News Story

Subsidized Green Energy Company Struggles, Lays Off Workers — Rewards Top Executives

Analyst: 'It looks like they are trying to pad their top people’s wallets in case something really bad happens'

In the nine months since David Prystash was named Chief Financial Officer of A123 Systems — the battery manufacturer that received $390.1 million in federal and state subsidies — the company has laid off 125 employees and had a net loss of $172 million through the first three quarters of 2011.

A123 Systems also learned earlier this month that the company that was to be the main purchaser of its batteries — Fisker Automotive — had its federal funding cut off for missing milestones and had to lay off its own employees. A123 Systems had invested $23 million into Fisker.

Yet, this month A123’s Compensation Committee approved a $30,000 raise for Prystash just days after Fisker Automotive announced the U.S. Energy Department had cut off what was left of its $528.7 million loan it had previously received.

Prystash wasn’t the only executive to see a big raise this month. Robert Johnson, vice president of the energy solutions group, got a 20.7 percent pay increase going from $331,250 to $400,000, while Jason Forcier, vice president of the automotive solutions group, saw his pay increase from $331,250 to $350,000. Prystash’s raise was 8.5 percent, going from $350,000 to $380,000.

The raises were reported by the company in its filings with the U.S. Securities and Exchange Commission.

“It looks highly suspicious,” said Paul Chesser, associate fellow for the National Legal & Policy Center. “It looks like they are trying to pad their top people’s wallets in case something really bad happens.”

When A123 Systems announced it was opening its lithium-ion battery manufacturing plant in Livonia in September 2010, then Gov. Jennifer Granholm wrote about it on the Huffington Post calling it “a Recovery Act success story.”

But there have been troubles for A123 Systems in the 17 months since then despite a lot of state and federal aid to prop it up.

The state of Michigan gave it a $100 million MEGA tax credit that is contingent on the company creating 300 jobs by the end of 2016. A123 Systems also received another $41 million in tax breaks and subsidies from the state. The Department of Energy awarded A123 Systems a $249.1 million grant.

But the company has not been able to meet its own projections. For instance, on March 28, 2011 in an SEC filing, the company projected total revenue between $210 million to $225 million for 2011. Its latest report shows they had just $118 million of total revenue through the first three quarters of 2011 and reported a net loss of $172 million.

A123 Systems has handsomely rewarded its executives since 2010, according to SEC filings.

For example, A123 Systems CEO David Vieau made $375,000 in 2010 and saw that increase to $450,000 in 2011, a 20-percent increase.

A123 Systems Spokesman Dan Borgasano referred questions for comment to a Feb.  10 article in Crain’s Detroit Business where Forcier said A123 Systems has hired back more than 20 employees who were laid off and was looking to hire engineers.

On Feb. 6, Fisker Automotive had its federal loan blocked by the U.S. Energy Department because it hasn’t met milestones.

In 2010, A123 Systems entered an agreement to Fisker Automotive to provide lithium-ion batteries for Fisker’s Karma plug-in hybrid.

Fisker was to build at a former GM plant in Delaware, but that plant halted work at the plant and laid off 26 workers.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.

News Story

How the Forced Unionization of Day Care and Home Health Care Providers Took Place

Anatomy of a Scam: Dues continue to flow

Editor's note: This story originally ran in January and is being republished because of repeated requests from readers wanting to know how the "dues skim" was created and put into action. Since late 2006, more than $28 million has been take from Michigan home health care workers, many without their knowledge or consent. Almost $4 million has been skimmed since a bill that would end the deductions arrived in the Michigan Senate in June 2011. (The story has been updated.)

As 2012 begins, the forced unionization of 56,442 so-called home health care workers in Michigan continues.

Approximately 80 percent of those impacted by an unpublicized election six years ago probably did not know what was occurring. As a result, they were railroaded into the Service Employees International Union (SEIU).

Union dues have been extracted from the taxpayer-funded checks they've received ever since. This represents a transfer of more than $28 million from taxpayers to the coffers of the SEIU.

House Bill 4003 was designed to stop the dues flow, but it remains stuck in the state Senate. Meanwhile, tens of thousands of those who care for the disabled in their homes — including many who are just caring for relatives — are still stuck in a situation not of their own making.

“SEIU has not responded once to our emails,” said Heather McLeod leader of the Saginaw County Tea Party. “They have no explanation. I think the union and the politicians were hoping this got lost in the political noise and the holiday season. Concerning the Saginaw County Tea Party, the issue will not get lost. Our senator, Roger Kahn, [R, Saginaw] has been a SEIU spearhead against these distressed families — a force for the status quo. In some sense, we feel obligated [to speak out on this issue].”

Dr. Dawn Lancaster, of the Conservative Caucus of Monroe County, said acceptance of the forced unionization sets a dangerous precedent.

"Let's hope this nefarious arrangement is ended quickly,” Lancaster said. “If parent caretakers in low-income families can be classified as public employees, just because they receive Medicaid checks to assist them in the cost of caring for their own disabled adult children, my physician colleagues can expect to receive union cards any day."

Dr. Lancaster's point is simple: If the state can force anyone who receives payment from the government into a public-sector union, this could include doctors (Medicare) and grocers (food stamps) as well.

Thomas Stump, secretary of the Saginaw County Tea Party, said pressure should continue to be exerted on the state Senate to put an end to the forced unionization.

“I understand a deliberative Senate concerning the making of laws,” Stump said. “But this is just plain corruption. The House is ready to end this now. Why the Senate delays is beyond me. I think it’s more than just political donations . . . of which there are many.  There is something else going on here.

“Forcing a parent to join a union so they may tend to their child is tyranny,” Stump continued. “This is partly why our Tea Party began.  A cursory look reveals a union filling its coffers and politicians involved in back door deals.”

Two forced unionizations took place while Gov. Jennifer Granholm was governor. One involved home-based day care workers. That situation ended shortly after Gov. Rick Snyder came into office.

The forced unionization that has yet to be halted involved alleged home health care workers. It's necessary to use the word “alleged” because this unionization included family members who take care of disabled relatives and their status as “home health care workers” is debatable.

Many who have looked closely at how the forced unionizations were accomplished say the scheme is ingenious. What occurred took place in what could be described as a covert manner. Any sort of news media coverage or public attention was avoided. The scheme cannot be fully understood without this context.

The following is an attempt to explain how the forced unionization of the alleged home health care workers took place:

Anatomy of a Scam

The target

Millions of taxpayer dollars are sent to home health care workers and others. This includes Medicaid checks sent to family members who take care of those who are developmentally disabled.

The goal

To get about $6 million per year of that money transferred into union coffers.

The mechanism

Michigan's employment relations structure, which is designed to resolve disputes between public employers and public employees. This structure was created with seemingly logical assumptions. They included:

  1. The assumption that employees would know whether or not they were employed by the employer.
  2. The assumption that employers would generally be working to prevent unionization, not trying to make it happen.
  3. The assumption that employees would be informed about unionization elections through word of mouth or bulletin board postings at shared work sites. Because of this assumption, it wasn't clear whether or not a public notice was required to alert the news media about upcoming unionization elections.

Secrecy

A quick scan of the above information shows that the system might not have technically required that the general public and the news media be informed about what was happening. For the plan to work, keeping it below the radar was an absolute necessity.

Pulling it off

Create a dummy employer

A state agency could not be used as the public employer because this would bring the matter before the state's Civil Service Commission and there it would have drawn attention and significant political fallout for increasing the state work force by 40,000-plus in an election year. But while a state agency could not be used to pull off the scheme, the employer would need to “employ” all of the providers. Therefore, in the case of the home health care scam, the dummy employer was the Michigan Quality Community Care Council (MQC3).

Get the dummy employer recognized

An attorney representing the union certified that MQC3 was the employer. The so-called home health care workers had to fill out cards asking for a unionization election and a portion of them did. The cards listed MQC3 as their employer. It's probable that many, or most, of these people were told they were signing for a chance to get health care coverage and a wage increase.

(Note: MQC3 now says it is not not the employer.)

Since no one ever foresaw a situation where the basic status of employer to employees would be questionable, the Michigan employment relations structure simply accepted MQC3 as employer and the workers who signed cards as MQC3 employees.

Had this portion of the plan taken place in a public forum, with the news media present, several issues would likely have been raised. For example, whether or not the workers were legally qualified to be public employees. Also, there is the issue of whether home health care workers who considered themselves as independent contractors or family members taking care of their own relatives should be considered as government employees. Subsequent developments indicate that the large majority of these people had no idea any of this was even going on.

The election

The Michigan Bureau of Employment Relations sent out 43,000 election ballots.

Fewer than 20 percent of those affected by the election voted. This indicates that the vast majority of home health care workers and family members who care for disabled relatives had no idea what was happening. It seems likely that they tossed the ballots away as junk mail that didn't apply to them.

How many more would have voted if the process had been done publicly, with the news media covering the election?

Zac Altefogt of SEIU Healthcare Michigan (the branch of the SEIU directly involved) and Sen. Kahn both were offered the opportunity to comment on this article but did not respond.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.