truthout--2020-05-16--Whistleblower Says Systemic Mortgage Fraud Has Returned to Wall Street

Among the toxic contributors to the financial crisis of 2008 , few caused as much havoc as mortgages with dodgy numbers and inflated values .
Huge quantities of them were assembled into securities that crashed and burned , damaging homeowners and investors alike .
Afterward , reforms were promised .
Never again , regulators vowed , would real estate financiers be able to fudge numbers and threaten the entire economy .
Twelve years later , there ’ s evidence something similar is happening again .
Some of the world ’ s biggest banks — including Wells Fargo and Deutsche Bank @ @ @ @ @ @ @ engaged in a systematic fraud that allowed them to award borrowers bigger loans than were supported by their true financials , according to a previously unreported whistleblower complaint submitted to the Securities and Exchange Commission last year .
Whereas the fraud during the last crisis was in residential mortgages , the complaint claims this time it ’ s happening in commercial properties like office buildings , apartment complexes and retail centers .
The complaint focuses on the loans that are gathered into pools whose worth can exceed $ 1 billion and turned into @ @ @ @ @ @ @ CMBS ( for commercial mortgage-backed securities ) .
Lenders and securities issuers have regularly altered financial data for commercial properties “ without justification , ” the complaint asserts , in ways that make the properties appear more valuable , and borrowers more creditworthy , than they actually are .
As a result , it alleges , borrowers have qualified for commercial loans they normally would not have , with the investors who bought securities birthed from those loans none the wiser .
ProPublica closely examined six loans that were part of CMBS in @ @ @ @ @ @ @ resembles the pattern described by the whistleblower .
What we found matched the allegations : The historical profits reported for some buildings were listed as much as 30 % higher than the profits previously reported for the same buildings and same years when the property was part of an earlier CMBS .
As a rough analogy , imagine a homeowner having stated in a mortgage application that his 2017 income was $ 100,000 only to claim during a later refinancing that his 2017 income was $ 130,000 — without acknowledging or explaining the @ @ @ @ @ @ @ questionable ” to alter past profits with no apparent explanation , said John Coffee , a professor at Columbia Law School and an expert in securities regulation .
“ I don ’ t understand why you can do that.
” In theory , CMBS are supposed to undergo a rigorous multistage vetting process .
A property owner seeking a loan on , say , an office building would have its finances scrutinized by a bank or other lender .
After that loan is made , it would be subjected to another round of @ @ @ @ @ @ @ investment bank that assembles 60 to 120 loans to form a CMBS .
Somewhere along the line , according to John Flynn , a veteran of the CMBS industry who filed the whistleblower complaint , numbers are being adjusted — inevitably to make properties , and therefore the entire CMBS , look more financially robust .
The complaint suggests widespread efforts to make adjustments .
Some expenses were erased from the ledger , for example , when a new loan was issued .
Most changes were small ; but a minor increase in @ @ @ @ @ @ @ significantly higher mortgage .
The result : Many properties may have borrowed more than they could afford to pay back — even before the pandemic rocked their businesses — making a CMBS crash both more likely and more damaging .
“ It ’ s a higher cliff from which they are falling , ” Flynn said .
“ So the loss severity is going to be greater and the probability of default is going to be greater.
” With the economy being pounded and trillions of dollars already committed to bailouts , potential @ @ @ @ @ @ @ larger than they would have even a few months ago .
Data from early April showed a sharp spike in missed payments to bondholders for CMBS that hold loans from hotels and retail stores , according to Trepp , a data provider whose specialties include CMBS .
The default rate is expected to climb as large swaths of the nation remain locked down .
After lobbying by commercial real estate organizations and advocacy by real estate investor and Trump ally Tom Barrack — who warned of a looming commercial mortgage crash — the @ @ @ @ @ @ @ prop up CMBS by loaning money to investors and letting them use their CMBS as collateral .
The goal is to stabilize the market at a time when investors may be tempted to dump their securities , and also to support banks in issuing new bonds .
( Barrack ’ s company , Colony Capital , has since defaulted on $ 3.2 billion in debt backed by hotel and health care properties , according to the Financial Times . )
The Fed didn ’ t specify how much it ’ s willing to @ @ @ @ @ @ @ it is allowing only those with the highest credit ratings to be used as collateral .
But if some ratings are based on misleading data , as the complaint alleges , taxpayers could be on the hook for a riskier-than-anticipated portfolio of loans .
The SEC , which has not taken public action on the whistleblower complaint , declined to comment .
Some lenders interviewed for this article maintain they ’ re permitted to alter properties ’ historical profits under some circumstances .
Others in the industry offered a different view .
Adam @ @ @ @ @ @ @ Bankers Association , which has helped set guidelines for financial reporting in CMBS , said he reached out to members of the group ’ s commercial real estate team and none had heard of a practice of inflating profits .
“ We aren ’ t aware of this occurring and really don ’ t have anything to add , ” he said .
The notion that profit figures for some buildings are pumped up is surprising , said Kevin Riordan , a finance professor at Montclair State University .
It raises questions about @ @ @ @ @ @ @ .
Investors don ’ t comb through financial statements , added Riordan , who used to manage the CMBS portfolio for retirement fund giant TIAA-CREF .
Instead , he said , they rely on summaries from investment banks and the credit ratings agencies that analyze the securities .
To make wise decisions , investors ’ information “ out of the gate has to be pretty close to being right , ” he said .
“ Otherwise you ’ re dealing with garbage .
Garbage in , garbage out.
” The whistleblower complaint has @ @ @ @ @ @ @ that keep wonkish investors up at night .
Flynn wondered what was going to happen when some of the most ill-conceived commercial loans — those made in the lax , freewheeling days before the financial crisis of 2008 — matured a decade later .
He imagined an impending disaster of mass defaults .
But as 2015 , then 2017 , passed , the defaults didn ’ t come .
It didn ’ t make sense to him .
Flynn , 55 , has deep experience in commercial real estate , banking and CMBS @ @ @ @ @ @ @ farm in Minnesota , the youngest of 14 children , and graduating from college — the first in his family to do so , he said — Flynn moved to Tokyo to work , first in real estate , then in finance .
Jobs with banks and ratings agencies took him to Belgium , Chicago and Australia .
These days , he advises owners whose loans are sold into CMBS and helps them resolve disputes and restructure or modify problem loans .
He began poring over the fine print in CMBS filings and @ @ @ @ @ @ @ many properties changed their names , and even their addresses , from one CMBS to another .
That made it harder to recognize a specific property and compare its financial details in two filings .
As Flynn read more and more , he began to wonder whether the alterations were attempts to obscure discrepancies : These same properties were typically reporting higher net operating incomes in the new CMBS than they did for the same year in a previous CMBS .
Flynn ultimately collected and analyzed data for huge numbers of commercial mortgages @ @ @ @ @ @ @ what he calls a massive problem : Flynn has amassed “ materials identifying about $ 150 billion in inflated CMBS issued between 2013 and today , ” according to the complaint .
The higher reported profits helped the properties qualify for loans they might not have otherwise obtained , he surmised .
They also paved the way for bigger fees for banks .
“ Inflating historical cash flows creates a misperception of lower current and historical cash flow volatility , enables higher underwritten [ net operating income/net cash flow ] , and higher @ @ @ @ @ @ @ , “ and thereby enables higher debt.
” Flynn eventually found a lawyer and , in February 2019 , he filed the whistleblower complaint .
The complaint accuses 14 major lenders — including three of the country ’ s biggest CMBS issuers , Deutsche Bank , Wells Fargo and Ladder Capital — and seven servicers of inflating historical cash flows , failing to report misrepresentations , changing names and addresses of properties and “ deceptively and inaccurately ” describing mortgage-loan representations .
It doesn ’ t identify which companies allegedly manipulated each specific @ @ @ @ @ @ @ and Wells Fargo declined to comment on the record .
The complaint does not mention Barrack or his company . )
The SEC has the power to fine companies and their executives if fraud is established .
If the SEC recovers more than $ 1 million based on Flynn ’ s claim , he could be entitled to a portion of it .
When Flynn filed the complaint , the skies looked clear for the commercial mortgage market .
Indeed , last year was a boom year for CMBS , with private lenders @ @ @ @ @ @ @ billion in commercial mortgage-backed securities — a 27 % increase over 2018 , which made it the most successful year since the last financial crisis , according to Trepp .
Overall , investors hold CMBS worth $ 592 billion .
Flynn ’ s assertions raise questions about the efficacy of post-crisis reforms that Congress and the SEC instituted that sought to place new restrictions on banks and other lenders , increase transparency and protect consumers and investors .
The regulations that were retooled included the one that governs CMBS , known as Regulation @ @ @ @ @ @ @ disclosures clearer and more complete for investors , so they would be less reliant on ratings agencies , which were widely criticized during the financial crisis for lax practices .
Still , the opinion of the credit-ratings agencies remains crucial today , a point reinforced by the Fed ’ s decision to hinge its bailout decisions on those ratings .
That ’ s a problem , in the view of Neil Barofsky , who served as the U.S. Treasury ’ s inspector general for the Troubled Assets Relief Program from 2008 to 2011 @ @ @ @ @ @ @ to reform the ratings agencies , Barofsky said , which could lead to the sorts of problems that emerged in the bailout a decade ago .
If things truly turn bad for the commercial real estate industry or if fraud is discovered , he added , the Fed could end up taking possession of properties that default .
CMBS can be something of a last resort for borrowers whose projects are unlikely to qualify for a loan with a desirable interest rate from a bank or other lender ( because they are too @ @ @ @ @ @ @ reason ) , according to experts .
Underwriting practices — the due diligence lenders do before extending a loan — for CMBS have gained a reputation for being less strict than for loans that banks keep on their balance sheets .
Government watchdogs found serious deficiencies in the underwriting for securitized commercial mortgages during the financial crisis , just as they did in the subprime residential market .
The due diligence process broke down , Flynn maintains , in precisely the mortgages he was worried about : the 10-year loans obtained before the @ @ @ @ @ @ @ he said , was that rather than lowering the values for properties that had taken on bigger loans than they could pay off , their owners instead obtained new loans .
“ Someone should have taken the losses , ” he said .
“ Instead , they papered over it , inflated the cash flow and sold it on.
” For commercial borrowers , small bumps in a property ’ s profits can qualify the borrower for millions more in loans .
Shaving expenses by about a third to boost profit , for @ @ @ @ @ @ @ to increase a loan ’ s size by a third as well — even if the expenses run only in the thousands , and the loan runs in the millions .
Some executives for lenders acknowledged to ProPublica that they made changes to borrowers ’ past financials — scrubbing expenses from prior years they deemed irrelevant for the new loan — but maintained that it is appropriate to do so .
Accounting firms review financial data before the loans are assembled into CMBS , they added .
The financial data that ProPublica examined @ @ @ @ @ @ @ the thousands Flynn identified as having inflated net operating income — revealed potential weaknesses not readily apparent to the average investor .
For those six loans , the profits for a given year were listed as 9 % to 30 % higher in new securities than in the old .
After they were issued , half of those loans ended up on watch lists for problem debt , meaning the properties were considered at heightened risk for default .
In each of the six loans , the profit inflation seemed to be explained @ @ @ @ @ @ @ Expenses reported for a particular year in one CMBS simply vanished in disclosures for the same year in a new CMBS .
Such a pattern appeared in a $ 36.7 million loan by Ladder Capital in 2015 to a team that purchased the Doubletree San Diego , a half-century-old hotel that struggled for years to bring in enough income to satisfy loan servicers , even under a previous , smaller loan .
The hotel ’ s new loan saddled it with far greater debt , increasing its main loan by 60 % — @ @ @ @ @ @ @ a watchlist in 2010 because of declining revenue .
Analysts at Moody ’ s pegged the hotel ’ s new loan as exceeding the value of the property by 40.5 % ( meaning a loan-to-value ratio of 140.5 % ) .
Filings for the new loan claimed much higher profits than what the old loan had cited for the same years : The hotel ’ s net operating income for two years magically jumped from what had previously been reported : 21 % and 16 % larger for 2013 and 2014 , respectively @ @ @ @ @ @ @ pulled from a property ’ s “ most recent operating statement , ” according to the regulation governing CMBS disclosures .
But , in response to questions from ProPublica , lender Ladder Capital said it altered the expense numbers it provided in the Doubletree ’ s historical financials .
Ladder said it wiped lease payments — $ 700,608 and $ 592,823 in those two years — from the historical financials , because the new owner would not make lease payments in the future .
( The previous owner had leased the building from @ @ @ @ @ @ @ a publicly traded commercial real estate investment trust that reports more than $ 6 billion in assets , said in a statement , “ These differences are due to items that were considered by Ladder Capital during the due diligence process and reported appropriately in all relevant disclosures.
” Yet when ProPublica asked Ladder to share its disclosures about the changes , the firm pointed to a section of the pool ’ s prospectus that didn ’ t mention lease payments , or explain or acknowledge the change in income .
The Doubletree @ @ @ @ @ @ @ debt package .
Revenues and occupancy declined after 2015 and by 2017 , the hotel ’ s loan was back on the watch list .
The hotel missed franchise fee payments .
Ladder foreclosed in December 2019 , after problems with an additional $ 5.8 million loan the lender had extended the property .
The Doubletree loan was not the only loan in its CMBS pool , issued by Deutsche Bank in 2015 , with apparently inflated profits .
Flynn said he was able to track down previous loan information for loans representing @ @ @ @ @ @ @ and all had inflated income figures at some point in their historical financial data .
There was also a noticeable profit increase in two loans Ladder issued for a strip mall in suburban Pennsylvania .
The mall ’ s past results improved when they appeared in a new CMBS .
Its 2016 net operating income , previously listed as $ 1,101,207 in one CMBS , now appeared as $ 1,352,353 in another , data from Trepp shows — an increase of 23 % .
The prospectus for the latter does not explain or @ @ @ @ @ @ @ mall owner received a $ 14 million loan .
Less than a year after it was placed into a CMBS , the loan ran into trouble .
It landed on a watchlist after one of its major tenants , a department store , declared bankruptcy .
Ladder said it excluded $ 203,787 in expenses from the new loan because they stemmed from one-time costs for environmental remediation of pollution by a dry cleaner and a roof repair .
Ladder did not explain why the previous lender did not exclude the expense also .
@ @ @ @ @ @ @ made by other lenders , too .
In a CMBS issued by Wells Fargo , a 1950s-era trailer park at the base of a steep bluff along the coast in Los Angeles reported sharply higher profits — for the same years — than it previously had .
The Pacific Palisades Bowl Park received a $ 12.9 million loan from the bank in 2016 .
The park reported expenses that were about a third lower in its new loan disclosures when compared with earlier ones .
As a result , the $ 1.2 million @ @ @ @ @ @ @ 28 % above what had been reported for the same year under the old loan .
A similar jump occurred in 2013 .
( Edward Biggs , the owner of the park , said he gave Wells Fargo the park ’ s financials when refinancing its loan and wasn ’ t aware of discrepancies in what was reported to investors .
“ I don ’ t know anything about that , ” he said . )
Flynn said he found that for the $ 575 million Wells Fargo CMBS that contained the Palisades @ @ @ @ @ @ @ pool appeared to have reported inflated profits at some point , when comparing the same years in different securities .
Another of the loans ProPublica examined with apparently inflated profits was for a building in downtown Philadelphia .
When the owner refinanced through Wells Fargo , the property ’ s 2015 profit appeared 23 % higher than it had in reports under the old loan .
Wells bundled the debt into a mortgage-backed security in 2016 .
The building , One Penn Center , is a historic Art Deco office high-rise with ornate @ @ @ @ @ @ @ a transit station underneath .
One of the primary tenants , leasing 45,000 square feet for one of its regional headquarters , happens to be the SEC .
The agency declined to comment .

Among the toxic contributors to the financial crisis of 2008, few caused as much havoc as mortgages with dodgy numbers and inflated values. Huge quantities of them were assembled into securities that crashed and burned, damaging homeowners and investors alike. Afterward, reforms were promised. Never again, regulators vowed, would real estate financiers be able to fudge numbers and threaten the entire economy.
Twelve years later, there’s evidence something similar is happening again.
Some of the world’s biggest banks — including Wells Fargo and Deutsche Bank — as well as other lenders have engaged in a systematic fraud that allowed them to award borrowers bigger loans than were supported by their true financials, according to a previously unreported whistleblower complaint submitted to the Securities and Exchange Commission last year.
Whereas the fraud during the last crisis was in residential mortgages, the complaint claims this time it’s happening in commercial properties like office buildings, apartment complexes and retail centers. The complaint focuses on the loans that are gathered into pools whose worth can exceed $1 billion and turned into bonds sold to investors, known as CMBS (for commercial mortgage-backed securities).
Lenders and securities issuers have regularly altered financial data for commercial properties “without justification,” the complaint asserts, in ways that make the properties appear more valuable, and borrowers more creditworthy, than they actually are. As a result, it alleges, borrowers have qualified for commercial loans they normally would not have, with the investors who bought securities birthed from those loans none the wiser.
ProPublica closely examined six loans that were part of CMBS in recent years to see if their data resembles the pattern described by the whistleblower. What we found matched the allegations: The historical profits reported for some buildings were listed as much as 30% higher than the profits previously reported for the same buildings and same years when the property was part of an earlier CMBS. As a rough analogy, imagine a homeowner having stated in a mortgage application that his 2017 income was $100,000 only to claim during a later refinancing that his 2017 income was $130,000 — without acknowledging or explaining the change.
It’s “highly questionable” to alter past profits with no apparent explanation, said John Coffee, a professor at Columbia Law School and an expert in securities regulation. “I don’t understand why you can do that.”
In theory, CMBS are supposed to undergo a rigorous multistage vetting process. A property owner seeking a loan on, say, an office building would have its finances scrutinized by a bank or other lender. After that loan is made, it would be subjected to another round of due diligence, this time by an investment bank that assembles 60 to 120 loans to form a CMBS. Somewhere along the line, according to John Flynn, a veteran of the CMBS industry who filed the whistleblower complaint, numbers are being adjusted — inevitably to make properties, and therefore the entire CMBS, look more financially robust.
The complaint suggests widespread efforts to make adjustments. Some expenses were erased from the ledger, for example, when a new loan was issued. Most changes were small; but a minor increase in profits can lead to approval for a significantly higher mortgage.
The result: Many properties may have borrowed more than they could afford to pay back — even before the pandemic rocked their businesses — making a CMBS crash both more likely and more damaging. “It’s a higher cliff from which they are falling,” Flynn said. “So the loss severity is going to be greater and the probability of default is going to be greater.”
With the economy being pounded and trillions of dollars already committed to bailouts, potential overvaluations in commercial real estate loom much larger than they would have even a few months ago. Data from early April showed a sharp spike in missed payments to bondholders for CMBS that hold loans from hotels and retail stores, according to Trepp, a data provider whose specialties include CMBS. The default rate is expected to climb as large swaths of the nation remain locked down.
After lobbying by commercial real estate organizations and advocacy by real estate investor and Trump ally Tom Barrack — who warned of a looming commercial mortgage crash — the Federal Reserve pledged in early April to prop up CMBS by loaning money to investors and letting them use their CMBS as collateral. The goal is to stabilize the market at a time when investors may be tempted to dump their securities, and also to support banks in issuing new bonds. (Barrack’s company, Colony Capital, has since defaulted on $3.2 billion in debt backed by hotel and health care properties, according to the Financial Times.)
The Fed didn’t specify how much it’s willing to spend to support the CMBS, and it is allowing only those with the highest credit ratings to be used as collateral. But if some ratings are based on misleading data, as the complaint alleges, taxpayers could be on the hook for a riskier-than-anticipated portfolio of loans.
The SEC, which has not taken public action on the whistleblower complaint, declined to comment.
Some lenders interviewed for this article maintain they’re permitted to alter properties’ historical profits under some circumstances. Others in the industry offered a different view. Adam DeSanctis, a spokesperson for the Mortgage Bankers Association, which has helped set guidelines for financial reporting in CMBS, said he reached out to members of the group’s commercial real estate team and none had heard of a practice of inflating profits. “We aren’t aware of this occurring and really don’t have anything to add,” he said.
The notion that profit figures for some buildings are pumped up is surprising, said Kevin Riordan, a finance professor at Montclair State University. It raises questions about whether the proper disclosures are being made.
Investors don’t comb through financial statements, added Riordan, who used to manage the CMBS portfolio for retirement fund giant TIAA-CREF. Instead, he said, they rely on summaries from investment banks and the credit ratings agencies that analyze the securities. To make wise decisions, investors’ information “out of the gate has to be pretty close to being right,” he said. “Otherwise you’re dealing with garbage. Garbage in, garbage out.”
The whistleblower complaint has its origins in the kinds of obsessions that keep wonkish investors up at night. Flynn wondered what was going to happen when some of the most ill-conceived commercial loans — those made in the lax, freewheeling days before the financial crisis of 2008 — matured a decade later. He imagined an impending disaster of mass defaults. But as 2015, then 2017, passed, the defaults didn’t come. It didn’t make sense to him.
Flynn, 55, has deep experience in commercial real estate, banking and CMBS. After growing up on a dairy farm in Minnesota, the youngest of 14 children, and graduating from college — the first in his family to do so, he said — Flynn moved to Tokyo to work, first in real estate, then in finance. Jobs with banks and ratings agencies took him to Belgium, Chicago and Australia. These days, he advises owners whose loans are sold into CMBS and helps them resolve disputes and restructure or modify problem loans.
He began poring over the fine print in CMBS filings and noticed curious anomalies. For example, many properties changed their names, and even their addresses, from one CMBS to another. That made it harder to recognize a specific property and compare its financial details in two filings. As Flynn read more and more, he began to wonder whether the alterations were attempts to obscure discrepancies: These same properties were typically reporting higher net operating incomes in the new CMBS than they did for the same year in a previous CMBS.
Flynn ultimately collected and analyzed data for huge numbers of commercial mortgages. He began to see patterns and what he calls a massive problem: Flynn has amassed “materials identifying about $150 billion in inflated CMBS issued between 2013 and today,” according to the complaint.
The higher reported profits helped the properties qualify for loans they might not have otherwise obtained, he surmised. They also paved the way for bigger fees for banks. “Inflating historical cash flows creates a misperception of lower current and historical cash flow volatility, enables higher underwritten [net operating income/net cash flow], and higher collateral values,” the complaint states, “and thereby enables higher debt.”
Flynn eventually found a lawyer and, in February 2019, he filed the whistleblower complaint. The complaint accuses 14 major lenders — including three of the country’s biggest CMBS issuers, Deutsche Bank, Wells Fargo and Ladder Capital — and seven servicers of inflating historical cash flows, failing to report misrepresentations, changing names and addresses of properties and “deceptively and inaccurately” describing mortgage-loan representations. It doesn’t identify which companies allegedly manipulated each specific number. (Spokespeople for Deutsche Bank and Wells Fargo declined to comment on the record. The complaint does not mention Barrack or his company. )
The SEC has the power to fine companies and their executives if fraud is established. If the SEC recovers more than $1 million based on Flynn’s claim, he could be entitled to a portion of it.
When Flynn filed the complaint, the skies looked clear for the commercial mortgage market. Indeed, last year was a boom year for CMBS, with private lenders in the U.S. issuing roughly $96.7 billion in commercial mortgage-backed securities — a 27% increase over 2018, which made it the most successful year since the last financial crisis, according to Trepp. Overall, investors hold CMBS worth $592 billion.
Flynn’s assertions raise questions about the efficacy of post-crisis reforms that Congress and the SEC instituted that sought to place new restrictions on banks and other lenders, increase transparency and protect consumers and investors. The regulations that were retooled included the one that governs CMBS, known as Regulation AB. The goal was to make disclosures clearer and more complete for investors, so they would be less reliant on ratings agencies, which were widely criticized during the financial crisis for lax practices.
Still, the opinion of the credit-ratings agencies remains crucial today, a point reinforced by the Fed’s decision to hinge its bailout decisions on those ratings. That’s a problem, in the view of Neil Barofsky, who served as the U.S. Treasury’s inspector general for the Troubled Assets Relief Program from 2008 to 2011. “Practically nothing” was done to reform the ratings agencies, Barofsky said, which could lead to the sorts of problems that emerged in the bailout a decade ago. If things truly turn bad for the commercial real estate industry or if fraud is discovered, he added, the Fed could end up taking possession of properties that default.
CMBS can be something of a last resort for borrowers whose projects are unlikely to qualify for a loan with a desirable interest rate from a bank or other lender (because they are too big, too risky or some other reason), according to experts. Underwriting practices — the due diligence lenders do before extending a loan — for CMBS have gained a reputation for being less strict than for loans that banks keep on their balance sheets. Government watchdogs found serious deficiencies in the underwriting for securitized commercial mortgages during the financial crisis, just as they did in the subprime residential market.
The due diligence process broke down, Flynn maintains, in precisely the mortgages he was worried about: the 10-year loans obtained before the financial crisis. What Flynn discovered, he said, was that rather than lowering the values for properties that had taken on bigger loans than they could pay off, their owners instead obtained new loans. “Someone should have taken the losses,” he said. “Instead, they papered over it, inflated the cash flow and sold it on.”
For commercial borrowers, small bumps in a property’s profits can qualify the borrower for millions more in loans. Shaving expenses by about a third to boost profit, for instance, can sometimes allow a borrower to increase a loan’s size by a third as well — even if the expenses run only in the thousands, and the loan runs in the millions.
Some executives for lenders acknowledged to ProPublica that they made changes to borrowers’ past financials — scrubbing expenses from prior years they deemed irrelevant for the new loan — but maintained that it is appropriate to do so. Accounting firms review financial data before the loans are assembled into CMBS, they added.
The financial data that ProPublica examined — a sample of six loans among the thousands Flynn identified as having inflated net operating income — revealed potential weaknesses not readily apparent to the average investor. For those six loans, the profits for a given year were listed as 9% to 30% higher in new securities than in the old. After they were issued, half of those loans ended up on watch lists for problem debt, meaning the properties were considered at heightened risk for default.
In each of the six loans, the profit inflation seemed to be explained by decreases in the costs reported. Expenses reported for a particular year in one CMBS simply vanished in disclosures for the same year in a new CMBS.
Such a pattern appeared in a $36.7 million loan by Ladder Capital in 2015 to a team that purchased the Doubletree San Diego, a half-century-old hotel that struggled for years to bring in enough income to satisfy loan servicers, even under a previous, smaller loan.
The hotel’s new loan saddled it with far greater debt, increasing its main loan by 60% — even though the property had landed on a watchlist in 2010 because of declining revenue. Analysts at Moody’s pegged the hotel’s new loan as exceeding the value of the property by 40.5% (meaning a loan-to-value ratio of 140.5%).
Filings for the new loan claimed much higher profits than what the old loan had cited for the same years: The hotel’s net operating income for two years magically jumped from what had previously been reported: 21% and 16% larger for 2013 and 2014, respectively.
Such figures are supposed to be pulled from a property’s “most recent operating statement,” according to the regulation governing CMBS disclosures.
But, in response to questions from ProPublica, lender Ladder Capital said it altered the expense numbers it provided in the Doubletree’s historical financials. Ladder said it wiped lease payments —$700,608 and $592,823 in those two years — from the historical financials, because the new owner would not make lease payments in the future. (The previous owner had leased the building from an affiliated company.)
Ladder, a publicly traded commercial real estate investment trust that reports more than $6 billion in assets, said in a statement, “These differences are due to items that were considered by Ladder Capital during the due diligence process and reported appropriately in all relevant disclosures.”
Yet when ProPublica asked Ladder to share its disclosures about the changes, the firm pointed to a section of the pool’s prospectus that didn’t mention lease payments, or explain or acknowledge the change in income.
The Doubletree did not fare well under its new debt package. Revenues and occupancy declined after 2015 and by 2017, the hotel’s loan was back on the watch list. The hotel missed franchise fee payments. Ladder foreclosed in December 2019, after problems with an additional $5.8 million loan the lender had extended the property.
The Doubletree loan was not the only loan in its CMBS pool, issued by Deutsche Bank in 2015, with apparently inflated profits. Flynn said he was able to track down previous loan information for loans representing nearly 40% of the pool, and all had inflated income figures at some point in their historical financial data.
There was also a noticeable profit increase in two loans Ladder issued for a strip mall in suburban Pennsylvania. The mall’s past results improved when they appeared in a new CMBS. Its 2016 net operating income, previously listed as $1,101,207 in one CMBS, now appeared as $1,352,353 in another, data from Trepp shows — an increase of 23%. The prospectus for the latter does not explain or acknowledge the change in income. The mall owner received a $14 million loan.
Less than a year after it was placed into a CMBS, the loan ran into trouble. It landed on a watchlist after one of its major tenants, a department store, declared bankruptcy.
Ladder said it excluded $203,787 in expenses from the new loan because they stemmed from one-time costs for environmental remediation of pollution by a dry cleaner and a roof repair. Ladder did not explain why the previous lender did not exclude the expense also.
The pattern can be seen in loans made by other lenders, too. In a CMBS issued by Wells Fargo, a 1950s-era trailer park at the base of a steep bluff along the coast in Los Angeles reported sharply higher profits — for the same years — than it previously had.
The Pacific Palisades Bowl Park received a $12.9 million loan from the bank in 2016. The park reported expenses that were about a third lower in its new loan disclosures when compared with earlier ones. As a result, the $1.2 million in net operating income for 2014 rose 28% above what had been reported for the same year under the old loan. A similar jump occurred in 2013. (Edward Biggs, the owner of the park, said he gave Wells Fargo the park’s financials when refinancing its loan and wasn’t aware of discrepancies in what was reported to investors. “I don’t know anything about that,” he said.)
Flynn said he found that for the $575 million Wells Fargo CMBS that contained the Palisades debt, about half of the loan pool appeared to have reported inflated profits at some point, when comparing the same years in different securities.
Another of the loans ProPublica examined with apparently inflated profits was for a building in downtown Philadelphia. When the owner refinanced through Wells Fargo, the property’s 2015 profit appeared 23% higher than it had in reports under the old loan. Wells bundled the debt into a mortgage-backed security in 2016.
The building, One Penn Center, is a historic Art Deco office high-rise with ornate black marble and gold-plated fixtures, and a transit station underneath. One of the primary tenants, leasing 45,000 square feet for one of its regional headquarters, happens to be the SEC. The agency declined to comment.
Tired of reading the same old news from the same old sources? So are we! That’s why we’re on a mission to shake things up and bring you the stories and perspectives that often go untold in mainstream media. But being a radically, unapologetically independent news site isn’t easy (or cheap), and we rely on reader support to keep the lights on.
If you like what you’re reading, please consider making a tax-deductible donation today. We’re not asking for a handout, we’re asking for an investment: Invest in a nonprofit news site that’s not afraid to ruffle a few feathers, not afraid to stand up for what’s right, and not afraid to tell it like it is.
This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.


truthout--2020-05-16--House Passes $3 Trillion Relief Package, But Progressives Say More Must Be Done

The Democrat majority House of Representatives passed a massive , $ 3 trillion coronavirus relief stimulus package known as the HEROES Act roughly along party lines on Friday night despite progressive concerns over the bill ’ s provisions .
“ The truth is that while a significant step in the right direction , the bill does not go far enough to provide urgently needed economic relief to the millions of people who lost their income and whose families are now standing in food lines , ” Ana Maria Archila , co-executive director of the Center for Popular Democracy , said @ @ @ @ @ @ @ must fight for legislation that upholds their dignity and protects their lives.
” The relief package , which was a priority of House Speaker Nancy Pelosi ( D-Calif. ) , was passed after hours of debate and amendments throughout Friday .
The bill was the subject of intense back and forth among progressives , with the need for more economic relief being weighed against the legislation ’ s giveaways to big business and the rich .
The final bill includes $ 1 trillion in relief aid to states and localities , extends unemployment @ @ @ @ @ @ @ , and provides another one-time $ 1,200 stimulus payment to every American .
The package also includes legislation to stop overcharging prisoners for phone and internet as well as extending food stamp funding and protecting the Post Office .
But , as The Nation ’ s Robert Borosage reported , the bill was meant to send a clear message to the Democratic Party ’ s progressive wing : The real message in the bill was sent not to Trump but to progressives inside and outside Congress .
With Congress dispersed , Pelosi and @ @ @ @ @ @ @ what went into the bill .
And the message to progressives was clear : Not yet .
No to recurring cash payments .
No to guaranteed paychecks that would keep workers off unemployment , despite Representative Pramila Jayapal ’ s success in gaining widespread support for the proposal across the caucus .
No to Medicare paying the health care costs of the unemployed .
No to a jobs guarantee .
No to a moratorium on rent and mortgage payments .
No to student debt forgiveness .
No public ownership stake in companies that @ @ @ @ @ @ @ corporate mergers or greater protection against private equity predators ’ picking the bones of weakened companies .
No major green infrastructure initiative .
Journalist Andrew Perez pointed to the bill ’ s bailout of lobbying firms as an example of the HEROES Act ’ s shortcomings and the priorities of Democratic leadership .
“ There are some decent things in the stimulus bill , ” Perez said , “ but progressives should never accept voting for garbage like a special loan fund for the lobbying groups that fight every single piece of their @ @ @ @ @ @ @ to a Green New Deal , to any and all worker protections.
” Jayapal ( D-Wash. ) was a “ no ” vote on the package , citing in a column for Common Dreams the bill ’ s lack of a paycheck protection guarantee , universal healthcare , and small business protections .
The congresswoman , the only progressive in the House to vote against the final package , wrote that the bill was ultimately insufficient to meet the needs of defeating the disease : Congress must be honest with ourselves and with @ @ @ @ @ @ @ and economic crisis Americans are facing will not end on its own .
We must beat the virus .
To beat the virus , we must keep people home .
To keep people home , we must make sure they get their paycheck , can access their health care and don ’ t feel pressured to return to work before it ’ s safe .
That ’ s the only way that we can give the American people real relief and certainty before this crisis gets worse—because if we fail to do so @ @ @ @ @ @ @ Indivisible ’ s national policy director Angel Padilla acknowledged those shortcomings while generally praising the bill ’ s passage .
“ We support this bill but admit it still contains major room for improvement , particularly in protecting paychecks and expansions to health care coverage , ” said Padilla .
“ We will continue to fight for those improvements while working to ensure its strong provisions remain intact when the bill meets the Grim Reaper in the Senate.
” People ’ s Action echoed calls for more relief , saying in a statement @ @ @ @ @ @ @ it clear Congress would need to return sooner rather than later to pass more relief for Americans in a “ true People ’ s Bailout.
” “ That would include cancelling rent and mortgage payments for the duration of the crisis ; enrolling the uninsured into Medicare and ensuring everyone in the U.S. can access healthcare if needed ; and direct cash payments lasting until the economy recovers , ” the group said .
“ We will continue to push elected officials to include these priorities in this and future relief packages .
@

The Democrat majority House of Representatives passed a massive, $3 trillion coronavirus relief stimulus package known as the HEROES Act roughly along party lines on Friday night despite progressive concerns over the bill’s provisions.
“The truth is that while a significant step in the right direction, the bill does not go far enough to provide urgently needed economic relief to the millions of people who lost their income and whose families are now standing in food lines,” Ana Maria Archila, co-executive director of the Center for Popular Democracy, said in a statement Friday. “We must fight for legislation that upholds their dignity and protects their lives.”
The relief package, which was a priority of House Speaker Nancy Pelosi (D-Calif.), was passed after hours of debate and amendments throughout Friday. The bill was the subject of intense back and forth among progressives, with the need for more economic relief being weighed against the legislation’s giveaways to big business and the rich.
While this legislation has some good elements, it ultimately does not achieve that. And it fails to match the scale of this crisis. We can and must do better. We must give people real relief and certainty before this crisis gets worse—because if we fail to do so, it will. Related Story News | Racial Justice US University Leading COVID Response Leaves Black Workers Behind Laid-off employees at Johns Hopkins University are demanding the four weeks’ pay the institution promised. Truthout — Rep. Pramila Jayapal (@RepJayapal) May 16, 2020
The final bill includes $1 trillion in relief aid to states and localities, extends unemployment benefit enhancements to the end of January, and provides another one-time $1,200 stimulus payment to every American. The package also includes legislation to stop overcharging prisoners for phone and internet as well as extending food stamp funding and protecting the Post Office.
But, as The Nation’s Robert Borosage reported, the bill was meant to send a clear message to the Democratic Party’s progressive wing:
The real message in the bill was sent not to Trump but to progressives inside and outside Congress. With Congress dispersed, Pelosi and her committee chairs maintained iron control of what went into the bill. And the message to progressives was clear: Not yet. No to recurring cash payments. No to guaranteed paychecks that would keep workers off unemployment, despite Representative Pramila Jayapal’s success in gaining widespread support for the proposal across the caucus. No to Medicare paying the health care costs of the unemployed. No to a jobs guarantee. No to a moratorium on rent and mortgage payments. No to student debt forgiveness. No public ownership stake in companies that are bailed out. No prohibition of corporate mergers or greater protection against private equity predators’ picking the bones of weakened companies. No major green infrastructure initiative.
Journalist Andrew Perez pointed to the bill’s bailout of lobbying firms as an example of the HEROES Act’s shortcomings and the priorities of Democratic leadership.
“There are some decent things in the stimulus bill,” Perez said, “but progressives should never accept voting for garbage like a special loan fund for the lobbying groups that fight every single piece of their agenda, from Medicare for All, to a Green New Deal, to any and all worker protections.”
BREAKING: House Democrats voted tonight for a stimulus bill that would bail out huge lobbying groups, hours after we reported that lobbying group PACs have donated $191 million to current members of Congress. The fight isn’t over. (1/6) — Democratic Policy Center (@DemPolicy) May 16, 2020
Jayapal (D-Wash.) was a “no” vote on the package, citing in a column for Common Dreams the bill’s lack of a paycheck protection guarantee, universal healthcare, and small business protections.
The congresswoman, the only progressive in the House to vote against the final package, wrote that the bill was ultimately insufficient to meet the needs of defeating the disease:
Congress must be honest with ourselves and with our constituents: The historic public health and economic crisis Americans are facing will not end on its own. We must beat the virus. To beat the virus, we must keep people home. To keep people home, we must make sure they get their paycheck, can access their health care and don’t feel pressured to return to work before it’s safe. That’s the only way that we can give the American people real relief and certainty before this crisis gets worse—because if we fail to do so, it will.
Progressive advocacy group Indivisible’s national policy director Angel Padilla acknowledged those shortcomings while generally praising the bill’s passage.
“We support this bill but admit it still contains major room for improvement, particularly in protecting paychecks and expansions to health care coverage,” said Padilla. “We will continue to fight for those improvements while working to ensure its strong provisions remain intact when the bill meets the Grim Reaper in the Senate.”
People’s Action echoed calls for more relief, saying in a statement that the package’s deficiencies made it clear Congress would need to return sooner rather than later to pass more relief for Americans in a “true People’s Bailout.”
“That would include cancelling rent and mortgage payments for the duration of the crisis; enrolling the uninsured into Medicare and ensuring everyone in the U.S. can access healthcare if needed; and direct cash payments lasting until the economy recovers,” the group said. “We will continue to push elected officials to include these priorities in this and future relief packages.”
Tired of reading the same old news from the same old sources? So are we! That’s why we’re on a mission to shake things up and bring you the stories and perspectives that often go untold in mainstream media. But being a radically, unapologetically independent news site isn’t easy (or cheap), and we rely on reader support to keep the lights on.
If you like what you’re reading, please consider making a tax-deductible donation today. We’re not asking for a handout, we’re asking for an investment: Invest in a nonprofit news site that’s not afraid to ruffle a few feathers, not afraid to stand up for what’s right, and not afraid to tell it like it is.
This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.


truthout--2020-05-16--ACLU Sues Betsy DeVos Over “Reprehensible” New Sexual Assault Rules

The American Civil Liberties Union has filed a lawsuit against Education Secretary Betsy DeVos that would block parts of her department ’ s new Title IX rule , saying the guidance will “ slash schools ’ obligations to respond to reports of sexual harassment and assault.
” The new guidance , which DeVos released May 6 , is by the Education Department ’ s own admission expected to reduce sexual assault investigations on campus by as much as 32 percent .
In a press statement , the ACLU said the rule creates “ a second-class standard for reports of sexual @ @ @ @ @ @ @ harassment allegations through a different and more strict investigative process than harassment based on race or disability .
Joel Levin , co-founder of Stop Sexual Assault in Schools , one of the three victims ’ rights groups represented in the filing , said in a statement , “ Sexual harassment and assault have no place in our schools .
In a reprehensible move that puts students at risk , the new rule gives schools more leeway to ignore their Title IX responsibilities.
” The regulations strengthen due process rights for the accused , @ @ @ @ @ @ @ cross-examination by legal representatives and perpetrators alike .
These changes , the ACLU says , will “ inflict significant harm ” on victims of abuse and “ dramatically undermine ” their civil rights .
The lawsuit targets a handful of specific imbalances , alleging that the guidance redefines sexual harassment in an anomalous and restrictive way , compels administrators to ignore reports of off-campus misconduct and raises the evidentiary standard for sexual harassment and assault higher than other harassment claims .
It was filed on behalf of three victims ’ rights groups and @ @ @ @ @ @ @ Kenneth Marcus , assistant secretary for civil rights .
Angela Morabito , press secretary at the Department of Education , told Salon in an email that the new rule “ codifies meaningful protections for survivors ” and establishes “ a transparent , fair , and reliable process ” for processing claims .
“ Under the previous administration ’ s misguided approach , schools lost dozens of lawsuits by students who alleged the school either ignored sexual harassment or punished them without providing due process .
We are holding schools accountable and protecting students @ @ @ @ @ @ @ aside and no accused student ’ s guilt is predetermined , ” Morabito said , accusing the ACLU of “ helping schools trample on basic due process ” and “ gutting protections for survivors.
” In response , an ACLU spokesperson told Salon that the group is “ committed both to ending sexual harassment and assault on campus , and to ensuring fair process for complainants and respondents alike.
” “ This lawsuit targets those provisions of the rule that reduce the responsibility of schools to take sexual harassment seriously , and that @ @ @ @ @ @ @ .
Creating barriers and making students jump through hoops to report sexual assault and harassment does nothing to ensure due process for all , ” the spokes person said .
The reactions last week split neatly on partisan lines , with Republicans applauding and Democrats condemning the rule , though all parties agree that the people who stand to benefit the most from the change are the accused — mostly men .
Sen. Lamar Alexander , R-Tenn. , chair of the Senate Committee on Health , Education , Labor , and Pensions , @ @ @ @ @ @ @ rule was released that the revision “ respects and supports victims and preserves due process rights for both the victim and the accused.
” His Democratic counterpart , Sen. Patty Murray of Washington , tweeted that the guidance is a “ devastating blow.
” “ BetsyDeVosED ’ s Title IX rule is not about ‘ restoring balance , ’ it ’ s about silencing survivors .
It will make it harder for students to report an incident of sexual assault or harassment — and that much easier for a school to sweep it @ @ @ @ @ @ @ .
The old rule had been under fire from men ’ s rights advocates for years .
A 2018 class-action lawsuit openly took up the grievances of accused student , presenting them as victims .
Hundreds of federal lawsuits have been filed on behalf of accused male students , many of them victorious , as tracked in the “ Title IX for All ” archive .
It isn ’ t the first time DeVos has been accused of putting politics over policy .
Earlier this year she was threatened with a congressional subpoena @ @ @ @ @ @ @ of Representatives hearing to stump for the Trump campaign , and her family has used its outsized wealth and influence to organize “ astroturf ” anti-lockdown protests .
John Gabrieli , founder and co-chair of the Every Voice Coalition of students against sexual violence , told Salon that DeVos ’ actions should set off a wave of lawsuits at all levels of government .
“ Since the proposed guidelines were released in 2018 , we have filed student-written legislation to combat sexual violence across five states that is specifically designed to cover the @ @ @ @ @ @ @ Gabrieli said .
“ We believe that now that the DeVos regulations have been finalized , the next frontier for activists will be to pass state-level legislation to step into the void that ’ s being left by the federal government , ” he said .

The suit claims that new Title IX rules could mean far fewer campus reports of sexual harassment and assault.
The American Civil Liberties Union has filed a lawsuit against Education Secretary Betsy DeVos that would block parts of her department’s new Title IX rule, saying the guidance will “slash schools’ obligations to respond to reports of sexual harassment and assault.”
The new guidance, which DeVos released May 6, is by the Education Department’s own admission expected to reduce sexual assault investigations on campus by as much as 32 percent.
In a press statement, the ACLU said the rule creates “a second-class standard for reports of sexual harassment and assault” by putting sexual harassment allegations through a different and more strict investigative process than harassment based on race or disability.
Joel Levin, co-founder of Stop Sexual Assault in Schools, one of the three victims’ rights groups represented in the filing, said in a statement, “Sexual harassment and assault have no place in our schools. In a reprehensible move that puts students at risk, the new rule gives schools more leeway to ignore their Title IX responsibilities.”
The regulations strengthen due process rights for the accused, such as allowing live hearings and victim cross-examination by legal representatives and perpetrators alike. These changes, the ACLU says, will “inflict significant harm” on victims of abuse and “dramatically undermine” their civil rights.
The lawsuit targets a handful of specific imbalances, alleging that the guidance redefines sexual harassment in an anomalous and restrictive way, compels administrators to ignore reports of off-campus misconduct and raises the evidentiary standard for sexual harassment and assault higher than other harassment claims.
It was filed on behalf of three victims’ rights groups and names the Education Department, DeVos and Kenneth Marcus, assistant secretary for civil rights.
Angela Morabito, press secretary at the Department of Education, told Salon in an email that the new rule “codifies meaningful protections for survivors” and establishes “a transparent, fair, and reliable process” for processing claims.
“Under the previous administration’s misguided approach, schools lost dozens of lawsuits by students who alleged the school either ignored sexual harassment or punished them without providing due process. We are holding schools accountable and protecting students by ensuring that no survivor is brushed aside and no accused student’s guilt is predetermined,” Morabito said, accusing the ACLU of “helping schools trample on basic due process” and “gutting protections for survivors.”
In response, an ACLU spokesperson told Salon that the group is “committed both to ending sexual harassment and assault on campus, and to ensuring fair process for complainants and respondents alike.”
“This lawsuit targets those provisions of the rule that reduce the responsibility of schools to take sexual harassment seriously, and that treat sexual harassment as a second-class problem. Creating barriers and making students jump through hoops to report sexual assault and harassment does nothing to ensure due process for all,” the spokes person said.
The reactions last week split neatly on partisan lines, with Republicans applauding and Democrats condemning the rule, though all parties agree that the people who stand to benefit the most from the change are the accused — mostly men.
Sen. Lamar Alexander, R-Tenn., chair of the Senate Committee on Health, Education, Labor, and Pensions, said in a press statement when the rule was released that the revision “respects and supports victims and preserves due process rights for both the victim and the accused.”
His Democratic counterpart, Sen. Patty Murray of Washington, tweeted that the guidance is a “devastating blow.”
“ @ BetsyDeVosED’s Title IX rule is not about ‘restoring balance,’ it’s about silencing survivors. It will make it harder for students to report an incident of sexual assault or harassment — and that much easier for a school to sweep it under the rug,” she wrote.
The old rule had been under fire from men’s rights advocates for years. A 2018 class-action lawsuit openly took up the grievances of accused student, presenting them as victims. Hundreds of federal lawsuits have been filed on behalf of accused male students, many of them victorious, as tracked in the “Title IX for All” archive.
It isn’t the first time DeVos has been accused of putting politics over policy. Earlier this year she was threatened with a congressional subpoena when she blew off a scheduled House of Representatives hearing to stump for the Trump campaign, and her family has used its outsized wealth and influence to organize “astroturf” anti-lockdown protests.
John Gabrieli, founder and co-chair of the Every Voice Coalition of students against sexual violence, told Salon that DeVos’ actions should set off a wave of lawsuits at all levels of government.
“Since the proposed guidelines were released in 2018, we have filed student-written legislation to combat sexual violence across five states that is specifically designed to cover the gaps in the DeVos guidelines,” Gabrieli said. “We believe that now that the DeVos regulations have been finalized, the next frontier for activists will be to pass state-level legislation to step into the void that’s being left by the federal government,” he said.
Tired of reading the same old news from the same old sources? So are we! That’s why we’re on a mission to shake things up and bring you the stories and perspectives that often go untold in mainstream media. But being a radically, unapologetically independent news site isn’t easy (or cheap), and we rely on reader support to keep the lights on.
If you like what you’re reading, please consider making a tax-deductible donation today. We’re not asking for a handout, we’re asking for an investment: Invest in a nonprofit news site that’s not afraid to ruffle a few feathers, not afraid to stand up for what’s right, and not afraid to tell it like it is.
This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.


truthout--2020-05-16--Hospital Workers Report Failures by Management to Notify Them of COVID Exposures

Dinah Jimenez assumed a world-class hospital would be better prepared than a chowder house to inform workers when they had been exposed to a deadly virus .
So , when her boyfriend , an employee of a popular seafood restaurant in Seattle , received a call from his boss on a Sunday in late March telling him a co-worker had tested positive for COVID-19 and that he needed to quarantine for 14 days , she said she assumed she ’ d get a similar call from the University of Washington Medical Center .
After all , the infected restaurant employee @ @ @ @ @ @ @ the hospital ’ s Plaza Cafe .
That call never came , she said .
Jimenez , 42 , said she returned to her job as a cashier at the hospital cafeteria two days later , and “ it was like nothing had happened .
They didn ’ t say anything.
” She said the infected worker , a fellow cashier , was stationed just 2 feet from her during a typical shift and that neither had been wearing a mask .
“ He was as close to me as the person sitting @ @ @ @ @ @ @ Jimenez said .
Word slowly spread among the cafeteria crew that a co-worker had the virus , she said .
In the days that followed , two more workers fell ill .
But communication about the outbreak was not broadly disseminated through the ranks , according to Jimenez and other employees interviewed .
It wasn ’ t until April , Jimenez said , that the hospital started providing workers with one mask per day .
A few weeks later , workers said , they learned a fourth staff member had tested positive for @ @ @ @ @ @ @ doctors and nurses , hospital workers around the country report frustrating failures by management to notify them when they have been exposed to co-workers or patients known to be infected with COVID-19 .
Some medical centers do carefully trace the close contacts of every infected patient and worker , alert them to the exposure and offer guidance on the next steps .
Others , by policy , do not personally follow up with health workers who unknowingly treated an infected patient or worked with a colleague who later tested positive for the virus @ @ @ @ @ @ @ issue , ” said Debbie White , president of the Health Professionals and Allied Employees , a union representing nurses and other health care professionals in New Jersey .
“ When a patient is positive , our expectation is that the employer would go back and do their due diligence in terms of investigating who was participating in that patient ’ s care.
” Instead , she said , union members often report “ there is very , very little follow-up ” to inform them after an exposure .
The disconnect between hospital @ @ @ @ @ @ @ the lack of clear , direct communication with individual workers who have been potentially exposed to the coronavirus .
And when workers are informed about an infected colleague or patient , some say that the efforts to conceal that person ’ s identity can make it difficult to gauge the level of risk .
Melissa Johnson-Camacho , a nurse at UC Davis Medical Center in Sacramento , California , said she was informed that another nurse in her unit tested positive , but not which one .
“ I don ’ t know @ @ @ @ @ @ @ ’ t know if I had lunch with that nurse .
I don ’ t know if I helped that nurse with a patient , ” said Johnson-Camacho , who is a chief nurse representative for the California Nurses Association .
UC Davis Health spokesperson Charles Casey said federal and state privacy laws prevent the hospital from identifying individuals who test positive .
HIPAA , the federal privacy rule , does permit some disclosures of personal health information to health care workers during an outbreak of infectious disease , but only the “ @ @ @ @ @ @ @ guidance from the Office for Civil Rights , which is part of the U.S. Department of Health and Human Services .
Other hospitals contend that because community transmission of COVID-19 is so widespread , workers should assume anyone they encounter , inside or outside the hospital , could be infected and adapt their behavior accordingly .
OHSU Health Hillsboro Medical Center , a major provider outside Portland , Oregon , for example , recently sent an email to all employees saying that because COVID-19 is widespread in that community , “ you will @ @ @ @ @ @ @ Employee Health program ] after caring for a patient with COVID-19 .
Instead , we ask that you serve as our eyes and ears and report any concerns for exposure to Employee Health as soon as possible.
” Based on similar reasoning , the federal Centers for Disease Control and Prevention issued updated guidelines in April to say hospitals should consider forgoing contact tracing for their workers — a fundamental of public health work that involves identifying people who have been exposed and asking them to quarantine — in favor of universal masking @ @ @ @ @ @ @ of shifts .
While all hospital employees , from food service to custodial staff , are vulnerable to exposure , nurses and other direct-care providers who interact closely with patients are at greatest risk .
Informing them of patient exposures is generally less important in intensive care units and wards designated for COVID-19 assessments , where patients are assumed to have the virus and proper protective gear should be used .
But when providers care for a patient hospitalized for an unrelated condition who later tests positive , workers say the information can @ @ @ @ @ @ @ nurses are caregivers , too , and we have people at home who are in the high-risk group , ” said Johnson-Camacho , the UC Davis nurse .
“ No one wants to take this home to their family or someone they love.
” Knowing about an exposure might make the difference when deciding whether to hug your children or move out of the family home , Johnson-Camacho added .
At Stroger Hospital in Chicago , nurse Elizabeth Lalasz said she contracted the coronavirus after spending several hours with a patient who came @ @ @ @ @ @ @ be a chronic respiratory condition , but who later was sent home with a presumed case of COVID-19 .
Lalasz said the hospital never followed up with her about the presumed exposure , even though she had not been wearing proper protective gear .
She said she subsequently fell ill and tested positive for the virus — and that her co-workers were never informed about her condition .
Cook County Health , which operates Stroger , did not directly respond to questions about its policies on informing workers about exposure to the virus @ @ @ @ @ @ @ system is following CDC guidelines .
At UW Medicine in Seattle , where the cafeteria outbreak played out , spokesperson Tina Mankowski said the hospital is not doing contact tracing when workers or patients test positive for COVID-19 .
She said that is because the medical center is not asking workers to quarantine at home following a potential exposure .
Under current policy , if an employee contracts the virus , that person ’ s manager is notified in general terms , and is supposed to share that information with other staff members @ @ @ @ @ @ @ fever or upper-respiratory symptoms , and to stay home if they are ill. Mankowski confirmed that four cafeteria employees had tested positive for the virus .
She said employees were notified but did not provide specifics about how or when .
“ The safety of University of Washington Medical Center patients and employees is our top priority , ” Mankowski wrote in an email .
“ If an employee tests positive for COVID-19 , the manager is informed that one of their employees has tested positive and then discusses this with the staff @ @ @ @ @ @ @ other workers said that was not their experience and that communication about the outbreak was muted .
Luis Rios , a cook at the cafeteria for 17 years , said he was not informed after the first colleague tested positive , though he had chatted with the sick cashier in the staff locker room several times , no more than 2 feet away .
A few days after that worker was diagnosed , Rios said , he was taste-testing a dish when he noticed his sense of taste was dulled , a symptom @ @ @ @ @ @ @ , even in the warm kitchen .
He was tested at an area medical clinic , and became the unit ’ s second confirmed case .
“ Honestly , I don ’ t know if UW or my managers care about workers ’ lives , ” said Rios , 49 , who spoke through an interpreter .
“ They only care if we can go in and work.
” Justin Lee , communications director for the Washington Federation of State Employees ( WFSE ) , which represents the cafeteria workers , said supervisors @ @ @ @ @ @ @ from the employee health department to cafeteria directors notifying them in general terms when the first worker tested positive .
A printout was tacked near the employees ’ time clock .
But many workers did not see it or may have been unable to understand it because it was written in English , according to Lee .
Information shared days later in a small huddle did not reach the whole staff , he said .
In early April , cafeteria workers delivered a petition to hospital management , with the support of WFSE @ @ @ @ @ @ @ , with 450 signatures .
They requested the hospital close the Plaza Cafe for a deep cleaning , install a temporary protective barrier around the cashiers and bring in a medical professional to educate all cafeteria staff about COVID-19 , with translations in other languages .
The cafeteria was not closed , but Mankowski said the hospital has disinfected it and all workstations , and now requires workers throughout the hospital to wear masks .
The hospital has declined to install Plexiglas barriers at the cafeteria , she said , because it believes @ @ @ @ @ @ @ precautions .
The Occupational Safety and Health Administration has no rule requiring that employers inform workers of exposures to infectious diseases .
But Dr. Alyssa Burgart , a bioethicist at Stanford , said hospitals do have an ethical obligation .
She acknowledged the challenges : With dozens of employees going in and out of a patient ’ s room each day , tracking every single one can be difficult , particularly with limited resources .
Hospitals are trying to figure out in real time exactly what they need to disclose and how to @ @ @ @ @ @ @ disaster now , and no one has time to answer anything .
So you ’ re seeing organizations fumble when figuring out how to do this in a way that meets their ethical obligation to protect employees but doesn ’ t violate federal privacy laws , ” Burgart said .
“ The typical way these decisions would be made would be over a very long deliberative process , and that is a luxury we do not have right now .
Some organizations are going to miss the mark the first time .
”

Dinah Jimenez assumed a world-class hospital would be better prepared than a chowder house to inform workers when they had been exposed to a deadly virus.
So, when her boyfriend, an employee of a popular seafood restaurant in Seattle, received a call from his boss on a Sunday in late March telling him a co-worker had tested positive for COVID-19 and that he needed to quarantine for 14 days, she said she assumed she’d get a similar call from the University of Washington Medical Center. After all, the infected restaurant employee worked a second job alongside her at the hospital’s Plaza Cafe.
That call never came, she said.
Jimenez, 42, said she returned to her job as a cashier at the hospital cafeteria two days later, and “it was like nothing had happened. They didn’t say anything.” She said the infected worker, a fellow cashier, was stationed just 2 feet from her during a typical shift and that neither had been wearing a mask. “He was as close to me as the person sitting behind you in an airplane,” Jimenez said.
Word slowly spread among the cafeteria crew that a co-worker had the virus, she said. In the days that followed, two more workers fell ill. But communication about the outbreak was not broadly disseminated through the ranks, according to Jimenez and other employees interviewed. It wasn’t until April, Jimenez said, that the hospital started providing workers with one mask per day. A few weeks later, workers said, they learned a fourth staff member had tested positive for the virus.
From cafeteria staff to doctors and nurses, hospital workers around the country report frustrating failures by management to notify them when they have been exposed to co-workers or patients known to be infected with COVID-19. Some medical centers do carefully trace the close contacts of every infected patient and worker, alert them to the exposure and offer guidance on the next steps. Others, by policy, do not personally follow up with health workers who unknowingly treated an infected patient or worked with a colleague who later tested positive for the virus.
“It’s an enormous issue,” said Debbie White, president of the Health Professionals and Allied Employees, a union representing nurses and other health care professionals in New Jersey. “When a patient is positive, our expectation is that the employer would go back and do their due diligence in terms of investigating who was participating in that patient’s care.”
Instead, she said, union members often report “there is very, very little follow-up” to inform them after an exposure.
The disconnect between hospital policy and worker expectations often centers around the lack of clear, direct communication with individual workers who have been potentially exposed to the coronavirus. And when workers are informed about an infected colleague or patient, some say that the efforts to conceal that person’s identity can make it difficult to gauge the level of risk.
Melissa Johnson-Camacho, a nurse at UC Davis Medical Center in Sacramento, California, said she was informed that another nurse in her unit tested positive, but not which one.
“I don’t know who that nurse is. I don’t know if I had lunch with that nurse. I don’t know if I helped that nurse with a patient,” said Johnson-Camacho, who is a chief nurse representative for the California Nurses Association.
UC Davis Health spokesperson Charles Casey said federal and state privacy laws prevent the hospital from identifying individuals who test positive. HIPAA, the federal privacy rule, does permit some disclosures of personal health information to health care workers during an outbreak of infectious disease, but only the “minimum necessary,” according to recent guidance from the Office for Civil Rights, which is part of the U.S. Department of Health and Human Services.
Other hospitals contend that because community transmission of COVID-19 is so widespread, workers should assume anyone they encounter, inside or outside the hospital, could be infected and adapt their behavior accordingly.
OHSU Health Hillsboro Medical Center, a major provider outside Portland, Oregon, for example, recently sent an email to all employees saying that because COVID-19 is widespread in that community, “you will no longer receive notification from [the Employee Health program] after caring for a patient with COVID-19. Instead, we ask that you serve as our eyes and ears and report any concerns for exposure to Employee Health as soon as possible.”
Based on similar reasoning, the federal Centers for Disease Control and Prevention issued updated guidelines in April to say hospitals should consider forgoing contact tracing for their workers — a fundamental of public health work that involves identifying people who have been exposed and asking them to quarantine — in favor of universal masking and screening for symptoms at the beginning of shifts.
While all hospital employees, from food service to custodial staff, are vulnerable to exposure, nurses and other direct-care providers who interact closely with patients are at greatest risk. Informing them of patient exposures is generally less important in intensive care units and wards designated for COVID-19 assessments, where patients are assumed to have the virus and proper protective gear should be used. But when providers care for a patient hospitalized for an unrelated condition who later tests positive, workers say the information can be crucial.
“A lot of nurses are caregivers, too, and we have people at home who are in the high-risk group,” said Johnson-Camacho, the UC Davis nurse. “No one wants to take this home to their family or someone they love.”
Knowing about an exposure might make the difference when deciding whether to hug your children or move out of the family home, Johnson-Camacho added.
At Stroger Hospital in Chicago, nurse Elizabeth Lalasz said she contracted the coronavirus after spending several hours with a patient who came in with what initially was believed to be a chronic respiratory condition, but who later was sent home with a presumed case of COVID-19. Lalasz said the hospital never followed up with her about the presumed exposure, even though she had not been wearing proper protective gear. She said she subsequently fell ill and tested positive for the virus — and that her co-workers were never informed about her condition.
“The contact-tracing idea didn’t even exist,” Lalasz said.
Cook County Health, which operates Stroger, did not directly respond to questions about its policies on informing workers about exposure to the virus. But spokesperson Deborah Song said the system is following CDC guidelines.
At UW Medicine in Seattle, where the cafeteria outbreak played out, spokesperson Tina Mankowski said the hospital is not doing contact tracing when workers or patients test positive for COVID-19. She said that is because the medical center is not asking workers to quarantine at home following a potential exposure.
Under current policy, if an employee contracts the virus, that person’s manager is notified in general terms, and is supposed to share that information with other staff members. Employees are asked to self-monitor for fever or upper-respiratory symptoms, and to stay home if they are ill.
Mankowski confirmed that four cafeteria employees had tested positive for the virus. She said employees were notified but did not provide specifics about how or when.
“The safety of University of Washington Medical Center patients and employees is our top priority,” Mankowski wrote in an email. “If an employee tests positive for COVID-19, the manager is informed that one of their employees has tested positive and then discusses this with the staff in that area.”
Jimenez and three other workers said that was not their experience and that communication about the outbreak was muted.
Luis Rios, a cook at the cafeteria for 17 years, said he was not informed after the first colleague tested positive, though he had chatted with the sick cashier in the staff locker room several times, no more than 2 feet away. A few days after that worker was diagnosed, Rios said, he was taste-testing a dish when he noticed his sense of taste was dulled, a symptom of COVID-19. He also felt cold, even in the warm kitchen. He was tested at an area medical clinic, and became the unit’s second confirmed case.
“Honestly, I don’t know if UW or my managers care about workers’ lives,” said Rios, 49, who spoke through an interpreter. “They only care if we can go in and work.”
Justin Lee, communications director for the Washington Federation of State Employees (WFSE), which represents the cafeteria workers, said supervisors did post a copy of an email from the employee health department to cafeteria directors notifying them in general terms when the first worker tested positive. A printout was tacked near the employees’ time clock. But many workers did not see it or may have been unable to understand it because it was written in English, according to Lee. Information shared days later in a small huddle did not reach the whole staff, he said.
In early April, cafeteria workers delivered a petition to hospital management, with the support of WFSE and Service Employees International Union Local 925, with 450 signatures. They requested the hospital close the Plaza Cafe for a deep cleaning, install a temporary protective barrier around the cashiers and bring in a medical professional to educate all cafeteria staff about COVID-19, with translations in other languages.
The cafeteria was not closed, but Mankowski said the hospital has disinfected it and all workstations, and now requires workers throughout the hospital to wear masks. The hospital has declined to install Plexiglas barriers at the cafeteria, she said, because it believes the universal masking offers the necessary safety precautions.
The Occupational Safety and Health Administration has no rule requiring that employers inform workers of exposures to infectious diseases. But Dr. Alyssa Burgart, a bioethicist at Stanford, said hospitals do have an ethical obligation. She acknowledged the challenges: With dozens of employees going in and out of a patient’s room each day, tracking every single one can be difficult, particularly with limited resources. Hospitals are trying to figure out in real time exactly what they need to disclose and how to do it.
“Everything is a disaster now, and no one has time to answer anything. So you’re seeing organizations fumble when figuring out how to do this in a way that meets their ethical obligation to protect employees but doesn’t violate federal privacy laws,” Burgart said.
“The typical way these decisions would be made would be over a very long deliberative process, and that is a luxury we do not have right now. Some organizations are going to miss the mark the first time.”
Tired of reading the same old news from the same old sources? So are we! That’s why we’re on a mission to shake things up and bring you the stories and perspectives that often go untold in mainstream media. But being a radically, unapologetically independent news site isn’t easy (or cheap), and we rely on reader support to keep the lights on.
If you like what you’re reading, please consider making a tax-deductible donation today. We’re not asking for a handout, we’re asking for an investment: Invest in a nonprofit news site that’s not afraid to ruffle a few feathers, not afraid to stand up for what’s right, and not afraid to tell it like it is.
This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.