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I am a journalist with more than 30 years of professional experience in newspapers, magazines, and higher education. I am based in Alabama and write the blog Legal Schnauzer, which focuses on justice issues in the South and beyond.
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Legal Schnauzer
  • Vanguard Group Has Extensive Holdings In Guns--And Porn

    Cross Posted at Legal Schnauzer

    Vanguard Group, the nation's largest mutual-fund company, received unwanted attention after the Sandy Hook massacre in December when reports showed that it was a major financial supporter of gun manufacturers. Based in the Philadelphia suburb of Malvern, Pennsylvania, Vanguard is the No. 1 holder of Smith & Wesson stock and a top-five investor in Sturm Ruger.

    John C. "Jack" Bogle, founder of Vanguard Group, said in a radio interview just days after the mass shooting in Newtown, Connecticut, that the investments simply were part of the firm's strategy to "hold the market" via index funds.

    Bogle's message, in so many words, was that Vanguard can't be held to any standards of ethical investing because gun manufacturers are in the market, and his firm is committed to "holding the market." If gun makers' products wind up being used to slaughter school children . . . well, Vanguard really can't do much about that, Bogle seemed to be saying.

    One wonders, then, how Bogle explains Vanguard's holdings in pornography. Is it strategically imperative to "hold that market"? The answer must be yes because public records show that Vanguard is a prominent holder in at least three companies that deal directly in porn. Vanguard's holdings in companies with indirect ties to porn--cable broadcasters, hotel chains, Internet providers, etc.--clearly are vast.

    Vanguard's questionable ethics is not limited to the world of weapons and porn. It is the No. 1 investor in Campus Crest Communities, a developer of student housing near college campuses around the country. Ted Rollins, the company's CEO, has a criminal record that includes a conviction for assault on his 16-year-old stepson in Franklin County, North Carolina. Rollins also was the subject of a social-services investigation, based on a citizen complaint, for possible child sexual abuse involving the same stepson.

    The assault met the definition for child abuse under North Carolina law, even though Rollins was prosecuted only for a "simple assault." Does it bother Vanguard Group that it supports a CEO with a documented history as a child abuser? The answer apparently is no.

    Part of the reason might be that Vanguard has a long history of supporting various Rollins-family enterprises. It is a major holder in Atlanta-based Rollins Inc., the umbrella company for Orkin Pest Control. It also is a prime investor in RPC Inc., a Rollins company that offers a number of services related to oil exploration and drilling.

    Vanguard manages more than $2 trillion in assets, so its fingers are in many financial pies. But the firm clearly has solid interests in what we might call "pistols, petroleum, poisons, and porn."

    That last one might come as a bit of a surprise to big-money investors who consider themselves "conservative." But it's right there in the public record.

    Most porn companies are private operations, but Vanguard has investments with at least three that are publicly traded:

    * Private Media (OTCPK:PRVT)--Based in Spain, Private Media is a worldwide distributor of pornographic films. According to records at Vanguard is the company's No. 5 investor.

    * FriendFinder Networks (FFN)--Based in Boca Raton, Florida, FriendFinder Networks is a holding company for numerous Internet firms that deal in adult content. Penthouse Media Group in 2007 bought Various Inc., the parent company of FriendFinder, and renamed itself FriendFinder Networks. Vanguard Group is the No. 6 holder of FFN stock.

    * LodgeNet Interactive (OTC:LNET)--Based in Sioux Falls, South Dakota, LodgeNet is a major provider of pornographic films for the hotel industry. The company has been struggling financially, but Vanguard holds almost 629,000 shares.

    Why does Vanguard, with its huge array of assets, need to be involved in porn? Perhaps the answer can be found in Jack Bogle's statements, made just days after the Sandy Hook shootings, about his company's involvement with gun manufacturers:

    We are the largest holder in Smith & Wesson, and we probably own about 5 percent of every corporation in America. The reason we do is that our strategy is one of hold the market. Smith & Wesson is in the market, so we will be holding that.

    Should we speak up? The answer is yes. Should we get out of the stock? I think that is pretty debatable because if your whole strategy is to hold the whole market, you end up making a whole lot of judgments that are never quite as clear as one might hope.

    It's something we ought to be thinking about, but we couldn't go to Smith & Wesson management and say, "Get out of the gun business." That's their business. . . . If we got out of that stock, the company wouldn't even know it; somebody else would own it. You don't have the kind of clout you would think that a 5 percent or so owner would have.

    Does this attitude explain Vanguard's cozy relationship with Ted Rollins, even though he has a record as a child abuser? It probably does. Does it explain Vanguard's connections to porn? Apparently so.

    Should Americans casually accept such an explanation from a company that carries massive financial clout? Perhaps it's time we all started asking ourselves that question.

    Jan 30 1:47 PM | Link | Comment!
  • "Oh, My God!" Is Wall Street Analyst's Reaction To News Aboug Ugliness In The Past Of CEO At Student-Housing REIT

    A Wall Street analyst gasped and said, "Oh, My God!" when she was told that Campus Crest Communities CEO Ted Rollins had been investigated for possible child sexual abuse of his stepson.

    Paula Poskon, of Robert W. Baird and Co., expressed concern when she learned that public records show Rollins was convicted for an assault on his stepson in 1995 in Franklin County, North Carolina. But she audibly gasped when she learned that Rollins had been investigated in 1993 for child sexual abuse involving the same stepson--a case that is reminiscent of the Jerry Sandusky scandal at Penn State, which began in roughly the same time period. (See video at the end of this post.)

    "I had not heard that," Poskon said, with a tone of alarm. Her company was one of about six underwriters on a $380-million Wall Street IPO that Campus Crest Communities completed in October 2010.

    Poskon describes underwriters as "the matchmakers of the financial world," pairing up investors with companies in need of capital. She also noted that investors' perceptions about a CEO--regarding both his management ability and his personal integrity--are critical. "Perception is reality for most investors," Poskon said.

    If Ted Rollins withheld information about his personal history, it could present serious legal issues for his executive team. And Paula Poskon made it clear that she was unaware Rollins has a criminal record involving child abuse--and was the subject of another investigation where a child possibly was victimized.

    Poskons's reaction? "Oh, my God, I was not aware of any of that. . . . It certainly sounds like I need to do a lot more digging."

    The Ted Rollins story includes a heavy dose of irony. As CEO of Campus Crest Communities, Rollins leads a firm that builds, manages, and markets student housing to young people and their parents. But records show that in Rollins' personal life, young people have a way of winding up abused.

    "That's what makes this so concerning," Poskon said.

    Our conversation with Paula Poskon went on to take some curious twists and turns. More on that in upcoming posts:

    Video: Interview with Wall Street analyst Paula Poskon

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Tags: reits
    Oct 30 8:47 AM | Link | Comment!
  • The Orkin Man Has A History Of Mistreating Customers

    This article originally was posted at Legal Schnauzer. It has been updated for SeekingAlpha.

    Orkin is perhaps the best-known brand in the pest-control business. The company is based in Atlanta, under the Rollins Inc. umbrella, so it has a particularly strong presence here in the Deep South.

    Our region has a stout bug population, with creepy-crawlies coming in all sorts of shapes and sizes. So it's disconcerting to learn that Orkin has a history of fraud, racketeering, incompetence, and general chicanery.

    In the company's advertisements, the Orkin man looks like a clean-cut guy of impeccable credentials. In real life, there's a pretty good chance that he's a creepy-crawly himself.

    Orkin's shady history is particularly alarming when you consider that the company specializes in spraying various forms of poison in homes and businesses. Let's consider a few "highlights" from the Orkin files:

    * According to a 2007 CBS News report, Orkin was facing four class-action lawsuits across the Southeast for failure to protect homes against termite damage. A Florida woman called her house "the termite buffet," even though she had a contract with Orkin for six years. "I think you hire Orkin to protect your home and all of a sudden one day you realize you have to protect yourself from Orkin," she said.

    * A series of articles in 2004 portrayed "Orkin Under Siege" from lawsuits launched by dissatisfied customers. From reporter John F. Sugg:

    The outfit is being nibbled at by lawyers and disgruntled customers who are as ferocious in their attack as termites are when they sniff unprotected wood. Juries and arbitration panels have slapped multimillion-dollar judgments on Orkin. Looming over the horizon are scores of other cases, at least four of which are seeking "class action" status that could pit hundreds of thousands of customers against Orkin -- and could, potentially, write the final chapter for a fabled American business icon.

    * Wayne Cowart, a former Orkin employee from Valdosta, Georgia, provides a devastating account of his time at the company. From John F. Sugg's report:

    Meet another Orkin man -- or, more accurately, ex-Orkin man -- Wayne Cowart of Valdosta. The 30-year veteran of the pest control industry worked for Orkin for six years, including two as a top executive in charge of handling consumer claims. He's now a consultant who spends most of his time giving testimony against Orkin and other termite companies.

    "If the Gambino [Mafia] family was doing what the Rollins family has done, there'd be a Senate investigation," says Cowart, referring to accusations against the company of fraud and forgery.

    His spin on what went awry at Orkin is that the "company has stopped being a service-oriented company and is now a revenue-oriented company. The losers are the customers."

    * The attorney general of Florida took such charges seriously, launching a racketeering investigation into Orkin in 2004. Orkin eventually settled the case in 2010. From a news report about the settlement:

    In 2004, Florida's Attorney General opened an investigation of Orkin under criminal and civil racketeering and corrupt practices statutes. The investigation focused upon termite contracts Orkin issued in the state which it administered under a nationwide system. After nearly four years of investigation, Orkin concluded it should quietly settle the claims, neither Orkin nor the Attorney General's office issued a press release.

    Orkin agreed to pay money to Florida to defray costs of the investigation and to provide free inspections and repair of termite damage where permitting procedures were not followed in the past and change its business practices to ensure future inspections and repairs are done correctly.

    According to Sandy Copes, a spokeswoman for the Attorney General, despite Orkin's denial of guilt, the settlement clearly indicates changes were needed and ensures correction of "poor practices by Orkin about which we have extensive evidence."

    The investigation was originally prompted by Collier Black's lawsuit (involving severe termite damage to his Duvall County, Florida home incurred while under Orkin's Lifetime termite protection contract) which resulted in a $4.6-million payment from Orkin.

    Is Orkin's bottom line suffering under the onslaught of lawsuits. It doesn't sound like it. According to a report in the Atlanta Business Chronicle, CEO R. Randall Rollins and President Gary Rollins each remain safely ensconced in the billionaire category. Rollins Inc. and its insurers are doing their part to keep the legal community happy. On the vast majority of Orkin lawsuits that we've seen, the enormous Chicago-based law firm of Sidley Austin provides defense services for the company.

    Sidley Austin is one of the world's oldest law firms, and it once employed a young black female attorney named Michelle Robinson. She now is better known as Michelle Obama, our first lady. Who says the Obama family does not have ties to our nation's corporate power structure?

    What kind of outfit is Sidley Austin defending? A Florida man named Jack Cox gives us an idea, per John F. Suggs:

    Cox, a former Orkin inspector in Tampa, was asked during a deposition in 2001 if he had ever forged customers' signatures to re-inspection tickets, meaning the homes hadn't been scoped for termites and were vulnerable -- or, perhaps, were about ready to collapse from termite damage.

    Cox pondered the number of forgeries he had committed, and concluded that "if you do a hundred a month, that's 1,200 a year. So it might be over 1,000. ... In fact, we've had parties, kind of like a party, sat down, and all of us sat down in a room and did them." Often, according to court documents, pizzas were served as Orkin employees industriously forged their trusting clients' signatures to stacks of documents, giving a special and well-known meaning to the term "pizza party" within the company.

    In another deposition last month, Cox testified that customers were kept in the dark about damage to their property. "If we found damage," he said, "we were to report it back to the office. Normally, we didn't tell the customer."

    Why would Orkin sandbag its customers? Cox explained: "It would have been an expense [to repair the termite damage]. It would have been a cost to the office to fix it. We're trying to make money at the office, you know."

    Yes, Orkin employees would throw pizza parties in order to have a good time while forging client signatures. That's what passes for "business ethics" at the company.

    In spite of all the lawsuits, published reports indicate Orkin and Rollins Inc. still have a healthy bottom line. Are they providing effective service to their customers? Our research indicates the answer is no.

    Oct 01 2:27 PM | Link | Comment!
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