Journalism
What Corporate Welfare Costs You: The Empire Of The Pigs (Part 4)
To help staff its hog-processing plant and farms, Seaboard has re-created the corporate model employed by the coal barons of the 1800s, whose workers lived in company-owned houses and shopped in company-owned stores.
In Guymon, Seaboard and local business leaders invested in an apartment complex and trailer parks to house the company's employees. Rent is automatically deducted from the paychecks of Seaboard workers. So, too, is the cost of meals that they eat at the plant. A two-bedroom apartment goes for $ 420 a month; for three bedrooms, $ 485. A Seaboard worker earns about $ 300 a week—before Social Security and income taxes are deducted.
"The people never see this money," said Carla Smalts, a rancher who campaigned against corporate hog farming while at the same time waging an ultimately losing battle against cancer. "It comes off the top of their paycheck right to Seaboard," she told TIME in December 1997. "By the time they pay Seaboard their rent and the meals are taken off out at the plant—and most of them eat at least one or two meals out there—they don't have a whole lot left. There's no way these people are going to buy houses." Carla Smalts died in August 1998 at age 52.
Bringing Home the Bacon
Let us recount, for a moment, some of Seaboard's corporate welfare in the 1990s: Minnesota provided more than $ 3 million in economic incentives; Kentucky, $ 23 million; Kansas, $ 10 million; and Oklahoma, $ 100 million. The Federal Government's OPIC provided $ 25 million in insurance for business ventures abroad. As for the financial burdens imposed on other taxpayers by virtue of Seaboard's presence, no one knows the cost. It is in the tens of millions of dollars. And all this for jobs that pay little more than poverty-level wages.
All this welfare has helped propel Seaboard into the front ranks of American pork producers. As recently as 1989, the company did not own a single hog. This year it's the No. 5 producer in the country—and about to vault higher. Seaboard plans to build yet another processing plant, capable of slaughtering 4 million hogs a year, thereby doubling its output.
So who really profits from all of this? A secretive Boston family of millionaires.
Seaboard's stock is traded on the American Stock Exchange, and last week it closed at $ 387 a share. Some 75% of that stock is owned by another company, called Seaboard Flour Corp., and 95% of Seaboard Flour is owned by brothers H. Harry and Otto Bresky Jr., their sister Marjorie B. Shifman and family trusts. All told, the family's stock in Seaboard is worth $ 425 million.
And who are the Breskys? A Boston Business Journal article published in February 1993 described them this way: "The Bresky family could teach J.D. Salinger a thing or two about maintaining a low profile... Try [to] find anyone in Boston who has even heard of the family, and you draw nothing but blanks... The Breskys have never held memberships with local Chambers of Commerce or positions on the boards of local companies and nonprofit organizations." Two months later, in April 1993, the Kansas City Star published a similar report: "Seaboard declined to be interviewed for this article, following a standard practice for at least a decade. That practice has helped Seaboard avoid press coverage almost totally.
"'We kind of like it that way,' said Marshall Tutun, a Boston lawyer who is Seaboard's corporate secretary. 'We're modest, humble, unassuming folk, and our stock is rather thinly traded.'"
Indeed, Seaboard's offices in Chestnut Hill, Mass., are a testimonial to anonymity and modesty. The executive offices of the company with annual sales of $ 1.8 billion are confined to several small rooms on the third floor of a frayed four-story building in a strip mall on the western edge of Boston. With stained orange carpets, faded paint and a warren of empty offices, the building is home to a number of small businesses, including a hair and nail salon, a furrier, a jeweler, a facial salon, an electrologist and a marketing firm. Notes are affixed to unmarked office doors advising delivery people to "put envelope under door."
It is from this location, as well as a suite in the San Carlos Hotel in midtown Manhattan, that 72-year-old Harry Bresky masterminds the day-to-day business operations of the family's global empire.
Harry Bresky, president of both Seaboard Corp. and Seaboard Flour, presides over a work force of 12,000 employees, 10,200 of them in the U.S. Holdings include flour mills in Ecuador, Guyana, Haiti, Mozambique, Nigeria, Sierra Leone and Democratic Republic of Congo; feed mills in Ecuador, Nigeria and Congo; 3,100 acres of shrimp ponds in Ecuador and Honduras; 37,000 acres of sugarcane, 4,200 acres of citrus and a sugar mill, all in Argentina; a winery in Bulgaria; other agricultural and business interests in Chile, Colombia, Costa Rica, Guatemala and Venezuela; electric-power-generating facilities in the Dominican Republic; shipping companies in Liberia; containerized cargo vessels running between Miami and Central and South America; and, of course, the processing plant and hog farms in Oklahoma, Kansas, Texas and Colorado, along with poultry-processing plants, feed mills, hatcheries and a network of 700 contract chicken growers in Alabama, Georgia, Kentucky and Tennessee.
Harry Bresky, who earned just under $ 1 million in salary and bonus last year as Seaboard's top officer, didn't respond to TIME's requests for an interview. But details of the business dealings of Seaboard and Bresky have emerged in a series of lawsuits filed over the years.
It all began in 1987, when Bresky fired Seaboard's vice president and chief financial officer, Donald Robohm, who had been with the company for more than a decade. Robohm sued, charging "illegal and improper activity by Seaboard and other components of the Flour conglomerate, as directed by Bresky."
Robohm claimed the activities included "improper diversion of corporate opportunities from Seaboard," a public company, to Seaboard Flour, Bresky's private company. When Robohm refused to "cover up the conduct," he claimed, Bresky fired him for "not being 'a team player.'"
The lawsuit was settled and, according to court documents, both parties are prohibited from disclosing "information concerning the substance of the...litigation and the substantive terms of its settlement."
Three years later, in 1990, Alan R. Kahn, a Wall Street investment broker and Seaboard stockholder, filed a lawsuit in Delaware seeking an accounting of the profits earned by the Breskys through their intercompany dealings. Kahn alleged that the Breskys required Seaboard Corp. to enter into business deals with Seaboard Flour that generated "unlawful profits" for Seaboard Flour. In short, according to Kahn's allegations, the Breskys used their controlling positions in the two companies to move money from the public company to their private business.
Robohm was subpoenaed in the Kahn lawsuit, and he recited a litany of business dealings in which, he said, Bresky had interests in companies that profited from inflated contracts with Seaboard Corp. According to his deposition, kickbacks were paid to officials in foreign governments; contracts were padded, with the excess money diverted to Swiss bank accounts; management fees were inflated; brokerage commissions ran 2 1/2 to five times the usual rate. And in the case of one Seaboard subsidiary, "there was a great deal of cash that was...unaccounted for."
In his deposition, Robohm recounted the time a top Seaboard executive dropped by his office to ask whether he had set aside money for Bresky in a contract that was being negotiated for a manufacturing plant in Nigeria. Robohm recalled the meeting:
"He said, 'Have you thought about including something in this for Harry?'
"I said, 'No...that thought didn't occur to me.'
"He said, 'You know that these are important considerations when you look at an investment of this size; that you need to have something in this for Harry.'"
Robohm said he told the executive that "that's not the kind of thing that I do." He added that "it wasn't 60 days later that I was taken off that project."
The litigation dragged on for four years. Finally, in 1994, the lawsuit was settled when Seaboard Flour and the Breskys, without admitting "any liability or wrongdoing," agreed to pay $ 10.8 million to Seaboard Corp. For practical purposes, that meant the Breskys transferred money from the family-owned Seaboard Flour to the publicly traded but still family-controlled Seaboard Corp.
As for Harry Bresky, financial statements filed in the Kahn legal case show that in 1991 he reported a net worth of $ 84 million. That was back when Seaboard stock was less than half its present value. Like many millionaires, Bresky also enjoyed a comparatively low federal tax rate. On his 1990 U.S. income tax return, he reported adjusted gross income of $ 2.243 million and paid $ 503,000 in federal income and Social Security taxes. His effective overall tax rate worked out to 22.4%—just a few percentage points above the 16.8% rate paid by families earning $ 35,000 a year. Of course, Bresky had 64 times as much income.
From 1990 to 1997, Seaboard Corp. was the beneficiary of at least $ 150 million in economic incentives from federal, state and local governments to build and staff poultry- and hog-processing plants in the U.S.; insure its operations in foreign countries, and sell its products.
Local (and federal) taxpayers supplied the dollars not just for the outright corporate welfare, but also by picking up the costs of new classrooms and teachers, homelessness, increased crime, dwindling property values and an overall decline in the quality of life.
During those same years, the value of a share of Seaboard stock spiraled from $ 116 to $ 387, increasing the worth of the Bresky family holdings in the company from $ 125 million to $ 425 million.
Not bad work if you can get it. But you can't.
And that is the inequity of the entire, elaborate jerry-built system of corporate welfare that infects and distorts the American economy. We are all left holding the bill.
— With reporting by Laura Karmatz and Aisha Labi, and research by Joan Levinstein