New Report: RI Pension Fund Invested in Private Equity Funds Tied to “Troubled Teen Industry"
GoLocalProv News Team
New Report: RI Pension Fund Invested in Private Equity Funds Tied to “Troubled Teen Industry"
Rhode Island’s pension plan has investments in two of the three firms identified in the report as investing in such companies.
The Employees’ Retirement System of Rhode Island (ERSRI) is chaired by Rhode Island General Treasurer Seth Magaziner and according to pension fund documents, the fund has tens of millions invested in Centerbridge and Bain.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTAccording to the report, “Several of the largest private-equity-owned companies operating in these industries have had track records of widespread neglect and abuse of youth under their care—including excessive use of physical restraints on children with disabilities (Advoserv – GI Partners), squalid living conditions at group homes and foster care facilities (Sequel Youth & Family Services – Altamont Capital Partners), and neglect that has led to numerous deaths (The Mentor Network – Centerbridge Partners, the Vistria Group)."
The mission of the Private Equity Stakeholder Project is to "identify, engage, and connect stakeholders affected by private equity with the goal of engaging investors and empowering communities, working families, and others impacted by private equity investments."
According to their report:
- Private equity firms are increasingly investing in behavioral services for children and adolescents, including services for youth with intellectual and developmental disabilities, services for youth in foster care, services for youth in the juvenile justice system, troubled teen programs, and autism services.
- Private equity has a troubling track record in investing in youth behavioral services. The private equity business model, which focuses on outsized returns over short time horizons, may prioritize profit over the well-being of children. Cost-cutting tactics at private-equity-owned youth behavioral companies, such as cutting staff, relying on unlicensed staff, and failing to maintain facilities, can lead to abuse, neglect, and unsafe living conditions for youth under the care of those companies.
- Despite horrific conditions at some youth behavioral health companies, their private equity owners have in some cases reaped massive profits.
This report examines several key areas of youth behavioral services:
- Companies in the troubled teen industry (TTI), including Aspen Education Group owned by Bain Capital; and Family Help & Wellness owned by Trinity Hunt Partners.
- For-profit foster care companies, including the Mentor Network owned by Centerbridge Partners; and Sequel Youth & Family Services owned by Altamont Capital.
- Services for youth with intellectual and developmental disabilities (I/DD), including AdvoServ (aka Bellwether Behavioral Health) owned by GI Partners and later by Wellspring Capital Management.
Aspen Educational Group has been the subject of numerous investigations over the past 15 years.
"A 2014 lawsuit against Island View’s parent company, Aspen Education, alleged that the center 'maintained a prison-like environment where physical and psychological torture were used against students,' [reporter Sebastien] Murdock writes. As one former Island View resident, a 25-year-old named Michelle Lemcke, told him: 'Long-term treatment facilities are like … a jail without having done anything illegal,'" reported Slate.
Similarly, Mentor Network was the subject of a Congressional investigation that began in 2018. In 2019, the Senate Finance committee issued a statement, from Chairman Chuck Grassley of Iowa and Ranking Member Ron Wyden of Oregon announcing they are requesting information from two companies affiliated with The MENTOR Network (Mentor) after recent news reports in Iowa and Oregon revealed multiple instances of abuse and neglect, and in one case, an apparent death. Mentor contracts with the two states to provide care for adults and children with intellectual and developmental disabilities.
“When vulnerable Americans are abused or even killed in the care of a taxpayer-funded care provider, that organization must be held accountable,” Grassley and Wyden said. “The Finance Committee has previously investigated The MENTOR Network for failing to protect those in their care, and tragically there is more work to be done. Nobody should have to fear for their loved ones’ safety when they are in the care of a group home.”
Mentor was also found to have numerous violations in a number of states including Massachusetts.
The other area that these private equity firms have invested in include autism services firms.
Magaziner's Activist Positions
RI's General Treasurer -- and candidate for U.S Congress -- has taken a vocal, activist stance on numerous state pension investments.
"Rhode Island Treasurer Says State Pension Won’t Back Future Leonard Green Funds," reported the Wall Street Journal in August 2020.
"The private-equity firm’s investment in hospital operator Prospect Medical has prompted political backlash over the fees and dividends the firm received from the hospital operator under its ownership, among other issues," the WSJ wrote.
In July 2021, Magaziner announced he was filing a lawsuit on behalf of the RI Employees’ Retirement System of Rhode Island against Facebook.
According to his press release the lawsuit was to be "filed against certain officers, including co-founder and CEO Mark Zuckerberg and Chief Operating Officer Sheryl Sandberg, and members of the board of directors of Facebook (NYSE: FB) alleging breaches of fiduciary duties pertaining to the Facebook-Cambridge Analytica data-privacy scandal."
But, when GoLocal asked if Magaziner has owned or today owns Facebook stock his office refused to respond.
On Sunday, Magaziner's office defended the pension fund's ownership in the two private equity funds.
"Both of these investments were made prior to Treasurer Magaziner taking office. The investment in Bain was made in 2008, and the investment in Centerbridge was made in 2014. The Treasurer shares the concerns that have been raised in the report and will address them with both firms," said Ben Smith, spokesman for the Treasurer's office.
This story was updated at 5:50 AM on 2/21/22