A Tale Of Two Silicon Valleys: Wage theft, billionaires, and the rest of us

By Mark Ames , written on October 15, 2014

From The News Desk

Last month, a multiagency task force composed of federal, state, and local authorities busted open a major Bay Area wage theft operation, leading to arrests, raids, mug shots on the local news, and big speeches about the injustice and immorality of wage theft:

“Businesses should not profit by stealing from their hard-working employees.”
For months here at Pando, we've been reporting on Silicon Valley’s Techtopus, the wage-fixing cartel organized by Steve Jobs, George Lucas, Eric Schmidt, Bill Campbell, Meg Whitman and other superstar luminaries. According to experts’ models, just four Big Tech companies at the center of the Techtopus—Apple, Adobe, Google and Intel—effectively stole up to $3 billion in employee wages between 2005-2010. This doesn’t include the dozens of other companies who appear as co-conspirators, from Disney and Dreamworks Animation to IBM, Microsoft, Oracle, Dell, WPP, Comcast and others named in secret internal company documents first revealed by Pando.

But September’s massive crackdown on wage theft, the culmination of a year long investigation, was not aimed at those very real wage heists. Rather, the accused wage thieves are a handful of sleazy senior care home operators: A 76-year-old woman and her daughter and son-in-law; and a 61-year-old Filipino woman. In all, the care home operators are accused of stealing roughly $2 million in underpaid wages to some 60 care home workers — largely imported Filipino workers.

It’s become almost a cliche by now to call attention to just how grotesque America’s two-tier justice system has become, a grotesquerie accelerating in tandem with our record levels of inequality. It isn't that there was once a golden age where all were judged equally here; but degrees do matter a lot, and the degree of unequal justice today has reached cartoonish levels that were only supposed to happen in basket cases like Boris Yeltsin's Russia.

Here then is a stark example of justice in greater Silicon Valley, the political economy of the future:

Get caught red-handed by the Department of Justice stealing an estimated $3 billion dollars in wages from tens of thousands of employees — and your “punishment” is an agreement with the DOJ “that does not constitute admission by the Defendants that the law has been violated or of any issue of fact or law.” And, no fine. Let me repeat that: $3 billion in stolen wages; no admission of guilt, no fine. The only punishment is an agreement to submit to periodic checkups on compliance with antitrust law as regards to illegal wage-fixing cartels. (See the DOJ settlement sections labeled "Required Conduct" and "Compliance Inspection.") Only eBay was slapped — more like flicked — with a $3.75 million fine, and only because eBay kept brushing off the DOJ’s “threats,” presumably because they didn’t find the DOJ’s no-guilt, no-fine "punishment" of Apple, Google et al particularly frightening. Considering that eBay’s 2013 revenues totaled over $16 billion, on $212 billion in “enabled commerce volume” — a $3.75 million fine is worth less than the pocket lint in Pierre Omidyar’s Bermuda shorts.

Contrast that with the multi-agency Contra Costa Employer Fraud Task Force — combining the power of the US Labor Department, the California state departments of Employment, Insurance, Employment Development, and the Contra Costa County Department of Insurance, along with the district attorney’s office and various police forces — all to bust a grubby small-time wage theft ring at a handful of local senior care homes, ending in police raids, arrests, and frog-marching a 76-year-old and 61-year-old woman into custody, over an estimated $1.5 million to $2 million in underpaid wages to care home providers. The punishment, according to deputy district attorney William Murphy, will include full restoration of the nearly $2 million in stolen wages, plus another $624,000 in fines. Plus at least a dozen criminal felony charges. That’s the result of a year long investigation by the so-called Contra Costa Employer Fraud Task Force.

Don’t get me wrong — underpaying the care home providers for a job as wretched as taking care of inconvenient elderly suburban Californians is disgusting and criminal. The care home business is a mean, grubby business; the owners of these operations, from my limited personal experience many years ago, tend to be hardened people in a hard job. It’s an ugly way to make money, profiting off discarded elderly suburbanites — suburban middle-class feeding cows to the care provider entrepreneurs, dead weight to everyone else in the Bay Area caught up in the cult of individual self-fulfillment. Though it’s little talked about, there’s an enormous amount of sublimated shame and guilt underlying the entire care home industry. Small-time care home providers aren’t heroic entrepreneurs; they’re something we’d all rather not talk about, because it’s a giant bummer and shameful if one thinks about it. Which one doesn’t, if one is a true Californian.

What’s galling is not just the blatant two-tier justice treatment, reminiscent of the Russia I left behind — but also the fake populist outrage used to PR the Big Wage Theft Crackdown. Noting that some of the care homes raided in Walnut Creek, Brentwood and Antioch were “million dollar homes,” deputy district attorney Murphy told reporters as he announced the arrests:

“(The owners) can afford to pay off these million-dollar homes because they’re only paying their workers a couple of bucks.”
Indeed. Except for the fact that these “million dollar homes” were filled with lonely, elderly boarders, dropped off with a suitcase and a promise to visit by their healthier blood relatives — to board with other semi-abandoned elderly, suburbanites... California’s Walking Dead, attended to by dozens of miserably exploited and lonely Filipino migrant care givers, whose families back home need every dollar that can be wired back their way. It’s not exactly like the four arrested care home owners spent 2013 waterskiing across Martha’s Vineyards with the Obama Family, like your Eric Schmidts and Pierre Omidyars and Jeffrey Katzenbergs and the rest of the Techtopus wage theft profiteers.

The deputy DA is right to point to the very real consequence of wage theft — those stolen wages mean more equity, in this case a handful of suburban California tract homes. That’s what wage theft does, it transfers wages from the many employee-victims, and converts it into real equity for the very few wage thieves. The value of that equity grows exponentially in a place like Greater Silicon Valley, whether it's equity in a tract home in the East Bay, or equity in a tech firm that grows into billions.

You can see how this terrible wage-theft-into-equity calculus works most clearly in the way George Lucas became a multibillionaire. Lucas, as I wrote, was the Obi-Wan Kenobi of the illegal wage theft conspiracy back in the mid-1980s, initiating the secret illegal scheme with Steve Jobs and Pixar president Ed Catmull. In his deposition last year, Lucas reveals himself as someone totally deluded into believing that his years illegally suppressing his employees’ wages was an act of moral courage, responsibility, and a sort of anti-capitalist collective rebellion against evil corporations. By secretly and illegally suppressing his workers wages and their opportunities, Lucas argued, he was serving a higher cause for their benefit and for Art. And Lucas clearly believes himself.

Towards the end of the deposition, as Lucas is caught contradicting himself — on the one hand insisting that without wage-fixing agreements, the entire VFX digital animation industry would implode, then insisting that LucasFilm did not need to suppress wages in order to survive as a business, because it wasn't really about profits and competition but about artistry and cooperation — Lucas let loose his twisted logic, polished over in the confused language of 60s resistance and Weathermen anti-capitalism:

“I was trying to -- we were trying to protect the San Francisco film industry. It is very, very small. It is very hard for us. We're not like Hollywood. And the only way we can survive is if we do it together. United we stand, divided we fall. This is not like a regular capitalist kind of operation where you're out to kill the other guy. I'm promoting digital technology for cinema, and I'm devoting a lot of my time working with animators and with visual effects people to try to expand the entire medium and discipline for everybody. When I came here, there were nobody -- there was nobody.”
And yet, to borrow from deputy DA Murphy, those wages stolen from Lucas’ workers over a period of decades allowed George Lucas to cash out of LucasFilm two years ago, selling his stake for $4 billion — $2 billion in Disney stock (making him the largest or second-largest shareholder in Disney) and $2 billion in cash. (A few years earlier, Steve Jobs cashed out his stake in Pixar — co-initiator of the illegal wage theft cartel — for $7.4 billion, making Jobs Disney's largest shareholder at the time.)

One could respond to Lucas’ garbled admixture of radical cliches and mysticism —Angela Davis by way of Yoda: “stand we do united, operation like capitalist this is not, m’m!” — that if he’d taken just half of his $4 billion cash-out in 2012 and redistributed it to the several hundreds of workers whose wages he suppressed to build up that equity, that then he’d make some sense.

But that is the stuff of hippie fantasies, and Lucas is in the business of selling fantasies. As for the real George Lucas, instead redistributing back the equity earned from suppressing his workers’ wages, he shrewdly held on to his wealth, and now he's shoveling close to $1 billion of his wealth into a controversial museum project with Chicago mayor Rahm Emanuel. It’s an old tradition going back to the robber baron days — endowing museums, sleazy land deals with local power brokers — which appears to be philanthropic but in fact serves to protect the billionaire’s ill-begotten wealth by integrating the riches into the cultural and political DNA, all with tax benefits.

And therein lies the problem with the four arrested care home providers: They didn’t steal nearly enough money. Just enough to gain some equity in a few miserable East Bay homes. And now they don’t have that, and the fleeced care workers will have to wait as the money trickles in from freshly abandoned elderly suburbanites, whose checks will presumably be garnished so that they can trickle down at last to the 60 or so exploited Filipino care home employees and their families somewhere on the other side of the Pacific Ocean.

[illustration by Brad Jonas for Pando]