US sugar plant removed safety device 13 days before temp worker’s death

Janio Salinas was buried alive in sugar. A newly released accident report and an undercover investigation by Univision reveal the obstacles OSHA faces in its temp worker safety initiative.

This story was done in collaboration with Univision.

Inside the sugar plant in Fairless Hills, Pa., nobody could find Janio Salinas, a 50-year-old temp worker from just over the New Jersey border.

Throughout the morning, Salinas and a handful of other workers had been bagging mounds of sugar for a company that supplies the makers of Snapple drinks and Ben & Jerry's ice cream. But sugar clumps kept clogging the massive hopper, forcing the workers to climb inside with shovels to help the granules flow out the funnel-like hole at the bottom.

Coming back from lunch that day in February 2013, one employee said he had seen Salinas digging in the sugar. But when he looked back, Salinas was gone. All that remained was a shovel buried up to its handle. Then, peering through a small gap in the bottom of the hopper, someone noticed what appeared to blue jeans.

It was Salinas. He had been buried alive in sugar.

As harrowing as the accident was, federal safety investigators recently discovered something perhaps even more disturbing: A safety device that would have prevented Salinas' death had been removed just 13 days before the accident because a manager believed it was slowing down production.

After a series of gruesome accidents involving untrained temp workers, the U.S. Occupational Safety and Health Administration (OSHA) has stepped up its enforcement of rules affecting temp workers. In recent cases, OSHA has held companies and temp agencies jointly responsible for training, and it has fined temp agencies for not assessing potential dangers before sending people to a workplace.

But the federal report on the accident that killed Salinas reveals how deeply rooted the problems are—and how difficult a challenge OSHA faces in changing the way temp workers are treated.

The Salinas case is featured in a new investigative report by Univision, airing tonight on its news magazine show, Aquí y Ahora. The report also features undercover video from the growing blue-collar temp world. Earlier this year, the Spanish-language TV network sent two producers to work for temp agencies in an immigrant neighborhood in New Brunswick, N.J. From there, the agencies provide workers to local warehouses to unload goods coming in from overseas.

Univision quickly learned that the agencies weren't following employment rules. At five of the seven agencies they visited, the employment forms the producers received were in English, even though they spoke Spanish and the overwhelming majority of workers who use the agencies don't speak English. One producer was asked to sign a safety quiz that had already been filled out. When they got to the warehouses, both men were sent to work without any training.

The temporary staffing business has been one of the fastest growing industries since the end of the 2007-09 recession. It now employs a record 2.9 million people in the United States. But the growth in blue-collar staffing has led to high injury rates and complaints about exploitation.

Last year, ProPublica found that temps face a significantly greater risk of getting injured on the job than permanent employees. In Florida, for example, temps were about twice as likely as regular workers to suffer crushing injuries, dislocations, lacerations, fractures and punctures. In Florida and the three other states for which records were available, temps were about three times as likely to suffer amputations.

At the time of the sugar plant accident, every employee at the Pennsylvania warehouse, which is run by CSC Sugar, was a temp worker. Even the warehouse manager, who ran the operation, was a temp although he was promoted and given raises by CSC managers and had authority to purchase materials and hire contractors on behalf of the company. Workers told OSHA that the only contact they had with their temp agency was when they had a payroll problem.

The warehouse manager told OSHA that he had complained repeatedly to upper management about the dangers of becoming engulfed while unclogging the sugar hopper. He said he had asked the plant manager for a safety device to prevent clogging, but the plant manager said "we can't do that" because of financial constraints.

Eventually, the company decided to install a screen over the hopper to prevent clogging. But 13 days before the accident, according to OSHA, the plant manager ordered it removed because it was slowing down production.

Around the same time, the plant had a near miss when a worker started to slide into sugar while unclogging the hopper. That worker was able to get to the side in time, the report said. Despite that scare, the screen was never put back on.

The plant manager leading up to the accident told OSHA he was unaware of the problems and didn't know the screen had been removed. "However, statements by employees indicated he had directed its removal," OSHA investigators wrote in their report.

CSC Sugar had been fined by OSHA in 2010 for failing to train temp workers at another plant. CSC said at the time that it depended on the temp agencies to train them. Despite the warnings from OSHA, several temp workers at the Fairless Hills plant said they too had never been trained by CSC.

Andy Reul, the company's chief financial officer, declined to comment, citing potential litigation.

Salinas, who had been an airplane mechanic in Peru before coming to the United States in 1990, died of asphyxiation. He left behind a wife and a large family in New Jersey and Peru.

"Janio's wife has had a difficult time," Salinas' brother John told Univision.

"It is not easy for the poor woman," added Salinas' sister-in-law, Elienda Barbarán. "Replaying the moment is difficult. But we have so many questions: What happened? Why didn't the company consider safety? Why wasn't there someone who checked that the company was functioning well?"

OSHA fined CSC $25,855 following the accident. But after the plant installed a safety guard and started using a new procedure to break up sugar clumps, the agency reduced the fine to $18,098.

Salinas' family told Univision they believe OSHA should have done more.

But, Jean Kulp, director of OSHA's Allentown, Pa., office, told Univision that her agency doesn't have the ability to shut down businesses and has limited criminal enforcement provisions.

In CSC's case, even though it removed a safety device and had received previous warnings to train its temp workers, OSHA didn't find the company "willfully in violation," which would have triggered bigger fines, she said. Kulp said the violations that were found didn't show "total disregard" for OSHA standards.

Congressional efforts to provide more protections for workers have repeatedly stalled. The Protecting America's Workers Act, which would raise fines and criminal penalties for OSHA violations, has been proposed in every Congress since 2004 but has received little attention since a House subcommittee hearing in 2010.



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US companies dropping share buyback plans

Buybacks have put US corporations deeper in debt. Net US corporate debt is a record $2.3 trillion, up 14% in the last year alone. The combination of too much debt, slowing earnings and expensive shares are slowing the buyback stampede

The combination of free money and incentives for management has been irresistible for many corporations in the US. In the 12 months to 31 March 2014, US companies increased their spending on buying their own shares by 29%. Then bought $534 billion worth. This was surpassed on in 2007 when companies bought $589 billion. These buybacks have helped the US market reach new highs and increased earnings. So any end to the process may have a dramatic impact.


Buying a company’s own stock is the classic strategy for managers who can’t think of anything more productive to do with their cash. By reducing the number of shares outstanding they make earnings look better. There are more earnings for fewer shares. Increased earnings usually raise the price of the stock. Since managers are often on incentives to raise share prices, buybacks can look very attractive. They can be even more attractive when the corporation can borrow at rock bottom rates to purchase the shares.


Buybacks are also popular with shareholders. There is even an exchange traded fund (ETF) for them. PowerShares Buyback Achievers has returned 22.7% per year compared to 18.8% for the S&P. But there is a problem. Although the process does flatter earnings, it also increases debt. Often corporations are using debt to purchase expensive shares. So it is no way to grow a company.


Philip Morris, the American tobacco company is one example. Over the past five years, Philip Morris has been able to grow its earnings by more than 10% even though sales were flat. Higher earnings were created by price increases and cutting costs, but these were not sufficient to send its earnings into double digits. What did that were buybacks.


Since 2008, Philip Morris spent $56 billion on its own shares. This large amount did not come out of its $43 billion if cash flow. They had to borrow another $14 billion to pay for it. Without income and increasing debt, Philip Morris’s credit rating might be at risk unless as its chief financial officer (CFO) states, the company “will have to bring our cash outflow in line with our inflow”. In other words they will no longer be able to spend $2.7 billion more than their income on buybacks and dividends. No doubt there will be an impact on their stock.


It is not just Philip Morris. Buybacks have put US corporations deeper in debt. Net US corporate debt is a record $2.3 trillion, up 14% in the last year alone. The ratio of long term debt to assets is almost as high as it was at its peak in 2009. Profits have not kept up. The awful first quarter reduced profits by $198 billion and net cash flow by $120 billion. Commentators love to blame this on the weather, but overseas profits were also hit by $26 billion.


So, buybacks will probably slow because managers have maxed out the corporate credit card. But there is another better reason. It no longer makes sense. There might be some economic basis for purchasing undervalued shares, but it is just incompetent to buy them at the present valuations. US markets are trading at all time highs. Tobin’s q, a well regarded index of valuation, puts equities at 88% overvaluation. Robert Shiller’s cyclically adjusted price earnings ratio (CAPE) puts the overvaluation at 87%. Buying expensive stock with more debt is not generally a good business plan.


Analysts always lower earnings expectations as the year goes on. This one is no exception. Second quarter growth estimates have been lowered from 3.5% to 2.8%. The combination of too much debt, slowing earnings and expensive shares are slowing the buyback stampede. The number of US companies announcing plans to buyback shares in June was only 38 the lowest since 2011. The amount spent on buybacks last month was only $22.2 about a third of the $61.7 billion spent last June. Even the ETF Buyback Achievers is beginning to notice. It gained 8.5% this year compared to the S&P’s 14.9%.


Eventually even the present bull market will correct. Eventually interest rates will go up. So eventually buybacks will stop. Then corporate balance sheets loaded with debt will not look so attractive to anyone.


(William Gamble is president of Emerging Market Strategies. An international lawyer and economist, he developed his theories beginning with his first hand experience and business dealings in the Russia starting in 1993. Mr Gamble holds two graduate law degrees. He was educated at Institute D'Etudes Politique, Trinity College, University of Miami School of Law, and University of Virginia Darden Graduate School of Business Administration. He was a member of the bar in three states, over four different federal courts and has spoken four languages.)


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