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Denmark’s ATP and US pension funds under pressure over links to US bail bond industry

Labour market scheme involved via an investment in private equity

Danish labour market pension giant ATP has come under pressure from a US non-profit group over its investments in the controversial US bail bond industry.

The DKK785bn ($119bn) scheme has $30m invested in a fund managed by Oregon-based private equity firm Endeavour Capital which holds several US companies linked to the industry.

Aladdin Bail Bonds, one of the companies held by the Endeavour Capital Fund VI, offers loans to cover bail costs for individuals unable to pay for their release from custody, charging a percentage of the bail as a fee for the service (usually 10%), irrespective of the outcome of the case.

Many, however, see the industry as predatory, disproportionately affecting minority and low-income communities. It was once described by former Californian Governor Jerry Brown as “an obvious tax on poor people”.

Jim Baker, Executive Director at US activist group Private Equity Stakeholder Project, has called on ATP to push Endeavour to exit its investments in Aladdin and Aladdin’s surety provider Seaview Insurance, and failing that, for the Danish fund to halt any new investments with the private equity firm.

Other major investors in the fund, which launched in 2011, include US public pension funds Oregon Public Employees Retirement Fund ($95m), Washington State Investment Board ($88m), and the Public Employee Retirement System of Idaho ($25m).

Last week, Baker addressed Washington’s investment board in person, warning of the “substantial regulatory and headline risk” the bail bond industry poses.

That regulatory risk looked set to become a reality for Aladdin’s California-based business when Brown signed a landmark Bill in August 2018 reforming the state’s bail law, effectively destroying the bail bond industry at the stroke of a pen.

But last month the Californians Against the Reckless Bail Scheme campaign – coordinated by the American Bail Coalition – successfully forced a referendum on the Bill after collecting the necessary 365,880 signatures, halting the legislation until at least November 2020.

Triton Management Services, which is also owned by Endeavour’s VI fund, contributed $794,331 to that campaign – a campaign that the Washington Post reported had paid people to collect signatures supporting the referendum.

“What you essentially have”, Baker told RI, “is deep pocketed companies opposing efforts to reform a predatory system purely for their own profit”.That sentiment was echoed by California Senator Bob Hertzberg, a sponsor of the bail reform legislation, who told the Los Angeles Times: “We know that private equity firms poured hundreds of thousands of dollars into this campaign — not to protect public safety, or decrease the number of innocent people in jail, but to protect their bottom line.”

ATP’s spokesperson told RI that it was “aware of the campaign by Triton to uphold the for-profit bail industry in California” and that it had “discussed” it with the Private Equity Stakeholder Project and Endeavour.

He said that this “type of lobbying activity is a product of the American system and is not illegal”, but added “in terms of the amount of money spent on campaigning, this is a business issue which is being discussed with Endeavour”.

In a letter from the American Civil Liberties Union (ACLU) – dated August 2018 – to Endeavour and Aladdin’s senior executives, the US non-profit cited similar efforts by Aladdin and its affiliate, Two Jinn, “to frustrate reform or expand for-profit bail into states such as Oregon where it is currently banned”.

Aladdin currently operates in California, Idaho, Nevada, Utah, Texas, Washington, South Carolina and Ohio.

ATP told RI that it is still in “dialogue” with Endeavour regarding its investments in Aladdin, but that it had found no “breaches” in the way the company conducted its business, which the spokesperson described as a “product of the American justice system”.

He did, however, concede that US bail reforms “are probably necessary” and cited “a lot of movement in the US” in this direction, which is “going to affect Aladdin”.

When considering investments in future Endeavour funds, ATP’s spokesperson said, relevant “information about previous funds and [their] portfolio companies” will be included as part of the scheme’s new private equity “ESG due diligence process”, which it established last year.

A spokesperson for Washington State Investment Board told RI that it is aware of the “public and political issues involving the bail bonds business” and has discussed this with Endeavour but that as a “limited partner” it “does not direct the GP in making or not making its specific investments”.

Oregon’s spokesperson similarly told RI that as a limited partner “neither Treasury nor the Council have any investment or operating authority, and cannot intervene in any fund-level decision”.

Endeavour had not commented at the time of writing.