ve been waiting for hours at the airport and only get one passenger.

There are also a number of musts. They must pay for their own gas and maintenance.

They must keep their van clean and it must look a certain way inside and out. (Which includes painting it blue with the SuperShuttle logo and putting in a laundry list of signs including one saying they accept credit cards and one banning smoking.)

They must wear one of several uniforms. Among the items they can’t wear: a sweater or baseball cap without a SuperShuttle logo.

And they do get penalized. When former Baltimore driver Fred Tinsley was cited on Sept. 17, 2009, for wearing “non-uniform items” including a “white shirt without a tie, shirt tail out, brown sandal type shoes,” he was given three days to comply or lose his franchise.

Too many franchises?

Some drivers also say it’s much harder these days to get enough work. They say that’s because SuperShuttle has been increasing the number of drivers, which hurts their ability to make money.

In Maryland, SuperShuttle had 62 drivers at the end of 2006 and by 2010 had 84. But its revenue has hovered around $10 million for the past few years.

SuperShuttle attorneys wrote in a letter to state regulators that it “does not knowingly or intentionally increase the number of franchisee-drivers beyond the level that it believes can be reasonably sustained over time.”

SuperShuttle’s Robertson adds: “I personally don’t believe that there’s a system set up that requires franchisees to spend an exorbitant number of hours per day working.”

But Enajekpo says that he’s seen the amount of work he gets slowly erode since he first started. It’s 8:30 a.m. when he drops off the two passengers at the airport from his $64 bid. He logs into the system to line up for the next run from the airport. He’s number 36 in line. So Enajekpo pulls up his van to a nearby Shell station and begins to wait.

“It’s going to be a while,” he says, pointing to a row of vans lined up at the same gas station.

Several drivers are sleeping inside their vans. “Some of them have probably been here since 3 a.m.,” he says. (Enajekpo also keeps a blanket and pillow in his van.)

Soon a red car drives by, slowly surveying each of the vans. It’s the manager who comes around to inspect drivers’ vehicles and uniforms, Enajekpo says.

The clock ticks slowly. At 4:10p.m., he’s finally called to pick up passengers. He gets two, and it’s dark again by the time he arrives home at 7:15 p.m. He looks down at the day’s tally: $150 earned in fares and $75 spent on gas.

The long fight

This lack of work is part of why Enajekpo began asking management to limit the number of new franchises.

Drivers across the country were also complaining about this issue. And in 2008, Tom Vitale, chief operating officer for Veolia’s On-Demand Division, wrote drivers a letter responding: “The only way for the company to provide all of this support which is critical to the success of your business as well as ours is to charge fees whether fixed or variable in nature. … The bottom line, yours and ours, is not going to change.”

Then, in 2010, SuperShuttle got a new contract with BWI, which increased airport fees from 15 to 17.5 percent of outbound fares — a difference drivers would have to make up. “We realize this change will be more of a financial hardship for many of you,” the company wrote in a memo to drivers, adding that it needed to raise payments in order to get the contract.

Enajekpo knew that would be hard. Though the company paid him $75,787.18 in 2009, after all his expenses and paying a relief driver Enajekpo was left in the red; His 2009 tax returns showed his income as -$2,665.

At the end of 2010, Enajekpo and colleagues took their case to the NLRB, arguing that they were really employees and should be able to unionize. When they lost, they turned to regulators: the Maryland Aviation Administration, (which spoke to the company but says it wasn’t responsible for labor oversight), the Public Utilities Commission (which says it didn’t have jurisdiction), the state Department of Labor, Licensing and Regulation (where the unemployment claim remains on appeal), and of course, federal court, where he finally settled with the company earlier this year.

John Singleton, a lawyer who has represented the group of drivers before state agencies and the NLRB says: “You’ve got a real problem here because you have different agencies of the state of Maryland, all designed to protect certain groups of people, failing to do their job.”

Enajekpo put it more bluntly in a letter to U.S. Attorney General Eric Holder. The state’s inaction has given the company, he wrote, “carte blanche freedom to exploit minority workers trying to eke a living and fulfilling part of their American dream.”

Correction: An earlier version of this story said that drivers for Super Shuttle earned a salary. In fact, these drivers were paid an hourly wage for each hour worked and not a flat salary regardless of the hours worked.

IMPACT: Environmental groups sue EPA over lack of coal ash regulation

2012-04-09T09:14:51-04:00

Environmental groups sued the Environmental Protection Agency in federal court Thursday over the EPA’s failure to regulate disposal of toxic coal ash.

“Politics and pressure from corporate lobbyists are delaying much needed health protections from coal ash,” Lisa Evans, a lawyer with Earthjustice, a nonprofit environmental law firm, said in a statement. “As we clean up the smokestacks of power plants, we can’t just shift the pollution from air to water and think the problem is solved. The EPA must set strong, federally enforceable safeguards against this toxic menace.”

Coal ash is the collective term for the solid remnants left over from the burning of coal at more than 500 power plants nationwide. It contains compounds such as arsenic, chromium, lead and mercury, which have been linked to cancer, birth defects, gastrointestinal illnesses and reproductive problems.

A 2009 investigation by the Center for Public Integrity revealed the havoc that coal ash has wreaked near ponds, landfills, and pits where it is dumped. Even the EPA has identified 63 “proven or potential damage cases” in 23 states where coal ash has tainted groundwater or otherwise harmed the environment. But critics say no meaningful federal regulations have been put in place.

The issue gained renewed attention after a dam holding billions of gallons of coal ash collapsed in eastern Tennessee in December 2008, destroying houses and water supplies and dirtying a river. Following the spill, EPA Administrator Lisa Jackson pledged to set federal standards.

The EPA unveiled a proposal in May 2010 with two options. Under the tougher of the two, the agency would classify coal ash as “hazardous,” triggering a series of strict controls for its dumping. Under the second option, the EPA would deem coal ash “non-hazardous” and merely set guidelines for the states.

Hundreds of people showed up at public hearings and sent in hundreds of thousands of comments on the proposal. But the EPA has yet to announce a final rule.

Thursday’s lawsuit seeks to speed up the process by forcing the EPA to take action under the Resource Conservation and Recovery Act, which requires that hazardous waste disposal regulations be routinely updated.

An EPA spokesperson said in a statement that the agency is still reviewing the lawsuit but "is aware of the concerns around coal ash" and "is committed to protecting people’s health and the environment in a responsible manner."

The EPA has already proposed a "historic" regulation of coal ash and "will finalize the rule pending a full evaluation of all the information and comments the Agency received on the proposal,” the statement said.

New whistleblower cases allege continued bank fraud

BANK OF AMERICA CORPORATION — 2012-03-09T12:22:34-05:00

Whistleblower lawsuits made public in recent weeks shed new light on abuses in the mortgage industry that led to — and continued well after — the housing crash in 2007.

The cases suggest that fraud inside the banking industry continued years after the meltdown, some as late as 2011. They have been made public as federal officials put the finishing touches on the $25 billion mortgage fraud settlement with five major lenders.

A suit unsealed March 7 alleges that Bank of America fraudulently misled borrowers and regulators in order to keep customers out of mortgage modifications that would have cost the bank money but potentially prevented foreclosures — making “a mockery of a program designed by Congress and the Treasury Department to help millions of struggling American homeowners,” the complaint stated.

As a condition of accepting $45 billion from the federal bank bailout, Bank of America promised to help move troubled borrowers into the taxpayer subsidized Home Affordable Modification Program (HAMP).

But that’s not what happened, according to the whistleblower suit filed by Gregory Mackler, formerly an employee of Urban Lending Solutions, the company Bank of America contracted to manage HAMP complaints.

Mackler claims the company developed a host of strategies to evade required HAMP modifications, using stalling tactics designed to run down the clock on the window of time borrowers were eligible for federally subsidized loan modifications.

The suit claims Bank of America:

Told borrowers and regulators that a complaint was “under review” while internally classifying the files as incomplete.
Parked cases with terminated or vacationing employees and sent payments to a “partial account” instead of crediting them to the loan, artificially inducing or prolonging a delinquent status.
Tried to persuade borrowers that did qualify for HAMP to take a proprietary loan that came with much less favorable terms, a violation of the bank’s agreement with the government when it took the bailout money.

Mackler, the whistleblower, rarely saw complaints resolved by moving a homeowner into a HAMP loan, although he was able to resolve one borrower’s complaint after alerting top management that the homeowner was an underwriter for AIG and presented an elevated risk of litigation.

Another whistleblower case filed in 2009 but not unsealed until last month detailed how Countrywide Financial Corp., now owned by Bank of America, developed a scheme to inflate housing prices, which ultimately led to more foreclosures. Bank of America allegedly manipulated home evaluations with help from LandSafe, a Bank of America subsidiary of appraisers, and a home building company, KB Home.

Those inflated prices, the complaint alleges, included thousands of Federal Housing Administration backed loans, which were supposed to be reviewed by qualified appraisers. But the complaint alleges that the companies skirted federal law by using rookie appraisers lacking certification from the federal government.

These came to the attention of Kyle Lagow, a former appraiser supervisor at LandSafe, who tried unsuccessfully to get the company stop.

Instead, these relationships allowed Countrywide to “use its market power to pressure appraisers to inflate values to whatever Countrywide needed and punish appraisers who refused to ‘play ball,’” the complaint stated.

Countrywide also set up a review system of the appraisals that the complaint alleges were used to “create the illusion” of due diligence but instead allowed “for rewriting and inflating of any appraisal valuations.”

“To put it plainly, Countrywide made money by making loans,” the complaint claimed. “It worked aggressively and unlawfully to prevent a final appraisal from coming in with a valuation less than was necessary to close the loan.”

A third whistleblower case unsealed last month also addressed fraud involving FHA loans, this time involving Citibank. The company settled the complaint in February for $158 million. The case was based on a whistleblower complaint brought by former quality assurance manager Sherry Hunt.

Citibank accepted responsibility for failing to verify borrowers’ ability to make payments and endorsing loans with “serious defects.” This violated government standards and as a result, since 2004, more than 30 percent of loans originated or underwritten by Citibank went into default.

Citibank spokesperson Mark Rodgers said in a statement: “We take our quality assurance processes seriously and have pro-actively undertaken process improvements to ensure that they are as robust as possible.”

Bank of America did not respond to calls for comment.

The federal government has until March 16 to decide whether to join the Bank of America or Countrywide actions.

These cases highlight issues that have been explored by recent Center for Public Integrity investigations. One piece documented evidence that Countrywide worked to silence whistleblowers who tried to report forged documents, inflated income documentation and other misconduct. One of the highest-level employees to complain about fraud inside Countrywide was Mark Zachary, a former vice president who alleged appraisal problems similar to those described in Lagow’s lawsuit. Zachary and Bank of America reached a confidential settlement in 2009.

Another Center story looked at how homeowners are still struggling to deal with a faulty mortgage modification process.

The $25 billion mortgage fraud settlement by 49 state attorneys general and several federal agencies included Bank of America and Citibank, as well as JP Morgan Chase, Wells Fargo, and Ally Financial Inc. Although the formal papers have yet to be filed in court, the U.S. Department of Justice announced that under settlement, the majority of the funds would go to principal reductions and loan modifications to borrowers under water. And roughly 750,000 borrowers who lost their homes to foreclosure will receive $2,000.

Virginians protest General Electric over foreclosures

WMC Mortgage Corporation — 2012-03-07T12:10:13-05:00

A crowd of Northern Virginia residents and clergy members marched to General Electric's offices in Washington, D.C., today, demanding that the company's CEO, Jeffrey Immelt, take responsibility for helping homeowners who received subprime loans from the company's now-closed mortgage arm, WMC Mortgage Corp.

WMC, was the subject of a Center for Public Integrity investigation, which found that after GE bought WMC in 2004 it continued to ignore complaints from compliance officers about suspicious loans supported by inflated incomes and falsified documents. After having pumped out roughly $110 billion in high-cost loans, the company’s finances began faltering and GE shuttered the unit in 2007

The FBI is now investigating WMC.

At today’s protest, Rev. Clyde Ellis, pastor at Mt. Olive Baptist Church in Woodbridge, VA, led off a series of speakers with a call-and-response litany of Immelt and WMC’s ills. “They made loans that were structured to fail!” he said.

“Shame!” the knot of roughly 75 protesters shouted back into the building’s otherwise empty lobby and 10-story high atrium.

The protestors were led by a coalition of religious groups, Virginians Organized for Interfaith Community Engagement (VOICE), which targeted GE because they say the company has refused to consider investing money in nearby Prince William County to help struggling homeowners make up for the equity and losses they incurred from the subprime loans. VOICE has successfully begun negotiations for reinvestments with other major lenders, including Bank of America.

The event came on the same day President Obama announced a new initiative for mortgage relief to military personnel.

GE spokesperson Russell Wilkerson said the company has agreed to fund one mortgage counselor and that it is reviewing VOICE's requests for additional investments.

"This is an ongoing discussion," Wilkerson said. ""It takes time to go through each of their items."

However VOICE member Rev. Nancy McDonald Ladd of Bull Run Unitarian Universalists in Manassas, VA, says that though they met with a GE representative last year, they've asked for follow up meetings three times since and been turned down.

What’s more, she said, WMC Mortgage was not part of the $25 billion nationwide attorneys general mortgage fraud settlement announced last month.

At the event, protestors left pink slips of papers — a notice of dismissal they said they were delivering to GE’s Immelt, who chairs President Obama’s jobs council.

"You're fired," the crowd shouted, as they asked for a GE representative to come downstairs to speak with them.

A handful of other clergy spoke before building security began ushering the group out the door.

Lawrence Lessig: One way forward

2012-02-29T14:01:03-05:00

Harvard Law Professor Lawrence Lessig spoke with the Center for Public Integrity about the problems with money's corrosive influence on the American political system — and what he believe should be done to fix it.

VIDEO: In the shadow of pollution

2011-11-30T05:00:01-05:00

Living and working in Muscatine, Iowa

In smelter town, decades of dirty air, disease — and bureaucratic dawdling

ASARCO Incorporated — 2013-04-19T14:36:05-04:00

HAYDEN, Ariz. — As Betty Amparano sees it, the failures that all but ruined this wisp of a town occurred on multiple levels.

A copper smelter failed to keep toxic air pollution in check. The state failed to lean on the smelter’s owner, Asarco. And the federal government failed, until days ago, to override the state.

“The bottom line is that the whole town is contaminated,” said Amparano, who was born in Hayden and has lived here most of her life.

Soil tainted by airborne metals has been excavated from hundreds of yards. In some families, generations claim to have suffered ill effects from bad air. Deaths from cancer are common. Regulators have done little; for people who live here, the sense of betrayal is profound.

On Nov. 10, the U.S. Environmental Protection Agency moved against Asarco for what the EPA describes as more than six years of illegal emissions of arsenic, lead, chromium and seven other dangerous compounds from the smelter. The agency issued an unpublicized administrative action that could result in millions of dollars in fines from Asarco for allegedly being in “continuous violation” of the Clean Air Act since June 2005. The action is a slap at both the company and the state — another measure of failure.

Asarco says its emissions are within legal limits and promises to “vigorously” contest the EPA’s claims. The head of the Arizona Department of Environmental Quality (ADEQ) calls the federal filing a “paperwork exercise” and an “attempt by the EPA to make it seem as if the state of Arizona has done nothing when, in fact, that is not true.” At the same time, he acknowledges the state has been too slow to act.

People in Hayden just want someone to do something about the air.

Known risks, government inaction

When it comes to toxic air pollution, help often arrives late. As an investigation by the Center for Public Integrity’s iWatch News and NPR has shown, the EPA itself maintains an internal watch list that catalogs the extent of foot-dragging by state environmental agencies entrusted by Washington to protect public health. Some agencies fail to crack down on known polluters for months or years. The Asarco smelter, while not on the watch list, is among more than 1,600 facilities the EPA considers “high priority violators” of the Clean Air Act — sites that regulators believe need urgent attention.

Here, government inaction goes back decades.

Amparano started a lawsuit against Asarco in the late 1990s — since settled — that came to include more than 200 plaintiffs. She welcomes the federal intervention but wishes it had come sooner. She’d like to ask the EPA, “Why the hell did you take so long?”

Since 1912, Hayden, population barely 900, has been both blessed and cursed by the presence of the smelter, fed by Asarco’s massive, open-pit Ray Mine 20 miles up the road. The smelter and mine have brought with them a precious commodity in this barren stretch of southeastern Arizona an hour north of Tucson — jobs. The jobs may have come at a steep price.

Asarco has spent the past three years cleaning up Hayden. On order of the EPA, the company has paid millions for the removal and replacement of dirt in the yards of nearly 300 residents because the soil was contaminated with arsenic, which can cause cancer, and lead, which can disrupt brain function.

And yet emissions from the smelter and dust blown from a 2,000-acre tailings pile — an ever-expanding mountain of mining waste — continue to deposit those same metals and other poisons on this poor, mostly Latino community.

It’s hard to escape Asarco’s footprint. The smelter’s 1,000-foot smokestack is visible from anywhere in town. A community playground and swimming pool lie just yards from the plant’s fence.

Asarco has long maintained — and the state concurs — that the Hayden smelter is not a “major source” of hazardous air pollutants, a designation that could force the company to install costly controls. The EPA disagrees, saying in its Nov. 10 filing that Asarco “has failed and continues to fail to comply” with federal rules applying to big polluters.

“There is no simple paperwork violation,” Jared Blumenfeld, the EPA’s regional administrator in San Francisco, told iWatch News and NPR. “We feel very comfortable, based on the science, that the Hayden Asarco facility is a major source and therefore needs to comply with the Clean Air Act by putting control technologies on.”

Amparano and her older sister, Mary Corona, have inventoried what they describe as a staggering amount of death and disease in Hayden: Middle-aged people and children who succumbed to cancer. Kids with asthma and young adults who may be suffering the effects of childhood lead exposures.

The pollution and the risks have been well known to regulators for years.

A 1980 memo by a state environmental official noted that the Hayden smelter has “problems with lead and arsenic fumes during their process because of the type of ore they receive … There is still a large amount of fugitive gas escaping.”

Concerns about fugitive emissions — from parts of the smelter other than the smokestack — continued. In 2009, the EPA reported that “air monitoring in [Hayden] has shown levels of arsenic, lead and chromium still exceeding public health standards, probably due to toxic fumes escaping from leaks in the plant” — an assertion Asarco disputes.

Asarco acknowledges discharging arsenic, lead, sulfuric acid and other pollutants from the smelter but accepts no blame for anyone’s poor health. “There’s no reason to be alarmed,” said Joseph Wilhelm, general manager of the company’s Hayden operations. Nonetheless, Asarco, which emerged from bankruptcy in 2009 and now is reaping the benefits of soaring copper prices, has promised to do better. In a statement to iWatch News and NPR, the company said it is investing $9 million to “significantly reduce not only lead emissions but other [hazardous air] emissions including arsenic and chromium.”

The EPA seems unimpressed.

In a letter on July 27, the agency chastised Asarco for not taking the Hayden cleanup more seriously, saying the company seemed more interested in justifying its lack of cooperation than in “providing any attempt at compliance.” Asarco is contesting the EPA’s allegations through a dispute resolution process.

In a letter to Arizona Gov. Jan Brewer on Nov. 8, EPA Administrator Lisa Jackson wrote that air monitoring this year had measured lead levels in Hayden at up to three times the federal standard.

And in its Nov. 10 “finding of violation,” the EPA alleged that Asarco has, among other things, failed to comply with emissions limits since 2005.

The federal government, which allows states to be the primary enforcers of the Clean Air Act, has largely deferred to Arizona’s regulatory agency. Despite the EPA’s allegations, Asarco has faced few repercussions for its activities in Hayden. A spokesman for the ADEQ said the company over the last five years has paid a single, $77,500 air pollution fine — for blowing dust from the tailings pile.

Asarco is owned by a Mexico City-based mining and smelting conglomerate, Grupo México, which reported what it called “record results” for 2010 — more than $8 billion in sales, a 67-percent increase over 2009. Copper sales alone totaled $5.3 billion, up from $2.7 billion.

A company town

Workers have been gouging copper ore from the Ray Mine since 1880. Asarco began processing the ore at its Hayden smelter in 1912, turning out 800-pound slabs of nearly pure copper called anodes.

“Without Asarco, the town of Hayden wouldn’t be able to exist,” said Mayor Monica Badillo, an operator with the company. “We get a lot of our tax revenue from the mine, so that’s what helps us continue to thrive. Every bit of copper that they sell, we get sales tax on that.”

Mary Corona and her sister, Betty, were born in 1958 and 1959, respectively. They grew up with four siblings in Hayden’s barrio, known as San Pedro. Mary recalls having bloody noses and fevers as a child and recurring sores on her torso that looked like cigarette burns. She and Betty would play in a gully — an arroyo — behind their home and apply purple and pink residue to their faces as pretend makeup. That residue, they now believe, was a toxic byproduct of Asarco wastewater.

Huge dust clouds from the tailings pile were common in the 1960s, Mary said. “It was so bad we couldn’t see our hands in front of our faces.” Acid from the smelter would eat the paint off of cars, and Asarco sometimes would reimburse the owners.

By the 1970s, unsettling research on smelter towns, including Hayden, was appearing in the medical literature. A 1977 article in the American Journal of Epidemiology found, for example, that “chronic absorption of arsenic, lead, and cadmium by persons living near smelters, particularly by such potentially vulnerable groups such as young children and pregnant women, may be causing undetected, latent disease that will become manifest in the future.” The authors studied 19 communities in all, 11 with copper smelters.

Hair samples taken from children in Hayden showed the second-highest levels of arsenic among the 11 towns; only Anaconda, Mont., was worse.

In 1990, the Arizona Department of Health Services found elevated lung cancer death rates in the Gila Basin, which includes Hayden. “The cause of the elevation remains to be explained,” the department said. “Data is lacking concerning the incidence of cigarette smoking, and the levels of exposure to arsenic or other potential carcinogens.”

Passage of the Clean Air Act amendments that same year sharpened regulators’ focus on air toxics — nearly 200 hazardous chemicals that could cause cancer, birth defects and other ailments. Beginning in 1991, two inspectors with the ADEQ, Dave Kempson and Mike Traubert, went after Asarco aggressively, regularly writing up the company for so-called opacity violations. High opacity — the degree to which air is impenetrable to light — can be an indicator of excessive particulate emissions, which can include arsenic, lead and other harmful metals.

Reports by Kempson and Traubert in 1991 and 1992 — obtained by iWatch News from ADEQ files — describe dense plumes of smoke emanating from the smelter. The violations added up, but Asarco pushed back. In a June 7, 1991, letter to the ADEQ, the company complained, “Your office seems intent on creating an adversarial relationship with a company that has consistently cooperated in efforts to improve air quality in this community.”

In recent interviews with iWatch News in Phoenix, Kempson and Traubert — no longer with the agency — recalled hoping to build a major enforcement case against Asarco. Unannounced inspections often turned up violations. “We would then document those violations and write a letter [to Asarco],” Kempson said, “and more often than not would get a rebuttal from the company’s law firm.”

Traubert said that Asarco would “explain [an air release] away as an extraordinary event” — unusual and uncontrollable. “It strained credulity a bit,” he said.

Ultimately, Traubert said, the hoped-for case against Asarco “kind of languished. I don’t have a good explanation of why it didn’t go any farther. Within our group we certainly had the perception that you tangle with the mines with care.”

Blood tests and litigation

In 1997, Betty Amparano was asked to renew her lease on the house she’d been renting in Hayden. The house was on Terrace Drive, on a hill near the tailings pile. The lease included a caveat: The house was contaminated with metals-laden dust.

Amparano took her seven children to the doctor for blood tests. All had blood lead levels above what the federal government considered to be safe. Erin, then 5, and Ray, then 8, had levels more than four times higher than the limit. Even relatively low lead exposures have been associated with diminished IQs, learning disabilities and other neurological problems.

Erin Amparano, now 19, said she still suffers from the lead that entered her blood. “I have trouble sleeping at night,” she said. “I’m always really hyper. I get rashes and headaches. I had difficulty learning, and it was real hard for me to pay attention. I’m still like that to this day.” She has two young daughters of her own. “If I had a choice, I wouldn’t be here,” she said.

A local newspaper published a story about the Amparanos’ plight in 1997, catching the attention of Steve Brittle, leader of a Phoenix-based environmental group called Don’t Waste Arizona. During his first visit to Hayden, “I was absolutely horrified,” Brittle said. “I didn’t think anything like this could exist in America. It didn’t seem like it could be possible with the environmental laws.”

Brittle connected the Amparanos and other Hayden residents with a lawyer in Tempe, Ariz., Howard Shanker, who began pulling together a class-action lawsuit against Asarco. More than 200 people eventually signed on, alleging they had suffered health effects from Asarco’s noxious emissions. Shanker commissioned tests for lead and arsenic. “A lot of people” came back with high levels, he said. “Clearly, it was attributable to Asarco emissions and operations.” Asarco denied any responsibility.

The lawsuit dragged on. In 1999, researchers with the University of Arizona tested the blood of 14 infants and young children for lead and found “no evidence of excessive … exposure.” The same group found elevated levels of arsenic in the urine of five of 224 people tested and speculated that “exposure to house dust may have been a contributing factor.” The study was partially funded by Asarco, and some residents were leery of its findings.

In 2002, the Arizona Department of Health Services reported that the main worry in Hayden was spikes in sulfur dioxide that “occasionally pose a short-term health hazard to sensitive asthmatics. … Other exposures to contaminants in other environmental media do not appear to pose a public health hazard.”

In 2005, Asarco declared bankruptcy, effectively ending the lawsuit. The plaintiffs settled for a large amount of money overall, but an average of less than $10,000 per family. Not enough to move away. “There were people that tried and still couldn’t do it,” Betty Amparano said. “And people that did move out are starting to come back because of the economy.”

The EPA intervenes

Prodded by environmental activist Brittle and others, the EPA came to Hayden as the lawsuit was winding down. In 2007, before it ordered Asarco to start digging up soil, the agency found arsenic levels within safe limits in only one of 99 yards sampled. Seventeen of 22 attics yielded dust samples high in arsenic; 15 attics had dust high in copper, eight in lead.

Asarco, still in bankruptcy, agreed to set aside $13.5 million to fund the cleanup, which began in December 2008. At last count, soil from more than 266 yards had been dug up and replaced. In its statement to iWatch News, Asarco said it “has completed the cleanup of the soils on residential properties, public areas and vacant lots” in both Hayden and the adjoining town of Winkelman, “and, in doing so, achieved all the required cleanup levels.”

In July, however, the EPA notified Asarco that its plan for doing additional cleanup work in Hayden had “serious deficiencies,” including a lack of “meaningful” air sampling.

Several residents said that they, too, are unhappy with Asarco’s performance. In August, the company bought Monica Fernandez’s mother’s home, almost directly under a conveyor belt that carries crushed ore. “They had a big old crane that smashed the whole house,” Fernandez said. “All they did was knock it down, wet the dirt and put the rocks there.” The contamination, she suspects, is still there. “It has to be,” she said. “They covered it with the same dirt.”

Amid concerns about the cleanup, Asarco is seeking renewal of its air permit — its license to pollute. The federal government allows states to grant such permission, and ADEQ officials say they plan to affirm Asarco’s status as a minor source of hazardous air pollutants.

Asarco insists that it doesn’t meet the legal threshold for a major source: emissions of 10 tons per year of an individual chemical listed under the Clean Air Act amendments, or a combination of such chemicals totaling 25 tons annually. The company says it puts out a total of 14 tons of air toxics. And the highest amount of any one compound it reported emitting in 2010 — arsenic — was just 3.8 tons.

The EPA’s view is quite different – and could have significant implications. In its Nov. 10 finding of violation, the EPA argues that the Hayden smelter has been a major source since June 13, 2005, the date a federal pollution-control standard for copper smelters took effect. As of that date, the EPA alleges, “the Hayden Smelter had the potential to emit 10 [tons per year] or greater of Arsenic and Lead Compounds, individually, and 25 [tons per year] or greater of a combination of [hazardous air pollutants].”

Understating emissions can enable companies to avoid expensive fixes. Eric Schaeffer, former head of the EPA’s Office of Civil Enforcement, said Asarco is, in effect, being accused of dropping out of the regulatory system. “If you basically keep yourself out of the system, then you’re able to bypass [pollution] standards and avoid compliance and save a lot of money,” said Schaeffer, now executive director of the Environmental Integrity Project, which litigates against polluters. “And that, obviously, is a fundamental violation of the Clean Air Act.”

In its statement, Asarco described the EPA action as “unexpected … [and] even more puzzling because our smelter is in compliance with its air permit. In Asarco’s view, the [finding of violation] is simply incorrect.”

ADEQ Director Henry Darwin said that Asarco’s new permit will force the company to make improvements. He expressed regret that it’s taken 10 years to act: “I fully acknowledge the fact that we should have issued [a permit with more stringent requirements] quicker than we have,” Darwin said.

“I do share your concern about what emissions from this smelter could be doing to that community. We’re not sitting idly by to see what Asarco’s going to do.”

Betty Amparano’s 32-year-old daughter, Jill Corona, is skeptical. Corona, a Hayden native who lives in Tempe, called the EPA’s action “bittersweet. In some ways, it’s great that the pollution problem is now finally being acknowledged. But for many years, it seemed to be implied that there was not really a problem.”

She worries about future generations. The EPA’s case against Asarco could be tied up in court for several years, with no guarantee that the government will prevail. And even if the Hayden area is deemed to be out of compliance with the federal air standard for lead, the state could have up to five years to bring down levels of the pollutant. In the meantime, exposures will continue.

“You know, I have a cousin who’s dying of cancer,” Corona said. “Whose health is being affected today? For the residents that are living [in Hayden] now, it’s not like a water faucet that gets shut off and that’s it, that’s the end of it and you’re done. It’s not that simple.”

Howard Berkes, NPR's rural affairs correspondent, contributed to this story.

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Pentagon lacks funding to fix public schools on military bases

2011-09-21T06:00:01-04:00

A top Pentagon official has acknowledged that the Defense Department is more than $1 billion short of what’s needed to repair decrepit public schools on military bases that were the subject of a recent iWatch News investigation.

The official, Jo Ann Rooney, principal deputy under secretary of defense for personnel and readiness, said in an interview with iWatch News that the Pentagon will be able to start renovating or replacing only about a dozen of the public schools on bases with the $250 million that Congress appropriated this year for the upgrades. A recent Pentagon report, however, found that about 62 of the 160 civilian-run schools are in “poor” or “failing” condition.

“There is a lot of work that needs to be done. Two hundred and fifty million dollars will not cover it,” Rooney said. “Depending on whether there is additional money coming forward, I can’t predict when those next group of schools would actually be addressed.”

An investigation by iWatchNews in June found that many of the schools attended by children of military personnel are in poor shape. Where military children go to school depends on circumstances often beyond families’ control. More than 500,000 children, the largest proportion, live off base, attending local schools in urban or suburban communities that often have significantly more resources.

But families who live on military installations — either for economic, career or security reasons — send their children to one of 194 base schools operated by the Pentagon around the world, or 160 base schools in the U.S. operated by local school districts.

Rooney’s sober assessment deals with those base schools operated by local districts, which are attended by about 150,000 students . Funding fixes for these schools is especially complex. For one thing, the Pentagon can't use its own funds for civilian schools on military bases and must obtain a special congressional appropriation. These schools are also required to cover 20 percent of the repair bill themselves. But school districts also frequently have trouble raising money for construction work on base schools through new local taxes or bonds because military families often don’t vote or pay taxes in their communities. If districts cannot meet the 20 percent requirement, the Pentagon will sometimes step in to help. If that happens, though, fewer schools on the list will get funding for repairs this year.

The districts with schools that have the greatest needs will be meeting with Pentagon officials from the Office of Economic Adjustment, which is overseeing the process, next month. Three school districts face an additional challenge of having two schools in the top 12 in need of repair: those at Naval Air Weapons Station China Lake in California; Fort Sill in Oklahoma; and Joint Base Lewis-McChord in Washington state.

Some of those schools will most likely have to wait — and hope —for an additional congressional appropriation.

“The big issue on future congressional appropriations is the larger deficit discussion,” said Joyce Raezer, executive director of the National Military Families Association. “If everything is on the table and there are many folks on the Hill who do not believe school construction is a federal responsibility, then getting more could be problematic.”

John Forkenbrock of the National Association of Federally Impacted Schools said there has been discussion on the House side of adding another $250 million for school construction to this year’s appropriation but no one knows whether the funding will ultimately go through.

“There is support there but it’s just a matter of whether the budget will allow,” Forkenbrock said. “Right now it’s still kind of a question mark.”

The 194 schools that are actually run by the Pentagon have their own problems. The iWatchNews investigation found that three in four Pentagon-run schools are either beyond repair or would require extensive renovation to meet minimum standards. But the Pentagon has already made plans to renovate or replace 134 of those schools with the worst problems over the next five years.

So far 28 projects at those schools are underway and Rooney said the Pentagon will be able to find the money to cover them all.

But however long it takes, Rooney said that getting funding for all schools on military bases “is not something that’s going to be dropped.

“We want to make sure that the children of our military families are taken care of and given the best opportunities for education,” she said.