Inspiration on Investigative Journalism- How ICIJ’s Project Team Analyzed the Offshore Files


Networking in the offshore world – ICIJ used advanced tools like Nuix to see how offshore providers linked up.

The International Consortium of Investigative Journalists’exploration of the secretive world of offshore companies and trusts began after a computer hard drive packed with corporate data and personal information and e-mails arrived in the mail.

Gerard Ryle, ICIJ’s director, obtained the data trove as a result of his three-year investigation of Australia’s Firepower scandal, a case involving offshore havens and corporate fraud.

The offshore information totaled more than 260 gigabytes of useful data. ICIJ’s analysis of the hard drive showed that it held about 2.5 million files, including more than 2 million e-mails that help chart the offshore industry over a long period of explosive growth.  It is one of the biggest collections of leaked data ever gathered and analyzed by a team of investigative journalists.

The drive contained four large databases plus half a million text, PDF, spreadsheet, image and web files. Analysis by ICIJ’s data experts showed that the data originated in 10 offshore jurisdictions, including the British Virgin Islands, the Cook Islands and Singapore.  It included details of more than 122,000 offshore companies or trusts, nearly 12,000 intermediaries (agents or “introducers”), and about 130,000 records on the people and agents who run, own, benefit from or hide behind offshore companies.

When ICIJ further analyzed the data using sophisticated matching software, it found that about 40 percent of files and emails were duplicates.

The people identified in ICIJ’s analysis of the data are shareholders, directors, secretaries and nominees of companies and trustees, “settlors” or “protectors” of offshore trusts, as well as power-of-attorney holders who direct the actions of third parties. Many of the structures are designed to conceal the true ownership and control of assets placed offshore.   Their identified addresses are spread across over more than 170 countries and territories.

A large number of positions are held by so called “nominee directors,” whose names appear again and again, sometimes in hundreds of companies.  Nominee directors are people who, for a fee, lend their names as office holders of companies they know little about.  It is a legal device widely utilized in the offshore world – akin to having your motor vehicle registered in the name of a stranger.

The records indicated that company directors and shareholders were often nominee companies, law firms or other types of “corporate persons,” some of which were managed and owned by still other nominees and companies.

ICIJ’s data analysis showed that the people setting up offshore entities lived most often in China, Hong Kong and Taiwan. Another important group of clients comes from Russia and former Soviet republics.  This helps explain why the second-largest source of capital investment flowing into China is the tiny offshore tax haven of the British Virgin Islands.  Similarly, a large source of investment flowing into Russia is from Cyprus, a country that also features heavily in the data – and whose financial stability was recently undermined by a crisis precipitated by Cypriot-based banks being bloated by Russian money.

ICIJ’s team of 86 investigative journalists from 46 countries represents one of the biggest cross-border investigative partnerships in journalism history. Unique digital systems supported private document and information sharing, as well as collaborative research. These included a message center hosted in Europe and a U.S.-based secure online search system.  Team members also used a secure, private online bulletin board system to share stories and tips.

The project team’s attempts to use encrypted e-mail systems such as PGP (“Pretty Good Privacy”) were abandoned because of complexity and unreliability that slowed down information sharing. Studies have shown that police and government agents – and even terrorists – also struggle to use secure e-mail systems effectively.  Other complex cryptographic systems popular with computer hackers were not considered for the same reasons.  While many team members had sophisticated computer knowledge and could use such tools well, many more did not.

Tackling the data

Analyzing the high volume of information was the team’s first and central challenge.  With this much data, relevant information, and good stories, cannot be found just “going and looking.”  What’s needed is to use “free text retrieval” (FTR) software systems.

Modern FTR systems can work with huge volumes of unsorted data, many times larger than even in this landmark investigative project.  They pre-index every number, word and name, making it possible for complex queries to be completed in milliseconds. The searches are akin to using advanced features on Google or other internet search engines but are more sophisticated – and, critically, are private and secure.

The use of FTR, as well as relevant features such as timelines that tools can extract and display, have been critical to the success of the project.  It sounds complicated, but still boils down to asking one of the most important questions that investigative journalists ask: “Who knew what, when?”

In their modern form, high-end FTR and analysis systems have been sold for more than a decade, in large quantities, to intelligence agencies, law firms and commercial corporations.  Journalism is just catching up.  Many of the tools are too expensive for most journalism organizations and may be too sophisticated for most to use. Perhaps the best-known intelligence analysis system, i2 Analysts Notebook, has been used by very few journalists or news organizations.

The major software tools used for the Offshore Project wereNUIX of Sydney, Australia, and dtSearch of Bethesda, Md.  NUIX Pty Ltd provided ICIJ with a limited number of licenses to use its fully featured high-end e-discovery software, free of charge. The listed cost for the NUIX software was higher than a non-profit organization like the ICIJ could afford, if the software had not been donated.

Computer programmers in Germany, the UK and Costa Rica designed sophisticated data mining and cleaning software for ICIJ to support data research. Before it was used, though, manual analysis had established much country-by-country identification of clients and thus provided an initial look at the scope and range of clients. This painstaking work was done in New Zealand and it proved crucial in early decisions on what countries ICIJ needed reporters to work in.

ICIJ’s online search and retrieval system – named Interdata – was developed and deployed by a British programmer in less than two weeks in December 2012 to support an urgent need to get relevant documents and files out faster for research by dozens of new journalists who were joining the expanding Offshore Project.

Interdata allowed team members to access and download copies of any of the offshore documents that were relevant to their countries and interests.  Journalists using the Interdata system have to date made over 28,000 online searches and downloaded more than 53,000 documents.

Unreadable documents

Before loading Interdata or using NUIX or similar analysis tools, the team’s data experts had to deal with a major problem affecting tens of thousands of the leaked documents.  Computers could not automatically read them because they were photographs or other images that do not contain text.

The solution was large scale re-scanning of unreadable files by optical character recognition (OCR) software that identifies and writes in the names and numbers on top of the images.  This brought to the surface dozens of important new documents, including passports, contracts and letters explaining how companies were controlled.

ICIJ’s offshore 260-gigabyte data collection is more than 160 times larger in size as measured in gigabytes than the U.S. State Department cables leaked to and published by Wikileaks in 2010.  The formats of the data that ICIJ’s team worked with were more complex and diffuse than the collected U.S. State Department cables passed to Wikileaks, and needed more levels of analysis.

One specially built program has been prepared to check and match names and addresses, and has spotted thousands of cases where the same person’s data has been entered numerous times in different ways for different companies. Another special program identifies the country associated with each person and company, even when geographic data has not been entered fully or correctly.

Unlike the U.S. cables and war logs released by Wikileaks, the offshore data was not structured or clean.  As delivered, it consisted of a large and mainly unsorted collation of company and trust documents and instructions, e-mails, large and small databases and spreadsheets, personal identity documents, accounting information and agents’ and companies’ internal papers and reports.

As might be expected in any office computer network, many documents and e-mails had been shared and copied many times over.  Some of the programs ICIJ used could automatically sift out duplicates, but others could not.

Large databases detailing offshore companies and the people who had set up and operated them were found in the data.  Over three months, ICIJ recovered and rebuilt the databases in an effort to run them in their original format. When the database reconstruction was done, there were surprises.  The databases had been built to record and check who really lay behind each company and trust, as required by international regulations on money laundering and “due diligence.”   ICIJ’s journalists hoped the data as to who was behind a company was a click away.

In fact, database entries for “beneficial owners” were often empty. Often too, the offshore services providers had passed the legal responsibility for holding the information to intermediaries in other countries who had brought the client to the service provider.   The lesson was that the empty fields were not an accident; it was the design.

A frustrating but rewarding road

In the rebuilt databases, researchers were excited by occasional electronic flashes. Sometimes, on accessing a company record, an alert screen popped up over the registered data, giving a name and contact details for the person or persons who really owned the company and its assets.   A further feature in one database masked a deeper layer of secrecy, identifying thousands of people as hidden stand-ins.

ICIJ’s fundamental lesson from the Offshore Project data has been patience and perseverance. Many members started by feeding in lists of names of politicians, tycoons, suspected or convicted fraudsters and the like, hoping that bank accounts and scam plots would just pop out.  It was a frustrating road to follow.  The data was not like that.

But persistently following leads through incomplete data and documents yielded some great rewards: not just occasional and unexpected top names, but also many more nuanced and complex schemes for hiding wealth.  Some of the schemes spotted, although well known in the offshore trade, have not been described publicly before.  Patience was rewarded when this data opened new windows on the offshore world.

Duncan Campbell (U.K.), a founding member of ICIJ, is the ICIJ Data Journalism Manager for the Offshore Project and a contributing journalist.  ProgrammersSebastian Mondial (Germany), Matthew Fowler (UK), Rigoberto Carvajal and Matthew Caruana (Costa Rica) provided custom software design, programming and data support. The initial manual analysis of the client names was done by ICIJ memberNicky Hager and Barbara Mare (New Zealand). ICIJ member Giannina Segnini oversaw the work in Costa Rica.

 

Global media investigation finds 612 Indians among thousands with firms in tax havens


 

Icij-reporters-, Ritu-sarin : New Delhi, Washington | Apr 04, 2013, IE

BM

In the biggest global expose of its kind on offshore investments and secret financial transactions, an international group of investigative journalists has found details of more than 1.2 lakh offshore entities and trusts belonging to individuals and companies in more than 170 countries and territories, including India.

These individuals and companies include politicians, the mega rich and tax offenders, among others, who have invested in tax havens such as the British Virgin Islands, the Cook Islands, Samoa and other offshore hideaways.

The 612 Indians in this list include two members of Parliament — Lok Sabha Congress MP Vivekanand Gaddam and RS member Vijay Mallya — and several industrialists such as Ravikant Ruia, Samir Modi, Chetan Burman, Abhey Kumar Oswal, Rahul Mammen Mappillai, Teja Raju, Saurabh Mittal and Vinod Doshi.

The list also includes businessmen who have had a brush with authorities such as the Income-Tax department and the CBI. Several of the offshore investments were made in possible violation of RBI and FEMA rules.

Details of these transactions were contained in 2.5 million secret files and accounted for more than 260 gigabytes of data. They were obtained by the International Consortium of Investigative Journalists (ICIJ) and their total size is more than 160 times larger than the leak of the US State Department documents by Wikileaks in 2010.

Based in Washington DC, ICIJ (www.icij.org) is an independent network of reporters who work together on cross-border investigations.

ICIJ collaborated with 38 media organisations around the world, including the The Indian Express, for this ambitious global project and to analyse the documents. The other media partners include The Washington Post in the US, The Guardian and BBC in Britain, Le Monde in France and the Canadian Broadcasting Corporation.

The secret files provide facts and figures — cash transfers, incorporation dates, links between companies and individuals — that illustrate how financial secrecy has spread aggressively around the globe. They represent the biggest stockpile of inside information about the offshore system ever obtained by a media organisation.

Besides several well-known Indians, the lists include American doctors and dentists, middle-class Greek villagers as well as families and associates of long-time despots, Wall Street swindlers, East European and Indonesian billionaires, Russian corporate executives and international arms dealers.

These people used international financial services providers such as the Portcullis Trustnet (PTN) of Singapore and the Commonwealth Trust Limited (CTL) in the British Virgin Islands to register offshore companies in tax havens. PTN and CTL, it has been found, have helped tens of thousands of people set up off-shore companies, personal financial trusts and hard-to-trace bank accounts.

Anti-corruption campaigners argue that offshore secrecy undermines law and order and forces average citizens to pay higher taxes to make up for revenues that vanish offshore. The stolen asset recovery initiative, a programme of the Wold Bank and the United Nations, has estimated that cross-border flows of global proceeds of financial crimes total between $1 trillion and $ 1.6 trillion a year.

On the other hand, offshore defenders counter that most offshore patrons are engaged in legitimate business transactions. Offshore centres, they say, allow companies and individuals to diversify their investments, force commercial alliances across national borders and do business in entrepreneur-friendly zones that eschew the heavy rules and redtape of the onshore world.

The 15-month long investigation has found that alongside perfectly legal transactions, the secrecy and lax oversight offered by the offshore world allows fraud, tax dodging and political corruption to thrive. The expose has also thrown light on the functioning of “nominee directors’’ in offshore companies, several of whom have also been engaged by Indian patrons of offshore companies.

For instance, a cluster of 28 “sham directors’’ have been identified as having served as the on-paper representatives of more than 21,000 companies between them, with some individual directors representing as many as 4,000 companies each.

The expose comes shortly after a list of 18 Indians who had bank accounts in the LGT Liechtenstein Bank and around 700 Indians who had accounts in HSBC in Geneva became public. In both cases, account holders were prosecuted and paid penalties to Income-Tax authorities for deposits they had made abroad without paying taxes in India.

Incidentally, India had signed a double taxation treaty called the Tax Information Exchange Agreement with the BVI in 2011 to check tax evasion and money laundering from the tax haven. Finance ministry officials said that similar agreements are in the process of being drafted with the Cook Islands and Samoa.

While the Liberalized Remittance Scheme 2012 permits Indians to deposit up to $200,000 abroad annually, the RBI has made it clear that this does not include deposits in tax havens. “As yet, the $200,000 facility for remittances abroad is not applicable for individuals to open accounts or companies in tax havens,” a RBI spokesperson told The Indian Express.

Auditors said the legality of holding offshore accounts and registering offshore companies is complex. The RBI restriction on individuals incorporating companies abroad, they said, can be easily circumvented if an offshore company is first incorporated and the shareholding then transfered to the beneficial owner.

In the cases under scrunity, documents show that both patterns have been followed. The date of incorporation and the date of the patrons being appointed shareholders/directors is either identical — which is a violation of RBI guidelines — or is a month or so later. If it is the latter, these individuals can say they just acquired shares of an offshore company.

However, with individuals debarred from using LRS for setting up companies, even the remittance dispatched by them for setting up an offshore entity can be a violation. Under rules of the Foreign Exchange Management Act (FEMA), the use of the offshore route to bring in FDI is also prohibitted and is a violation of Section 8 of the act.

There is also a restraint on individuals setting up offshore companies without the prior approval of the RBI.

MEGA BYTES

* 15-month investigation based on 260 GB data in 2.5 million secret files including 2 million emails covering nearly 30 years

* Data had details of over 1.2 lakh offshore firms/trusts and 12,000 agents

* Owners, benefactors of offshore accounts spread across more than 170 countries, territories

* 86 ICIJ journalists from 38 media organisations in 46 countries collaborated in investigation

* Data found 28 ‘sham directors’ who together represented 21,000 firms

 

 

When workers die: “And nobody called 911″


A man is scalded by boiling water and citric acid at a plant. His fate points to a dark reality for temp workers

BY  AND , Salon.com

When workers die: Carlos Centeno, a Chicago-area temporary worker who died after a workplace accident, and his partner, Velia Carbot.
This story was reported by the Center for Public Integrity and WBEZ. An audio version ran on the APM radio program “The Story,” and is printed here as part of Salon’s partnership with the show. To listen to the report, click here.

CHICAGO — By the time Carlos Centeno arrived at the Loyola University Hospital Burn Center, more than 98 minutes had elapsed since his head, torso, arms and legs had been scalded by a 185-degree solution of water and citric acid inside a factory on this city’s southwestern edge.

The laborer, assigned to the plant that afternoon in November 2011 by a temporary staffing agency, was showered with the solution after it erupted from the open hatch of a 500-gallon chemical tank he was cleaning. Factory bosses, federal investigators would later contend, refused to call an ambulance as he awaited help, shirtless and screaming. He arrived at Loyola only after first being driven to a clinic by a co-worker.

At admission Centeno had burns over 80 percent of his body and suffered a pain level of 10 on a scale of 10, medical records show. Clad in a T-shirt, he wore no protective gear other than rubber boots and latex gloves in the factory, which makes household and personal-care products.

Centeno, 50, died three weeks later, on Dec. 8, 2011. The Cook County medical examiner’s report attributed his death to “scald and chemical burns due to an industrial accident.”

A narrative account of the accident that killed him — and a description of conditions inside the Raani Corp. plant in Bedford Park, Ill. — are included in a U.S. Occupational Safety and Health Administration memorandum obtained by the Center for Public Integrity. The 11-page OSHA memo, dated May 10, 2012, argues that safety breakdowns in the plant warrant criminal prosecution — a rarity in worker death cases.

The story behind Centeno’s death underscores the burden faced by some of America’s 2.5 million temporary, or contingent, workers — a growing but mostly invisible group of laborers who often toil in the least desirable, most dangerous jobs. Such workers are hurt more frequently than permanent employees and their injuries often go unrecorded, new research shows.

Raani’s “lack of concern for employee safety was tangible” and injuries in its factory were “abundant,” Thomas Galassi, head of OSHA’s Directorate of Enforcement Programs, wrote in the memo to David Michaels, assistant secretary of labor for occupational safety and health.

Raani managers failed to put Centeno under a safety shower after he was burned and did not call 911 even though his skin was peeling and he was clearly in agony, Galassi wrote. “It took a minimum of 38 minutes before (Centeno) arrived at a local occupational health clinic … after having been transported by and in the vehicle of another employee while he shivered in shock and yelled, ‘hurry, hurry!’ ”

A clinic worker called an ambulance, which, according to Chicago Fire Department records, arrived at 2:26 p.m. Centeno was in “moderate to severe distress with 70-80% 1st and mostly 2nd degree burns to head, face, neck, chest, back, buttocks, arms and legs,” the records show. Paramedics administered morphine.

“The EMT’s were horrified and angered at the employer, for not calling 911 at the scene and further delaying his care by transferring him to a clinic instead of a hospital,” Galassi’s memo says.

John Newquist, who retired from OSHA in September after 30 years with the agency, said the case was among the most disturbing he encountered as an assistant regional administrator in Chicago.

“I cannot remember a case where somebody got severely burned and nobody called 911,” said Newquist, a former compliance officer who investigated more than 100 fatal accidents during his career. “It’s beyond me.””

On May 15, OSHA proposed a $473,000 fine against Raani for 14 alleged violations, six of which are classified as willful, indicating “plain indifference” toward employee safety and health. No decision has been made on whether the case will be referred to the Department of Justice for possible prosecution, agency spokesman Jesse Lawder said. OSHA hadn’t inspected the Raani factory for 18 years prior to the accident.

Centeno’s family has filed a wrongful-death lawsuit against Raani and a workers’ compensation claim against the temp agency that employed him, Ron’s Staffing Services Inc.

“It’s just wrong, what happened,” Centeno’s 26-year-old son, Carlos Jr., said of Raani managers’ actions after his father’s accident. “They were not thinking of him as a human being.”

Raani is appealing the OSHA citations. H. Patrick Morris, a lawyer for the company, did not answer questions about the alleged violations. In a court filing, however, Raani denied allegations of negligence in the family’s lawsuit. Among its defenses: Centeno himself was responsible for the accident. “Plaintiff’s Decedent knew about the hazards of his conduct, but proceeded with his course of conduct, causing the claimed injuries,” the document says.

Jeffrey Kehl, a lawyer for Ron’s Staffing, declined to comment.

“I wanted him to quit”

Carlos Centeno came to Chicago from Mexico City in 1994. He was joined six years later by his partner, Velia Carbot, and Carlos Jr. A daughter, Alma, stayed behind.

The family settled in Humboldt Park, a working-class neighborhood on the city’s northwest side. A second daughter, Melanie, was born in 2001.

Centeno held jobs as a bartender, newspaper deliveryman and forklift driver at a warehouse. In June 2010, after being laid off by the warehouse, he put in an application at the Ron’s Staffing office on West 63rd Street, not far from Midway International Airport. He was sent to the nearby Raani Corp. factory, which makes products ranging from shampoos, styling gels and deodorant sticks to dishwashing liquids and household cleaners. His starting pay was $8.25 an hour.

Raani, founded in 1983 by Rashid A. Chaudary, a chemist turned entrepreneur, has about 150 employees, roughly 40 percent of whom are contingent workers, according to the May 2012 OSHA memo. Centeno cleaned the tanks in which the factory’s products are mixed. His work clothes became so rank, he had his own laundry basket at the family’s apartment, partner Carbot said; about six months before the fatal accident, chemicals splashed in his right eye and he couldn’t see out of it for three days, she said.

“I wanted him to quit,” Carbot, speaking in Spanish, said. “But, at the same time, we knew he hadn’t found another job yet, and expenses continued, unfortunately, and he had to work.”

The OSHA memo describes a factory in which workers were often hurt and injuries were not properly recorded. An OSHA inspection on Dec. 9, 2011, the day after Centeno died, revealed, for example, that workers “were handling chemicals including, but not limited to, corrosives and acids while wearing only medical grade latex gloves,” the memo says.

Workers were seen putting their hands directly into streams of chemicals poured from drums, OSHA enforcement director Galassi wrote. “Another significant hazard (to) which employees are exposed, as evidenced by the fatality, was the high temperature (nearly boiling) water and cleaning solutions used for cleaning tanks, process lines and floors. Employees interacted with high temperature liquids wearing only latex gloves and tee-shirts.”

A manager explained that thick, black gloves were kept in the maintenance department “because they were expensive and the employees stole them,” Galassi wrote. The manager said, however, that “any employee could obtain the black gloves if so desired.”

A review of Raani’s medical files turned up five injuries, apart from Centeno’s, that had occurred since 2010 but had not been entered in OSHA logs, as required by federal law, Galassi wrote. Injuries “involving chemical exposure to eyes, high temperature liquid burns and cuts had been a common occurrence for years,” his memo says. One worker who had been burned and whose skin was peeling was told by a manager “to leave it alone, it wasn’t dangerous.”

Another was burned so badly he needed skin grafts, but the incident wasn’t recorded even though CEO Chaudary “stated he was aware of the injury,” Galassi wrote. On Jan. 27, 2012, more than two months after Centeno was scalded, a worker performing a similar tank-cleaning procedure received severe burns to his left leg. He was handed a written notice from management. “You are hereby warned to be careful in the future,” it said, in part, according to Galassi’s memo.

“Instead of issuing the appropriate (protective gear) to its workers and ensuring its usage, Raani Corporation has chosen to blame their employees outright for their injuries and non-compliance,” Galassi wrote.

Two managers “admitted to witnessing (Centeno) with his shirt off and speaking with him” shortly after he was burned, the memo says. “Both managers agreed the injured employee’s skin was burned, damaged, wrinkled and parts were ‘peeling.’ ”

The managers not only failed to call 911 — they made Centeno wait while one filled out paperwork before allowing him to be taken to a local clinic, Galassi wrote. The co-worker who drove Centeno about four miles to the MacNeal Clearing Clinic said “he was asked to lie on his written statement and write that Carlos Centeno was acting fine, conscious and talking on the drive to the clinic,” the memo says. “Even after the incident, company officials have not concluded that 911 should have been called immediately.”

Chaudary, who was not on the scene the day of the accident — Nov. 17, 2011 — told an OSHA inspector that the “wrong valve opened” on the tank Centeno was cleaning, according to the memo, but insisted that “if Carlos Centeno had lived, the decision to not call an ambulance would have been the right call.”

Centeno’s co-workers, however, “provided signed statements of the severity of the injury and the extreme delayed response in seeking medical care,” Galassi wrote.

Chaudary did not respond to requests for comment.

Not long after he was doused with the hot water-citric acid mixture, Centeno called Velia Carbot, asking for Carlos Jr. He sounded agitated and had trouble speaking, Carbot said, but would not explain what had happened.

Carbot went across the street and got Carlos Jr., who called his father’s cellphone. It was answered by a co-worker, Samuel Meza, who said Carlos Sr. had been burned at work. “He was like, ‘I’m taking him to the clinic,’” Carlos Jr. said.

Meza called Carlos Jr. after he arrived at the MacNeal Clearing Clinic. While they talked, Carlos Jr. said, “I could hear that the nurse in the clinic was telling him, ‘Why are you bringing him here? … He needs to go to the emergency room.’”

Carbot and Carlos Jr. said they began driving to the clinic, 13 miles south of Humboldt Park, but diverted west to Loyola Hospital when Meza told them that’s where Centeno would be heading.

Carlos Jr. and Carbot got there first, watching ambulance after ambulance pull up. “I remember just walking up to all the ambulances and it was someone else,” Carlos Jr. said. “It wasn’t my dad. It just makes you more anxious.”

At 3:08 p.m., more than 98 minutes after he had been burned, Carlos Sr. made it to Loyola. “When they finally opened the doors and I saw it was him, I could just see he was in pain,” Carlos Jr. said. “He was trying to hide it. He saw my mom and I could see his eyes started to tear.”

Carlos Centeno Sr. died three weeks later. OSHA, which learned of his death from the Cook County medical examiner, began its inspection of Raani the next day. Its last visit to the plant had been in 1993, when, responding to a worker complaint, it cited the company for six alleged violations — including failing to protect workers from unexpected energizing or start-up of machines — and proposed a $9,500 fine. Raani settled the case for $6,500 in 1994.

In an emailed statement, OSHA said no follow-up inspection was conducted. This is “not unusual,” the agency said, “as long as we receive documentation from the employer that the violations were corrected.”

Dangers of temp work

The use of contingent workers by U.S. employers has soared over the past two decades. In 1990, according to the U.S. Bureau of Labor Statistics, there were about 1.1 million such workers; as of August 2012, the number was 2.54 million, down slightly from pre-recession levels but climbing.

The American Staffing Association, a trade group, says the hiring of contingent workers allows employers to staff up at their busiest times and downsize during lulls. Temporary work enables employees to have flexible hours and “provides a bridge to permanent employment,” the group says on its website.

Recent research, however, suggests a dark side to contingent work.

study published this year of nearly 4,000 amputations among workers in Illinois found that five of the 10 employers with the highest number of incidents were temp agencies. Each of the 10 employers had between six and 12 amputations from 2000 through 2007. Most of the victims lost fingertips, but some lost legs, arms or hands.

The researchers, from the University of Illinois at Chicago School of Public Health, called the glut of amputations a “public health emergency,” inflicting psychological and physical harm and costing billions.

Another study, published in 2010, found that temp workers in Washington state had higher injury rates than permanent workers, based on a review of workers’ compensation claims. In particular, temp workers were far more likely to be struck by or caught in machinery in the construction and manufacturing industries.

“Although there are no differences in the (OSHA) regulations between standard employment workers and temporary agency employed workers, those in temporary employment situations are for the most part a vulnerable population with few employment protections,” wrote the researchers, with the Washington state Department of Labor and Industries.

In fact, experts say, there’s little incentive for host employers to rigorously train and supervise temp workers because staffing agencies carry their comp insurance. If an agency has a high number of injuries within its workforce, it — not the host employer — is penalized with higher premiums.

“This is really about an abdication of responsibility,” said Tom Juravich, a professor at the University of Massachusetts, Amherst, who has studied the temp worker phenomenon. “If some of the jobs in your facility are undesirable and dangerous, you outsource them to people who won’t complain. If you have a direct worker who’s injured, you have an obligation to him through workers’ comp. If he’s a contingent worker, you don’t have that obligation.”

As part of a three-year study, researchers in Canada interviewed temp workers and managers at temp agencies and client companies. “To be frank,” one agency manager confided, “clients hire us to have temps do the jobs they don’t want to do.” Co-author Ellen MacEachen, of the University of Toronto and the Institute for Work and Health, said, “Even if (temp workers) are not cheaper, they’re more disposable. … You can get rid of them when you want, and you don’t pay benefits.”

Stephen Dwyer, general counsel for the American Staffing Association, denied that the temp workers have less legal protection than permanent employees.

“I can say nationally, and on a state level, the legal framework is there to ensure the safety of the temporary employees,” he said. “And this framework imposes obligations on both the staffing firm and the client and so one could argue actually that temporary workers have greater workplace safety protections under the law than their counterparts with clients.”

Bureau of Labor Statistics numbers say contingent workers’ injuries are declining. Yet, new evidence suggests these injuries are undercounted.

In a BLS-funded project completed last summer, officials with the Washington State Department of Labor and Industries interviewed 53 employers who had used temp workers. Only one-third said they would enter a temp worker injury in their OSHA log, as the law requires. The others said they wouldn’t or claimed ignorance. “A lot of them just didn’t know” the rules, said Dr. David Bonauto, the department’s associate medical director.

Dwyer, of the staffing association, said the problem in Washington appears to be isolated.

“I’m not sure it’s actually a widespread problem,” he said. “The laws are very clear about this — that whoever controls the worksite is responsible for recording temporary workers’ injuries on the (OSHA log) and typically that’s the client.”

The executive director of the Chicago Workers’ Collaborative, which advocates for temp workers, says OSHA should target employers known to make heavy use of staffing agencies.

“The rise of the staffing industry is partially to give companies a greater distance from regulation,” said Leone José Bicchieri. “OSHA needs to come up with different approaches for this rapidly growing sector” — meeting with temp workers offsite, for example, so they’re not intimidated by supervisors.

Temp workers are often reluctant to report injuries because they are so easily replaced, Bicchieri said.

“They have no power to speak up,” he said. “The whole temp industry was created so the client company has less liability. We need to put workplace injuries back on the plate of the client company.”

But Dwyer, the American Staffing Association’s lawyer, denied that the temp workers have no recourse.

“Both the staffing firm and the client have joint obligations, as joint employers, to ensure the workplace safety of temporary employees, meaning that if something goes wrong, temporary employees have recourse, typically against the client and the staffing firm, if one or both fails to discharge their duty under the law,” he said.

He also cautioned against an OSHA crackdown on temp agencies. “To the extent that efforts become heavy-handed, there can be a disincentive, then, to using temporary workers,” Dwyer said, to the detriment of the workers, client employers and “the overall economy.”

In a statement, OSHA said it “feels strongly that temporary or contingent workers must be protected. They often work in low wage jobs with many job hazards — and employers must provide these workers with a safe workplace.”

The agency said it has brought a number of recent enforcement actions against employers for accidents involving temp workers.

Weak law, few prosecutions

Although the Galassi memo recommends criminal action in the Centeno case, employers in America are rarely prosecuted for worker deaths.

The Occupational Safety and Health Act of 1970 is exceptionally weak when it comes to criminal penalties. An employer found to have committed flagrant violations that led to a worker’s death faces, at worst, a misdemeanor punishable by six months in jail.

By comparison, a violation of the Endangered Species Act carries a maximum sentence of one year.

“It should not be the case that a facility that commits willful violations of the worker safety laws faces only misdemeanor charges when a worker dies because of those violations,” said David Uhlmann, a law professor at the University of Michigan and former chief of the Justice Department’s Environmental Crimes Section.

“The company involved as well as any responsible corporate officials should face felony charges that carry significant financial penalties for the company and the possibility of lengthy jail terms for the individuals,” Uhlmann said. “Anything less sends a terrible message about how we value the lives of American workers.”

Federal prosecutors are generally unenthusiastic about worker cases, said Jordan Barab, second-in-command at OSHA. The Justice Department “often says, ‘You know, we’re not going to spend all these resources just to prosecute a misdemeanor,’ ” Barab said.

At Justice, Uhlmann made creative use of environmental statutes to get around the OSH Act. In one case, a worker at an Idaho fertilizer plant named Scott Dominguez nearly died after being sent into a steel storage tank containing cyanide-rich sludge. Dominguez had been ordered into the 25,000-gallon tank without protective equipment by the plant’s owner, Allan Elias, who had refused to test the atmosphere inside the vessel.

Dominguez collapsed and sustained brain damage from the cyanide exposure. Prosecutors charged Elias with three felony counts under environmental laws, including the Resource Conservation and Recovery Act, which governs the handling and disposal of hazardous waste.

Because Elias had fabricated a confined-space entry permit indicating it was safe for workers to enter the tank, he also was charged with one count under a section of Title 18 of the U.S. Code, for making a false statement to, or otherwise conspiring to defraud, government regulators.

After a jury trial in 1999, Elias was convicted on all counts and sentenced to 17 years in prison.

Environmental statutes don’t always apply in worker death or injury cases. The accident that mortally wounded Carlos Centeno, for example, appears not to have involved hazardous waste, or air or water pollution.

Charges under Title 18 remain a possibility, Uhlmann said. Nonetheless, he said, the OSH Act needs revision. Congress came close to adding felony provisions to the law in 2010 but failed amid pushback from the business community.

“Accidents are not criminal,” Uhlmann said. “What are criminal are egregious violations of the worker safety laws that result in not just deaths but serious injuries.”

Sen. Tom Harkin, an Iowa Democrat who chairs the Senate Health, Education, Labor and Pensions Committee, is a co-sponsor of the Protecting America’s Workers Act, which would enhance criminal and civil penalties for OSHA violations.

“In every other walk of life, if a person engages in willful conduct that results in someone else’s death, we throw the book at them,” Harkin said in a statement. “But if someone dies on the job, the rules are different. Even intentional lawbreaking that kills a worker brings no more than a slap on the wrist.”

Whether a bulked-up worker-protection law would have improved conditions at the Raani Corp. is a matter of speculation. According to Thomas Galassi’s memo, the accident that ultimately killed Carlos Centeno merited only a one-line entry in the company’s files, stating that an internal committee would investigate.

During the inspection after Centeno’s death, a newly hired Raani manager asked OSHA officials to help him convince his superiors to train and provide safety gear to workers, Galassi wrote. The manager had concluded that those above him had “no respect for the hazards of the chemicals on site or human life,” the memo says.

This story was jointly reported by WBEZ, the public radio station of Chicago, and the Center for Public Integrity, a nonprofit investigative news outlet in Washington, D.C. Jim Morris and Chip Mitchell, reporters.

 

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