Bailed-Out AIG Goons Force Poor to Choose Between Running Water and Food

Class War For Idiots / Water Wars / November 26, 2009

By Yasha Levine

slum-america

This article was first published on AlterNet

What are we getting in return for the bailout? So far, predatory credit card rates, exorbitant bank fees and obscene Wall Street bonuses. But we’re being robbed in other, sneakier ways, too. It seems that taxpayers in the poorest, most vulnerable parts of the county are getting plundered by the same institutions they bailed out. One example is AIG’s underhanded fleecing of residents of rural Kentucky.

Middlesboro and Clinton are two tiny, impoverished towns in southern Kentucky with a combined population of 12,000. In 2008, Middlesboro’s per capita income was $13,189 a year, only a few hundred dollars more than the average worker earned in third-world Mexico. That is if they were lucky to even get a job. Real unemployment hovers somewhere around 30%, and the state is so broke that half the people eligible for unemployment benefits can’t receive them. Life may be tough and most people live in poverty, but that doesn’t mean they can’t be made a little poorer. That’s the lesson locals learned after bailed-out insurance villain AIG took over their water utility and instantly raised rates to squeeze an extra $1 million in profits out of its new customers, forcing some to consider choosing between running water and food.

The towns are so rural, their residents have yet to be touched by the Internet revolution. Forget comment sections or forum threads. In Clinton, you have to track down actual hand-written notes that residents filed with city hall to read their complaints about the rate increase. Luckily, city officials were nice enough to scan some of them.

Here’s one, dated August 8, 2009:

My husband and I are on a fixed income and with everything going up in price this would be very a very large burden on us as well as most of the citizens of Clinton. Our town is mostly of people like us and this would be such a hardship for us. A 50.8% raise is outrageous on anything. Please do not let this happen. It would mean the difference in bringing buying food and medicine or paying a high water bill to make someone else’s life easier.

Here is how the AIG takeover went down: In 2005, flush with cash from its shady dealings in the mortgage derivatives market, AIG announced that it was in the process of acquiring Utilities Inc., a holding company that controlled scores of small water utilities across 17 different states. With just 300,000 customers, the company wasn’t huge, but it boasted of being the largest privately held water utility in the country.

“We have long considered water infrastructure as an attractive investment opportunity and an excellent complement to [our] existing energy infrastructure portfolio. Utilities Inc. is a leader in this industry and we are pleased that [we have] the opportunity to acquire this business,” AIG Chairman and CEO Win J. Neuger gloated in a press release.

AIG had reason to be pleased with its purchase. Water utilities are one hell of a profitable business, with international corporations easily making a 20 to 30% profit margin, according to a 2007 report by Food and Water Watch. In the US, federal regulations limit profits to 10%, a pesky rule that companies easily subvert by shuffling their income around and “investing” it in side businesses. These kinds of returns would be the envy of the pharmaceutical and oil industries. How do water companies do it? According to Food and Water Watch, they charge 50% more for services than public utilities and pocket the difference, thereby unleashing the potential of the free market.

People who have been ripped off by bailed-out banks’ schemes to trick late fees out of their customers will recognize what Utilities Inc. did to the people of Middlesboro and Clinton. In the summer of 2008, as AIG was teetering and desperate for funds, it “upgraded” its billing system, and suddenly a slew of late fee charges hit the struggling locals.

Residents had been getting their water bills like clockwork for as long as anyone could remember, but confusion and disorder set in as soon as Utilities rolled out its new and improved billing system. Monthly statements started coming late or didn’t come in for months at a time. People were double-billed and double-penalized for bills that never arrived. One month, a bill would include sewer fees, the next month it wouldn’t—and you’d be charged if didn’t catch the omission. It’s obvious the new invoice system was designed for pure harassment, creating chaos and reaping the rewards of the late fees it generated.

Internally, Utilities referred to their revamp of the billing system as “Project Phoenix.” It sounded eerily similar to the CIA’s “Phoenix Program,” which was designed to terrorize, kill and torture uppity Vietnamese villagers into submission during the Vietnam War. One month after Project Phoenix started wreaking havoc on locals, AIG collapsed and took the first of over $150 billion in taxpayer bailout funds. That meant Project Phoenix could still go on terrorizing locals—which it did.

Here is how a local newspaper described the new billing program in Clinton in March, 2008:

It wasn’t until the summer of 2008 that the new bills began to arrive and from Day One, they were messed up. Few customers here in Clinton [called] the water company because they got multiple bills. One business thought it got a break when its bill went down somewhat, only to discover that the bill hadn’t included sewer costs. This went on for several months. Finally, the [sewer bill] showed up – due in full – on one bill. Requests to spread out the payment fell on deaf ears. . . . Some of us were so confused by the bills, we paid them every time they came in. . . . Fears of bad credit reports and shut offs kept most customers paying whenever a bill arrived.

To make it harder for Clinton residents to file complaints, AIG closed the utility’s local office as soon as it took over the company. Pleas made by phone were rejected.

Local citizens are angry, upset and fearful. Many senior citizens on fixed incomes are already stretched past the breaking point. Others living below the poverty line without hope of getting a job are worried about how to pay another rising utility bill.
Customers we’ve talked to “want to do something,” but say they cannot afford to file to intervene in the case. The trip to Frankfort is daunting and expensive. Some dare not leave the jobs or businesses they have for the time it would take to travel…

In November 2008, right as AIG was recieving the second installment of its bailout and the economy was in a free-fall, AIG’s water utility notified Middlesbro and Clinton residents that it would be raising rates by 51%. It would mean more than $750,000 in additional revenue a year, just from 8,000 customers. The money wouldn’t be used to fund infrastructure improvements—none had been made and none were planned. No, according to a company spokesman, the utility was trying to recoup money it had invested in its “improved” billing system, in effect forcing the victims of the billing system to pay for their own fleecing.

It seems Utilities was quite honest about explaining that a good chunk of the $750,000 would be transferred straight into the pockets of its investors, according to the West Kentucky Journal of Politics and Issues.

[Another] reason came from [the] company’s financial expert, Pauline M. Ahern, who opined that a rate increase will allow [the utility] to “earn a range of common equity cost ratio of 11.60% to 12.10%.” In the present market, that is an attractive return on investment.

One million dollars may not seem like much these days, but it sure meant a lot to the poverty-stricken residents of Middlesbro and Clinton. There were quite a few bleak handwritten statements filed with Clinton’s city hall during a public hearing on the water rates increase. It makes sense to quote them to get a feel for the level of despair that exists in rural communities like this all over the United States.

Here’s one from August 8, 2009:

I get $675.00 a month, if they raise the water, or utilities, I can’t pay them. I would have to go without water, etc. or gas. I’m disabled and I can’t walk. Raising the utilities hurt a lot of people here in Clinton. Not just me but everyone. As it is I can’t pay the water bills because its high. But I pay what I can.

And here is another from August 12, 2009:

I feel that a rate increase of 50.8% will add a heavy burden on our small rural community. Our citizin [sic] that lives in our city are on Social Security, have full time jobs that pay barely minimum wage or are working as many as 3 part time jobs to make their monthly budget.

And another from May, 2009:

“I always have a high bills [sic] to pay. I pay what I can. I am on disable. [sic] I try not to use too much water. But yet I have a high water bill. If the bill goes up, I will be lucky to pay them $10.00 instead of $80.00.

In the end, Kentucky’s regulatory commission reduced the water rate increase from 50.1% to 30%. How long before they try raise the rate again? Or until the energy company decides to follow suit? It’s hard to say. But one thing is for certain: AIG’s takeover shows again that the American people were screwed by the bailed-out billionaires, who, instead of showing gratitude or willingness to reciprocate, have been preying upon the most vulnerable Americans like they are 15th century barons soaking the peasants.

And as our cities and states start leasing out and selling public infrastructure to pay off their municipal debts, we can expect banks to gain more control of public wealth. Middlesbro and Clinton are a glimpse into the future of post-privatized America.

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36 Comments

Add your own

1. Peter | November 26th, 2009 at 3:12 pm
2010 is the year to “bail out” all the idiots who thought the government could “fix the economy”.
I’d like Mopping up tea bagger jizz in 2012.
2. proletariat | November 26th, 2009 at 5:34 pm
I bet every one of these people votes Republican, too.
What is it about the Western Proletariat? Why are we so inactive? They push and push and we do nothing. We think waving some sandwich board around is going to magically fix all our problems.
You’ve been lied to, people. Both sides of our political spectrum represent the same bourgeoisie interests.
It was time to stop waving signs and start waving assault rifles 100 years ago.
3. RT Carpenter | November 26th, 2009 at 11:17 pm
“Too big to fail.” The new cliche is “We looked into the Abyss.” What did we see there? Wall Street billionaires becoming mere millionaires. Goldman Sachs operatives (in and out of government) did what the Ancients did when they looked into an Abyss (an angry volcano). They sacrificed virgins! Our GS handlers tossed in whole generations of virgin taxpayers, including those as yet unborn, who will be handed the bailout and gaurantee/pledge bills.
4. Rodolfo Fierro | November 26th, 2009 at 11:59 pm
The oligarchs will only understand the language of weapons.
5. Castillo | November 27th, 2009 at 5:57 am
All this talk of weapons is nonsense. Against organized state violence, a bunch of angry goons with guns are just not useful. They will be jailed in a heartbeat. What you need is strong social movements: thousands of people on the streets, day after day, with a long term strategy and specific demands. Organisation. That is the only way to force the politicians, and specially the POTUS, to work for the people, not the oligarchs. That is what brought about the New Deal. So stop deluding yourselves, and do something positive with your rage.
6. CocaCola | November 27th, 2009 at 7:50 am
Subsidized stuff stops being subsidized without any corresponding decrease in the cost of government. All profits go right in the pockets of politicians and pensioners. Those are the wages of democracy.
7. Josephus P. Franks | November 27th, 2009 at 10:52 am
Castillo, both large, organized, sustained protest and civil disobediance movements, and smaller, organized violent groups, would be influential in reducing the power of the oligarchs. (Especially operating in tandem.) The former would require a lot less personal sacrifice, while the latter is better suited to the utterly crushed and dispossessed with nothing left to lose. Sadly, we are just intellectually masturbating until you can point to concrete organizations to join rather than talking about the power of organization in the abstract.
8. Metallica | November 27th, 2009 at 11:29 am
You fucking liberal whiners, water literally falls right out of the sky. Stop your bitchin’.
9. Megadeth | November 27th, 2009 at 6:15 pm
Haha, I bet there is a slew of motherfuckers in Kentucky who would take your ass out to the barn and leave slim pickins, Metallica. If you really believe this is “liberal whining,” keep your views to yourself and keep willfully paying for the filthy rich to get even more soiled in richness. Idiocy.
10. Tony | November 27th, 2009 at 9:59 pm
For a prior job I had, I traveled extensively throughout Kentucky. I ran land title a few times in Hickman County. I always thought Clinton was cool because the locals had made a hand lettered directional sign on one side of the courthouse square that read, “Columbus-Belmont State Park on the Mississippi River, 9 miles.” It was so evocative of place and people.
And I have to say the people of Clinton were some of the nicest people I have ever met. They were the sort of people who would cross the street to speak to a stranger. They weren’t nosing into my business, but were just trying to be friendly and to show kindness to a stranger. I haven’t been there for a number of years, but it’s sad that such people are getting so badly shafted.
11. Hey Man Nice Shot | November 28th, 2009 at 1:41 am
5. Castillo
All this talk of weapons is not necessarily misdirected. It depends on who is being placed in the sights. If you targeted police, well, yeah, you could expect to be run down fairly quickly, with news headlines emphasizing the wife and two kids they had, etc. But if you targeted the most assholish of the oligarchs, well, you might have one or two of the detectives arresting you joining in with quiet praise alongside the thousands of people that your target has been destroying in the name of profit.
Not really good prospects for someone with a wife and kid and something to lose, but if you’ve nothing to lose, well…
12. Castillo | November 28th, 2009 at 5:00 am
Josephus,
I think you are totally right. Talking the talk is easy, but walking the walk is another matter. As far as existing organisations, i dont really know what are the options in USA. Where am from (Spain), the traditional labour movements, unions and “left” parties, are completely coopted by the economic and political establishment. So you have to go to the fringes to find real antisystemic options, that have very little support and influence at the moment. So the picture is rather bleak, but that is all the more reason start now, and strengthen radical, anticapitalist organisation for the upcoming deluge.
The most important task will be to convince people to take part in political rebellion, and thats only posible through a change in the dominant beliefs and assumptions. Violent action may or may not help, but in any case its just an aside to the ideological struggle that will determine if thing continue like always, or there is a change for the positive: redistribution of wealth, income equality, economic rights, and so on. Maybe I am naive, but I think there is a real shot of exploiting the waning hegemony of free market ideology and pushing for a radical socioeconomic restructuring.
13. Marquelot | November 28th, 2009 at 6:11 am
Kentucky is republican country. Hopefully they’ll continue getting a good fucking for years to come…
14. adolphhitler | November 28th, 2009 at 6:44 am
don’t tell me guns and violence are ineffective. Blacks were getting nowhere until they burned down cities and started shooting cops and scaring the shit out of white people. The panthers may have been killed or jailed but the government started pouring money into the black communities to end the activism. A violent attack on the utility, its corporate owner, or the government agency that regulates it may receive public support which will scare the government and the oligarchs shitless. The thirties have already arrived economivally. Now it is time to revert to 30’s style violence if you really want change.
15. Anvil | November 28th, 2009 at 5:16 pm
Violence can indeed be an effective tool at getting the attention of the power structure. In this case, as well as in pretty much any issue we face in the U.S., it is totally unnecessary and usually counter-productive.
I hope the day is not too far off when we as a people wake up to the fact that far too much power has been given to the corporatists who have, in turn, purchased our representatives in local, State, and Federal legislatures.
It is the liberal/progressive’s responsibility to point this out to the ‘low information’ voters, to our representatives, and to the media. Keep hammering it and keep pushing for true campaign finance reform. Change is slow to come because the true constituency of most politicians are their major donors. This invasive and poisonous manner of governing must be brought to light and stopped.
Don’t be discouraged, keep spreading the word.
16. Josephus P. Franks | November 28th, 2009 at 9:04 pm
I’m completely at a loss as to what organizations one could join. I don’t know any that proseletyze and spread the way religious sects do – but that’s what’s needed. The CPUSA has a sensible strategy, but it’s problem is that its name is “the CPUSA” and you’d have to be so impervious to the propaganda as to be nearly crazy to be a Unitedstatesian who does not consider “communist” to be a synonym for “evil”.
Sadly, just because the situation screams out for it doesn’t mean that revolution or even progressive evolution will happen. Look at Indian society for the exemplar of just how much one small group can go on exploiting the majority without so much as a peep from those they are raping daily…
That being said, the conditions certainly are ripe for the picking… I just don’t see any pickers on the horizon.
17. az | November 29th, 2009 at 8:45 am
16: The CPUSA is a non-electoral party that supports Obama and the Democrats. They go on CNN/MSNBC/Fox News sometimes but that’s it. Their greatest ambition is their plan to control the country by 2050 but I don’t know how that’s working out. There’s also the PSL and WWP but most of what they do is community organizing, trying to control ANSWER, and publishing poorly-written newspapers. It’s really not the lack of resources that is the problem though, as Nepal, India, Peru (I think), etc. it’s that “without revolutionary theory there can be no revolutionary movement.” Currently, however, these movements have no plan for America and wouldn’t know what to do with it if they were in power, except doing petty and needlessly confrontational stuff that would piss most people off. So really, I don’t blame you, and I don’t blame them. If you joined one of those movements, you’d probably give up and become even more disillusioned within a month anyway.
18. Necronomic Justice | November 29th, 2009 at 9:19 pm
@OP Holyfuck Yasha, I was almost going to skip reading this one.
@16, What was the CPUSA strategy again? Wasn’t it vote Democrat?
19. umdesch4 | November 30th, 2009 at 12:51 pm
While I’m definitely not advocating violence, to say it wouldn’t work is naive. Just google “Cochabamba water war” to see how Bolivia dealt with an attempt at water privatization. Seems no-one really gave a crap until shots were fired.
20. fallout11 | December 1st, 2009 at 5:43 am
Solid point, umdesch4.
A bit late now, but just to point out that in the arid US Western states, the right to water has often historically led to outbreaks of “shootin”, and remains a contentious and thorny issue to this day, just barely papered over with massive (and failing) government irrigation projects.
Likewise, Midwesterners backed bank robbers during the Great Depression because they (rightfully) saw them and the local LEO (who was busy enforcing repossession) as predatory, deserving of what they got.
I’d be damned if some predatory entity would leech off of me for water or oxygen, get some bolt cutters and a rifle and fight back.
21. StopCrying | December 1st, 2009 at 8:49 am
Why do Americans whine so much? I was born in Southern KY, have a (poor) high school education, and made over $750K last year. Admittedly, it was mostly in US dollars which are of questionable value (LOL). And yes, I moved to a CA for the better weather. When did our society become all crybabies who can’t take on any personal responsibility. Like it or not, people make personal choices in the US and live with the consequences. If you don’t like being poor, go make some money. Alternatively, we can follow the EU and RU into a society of entitlements. Either works I suppose. But have some courage and make a statement. Stop whining that you were ripped off, pull up your panties, and go earn what you want. I’m glad I was born poor in the US. It evidently made me stronger and more capable than the majority eh?
22. jester l | December 1st, 2009 at 3:37 pm
Is stop crying for real, or just trying to goad us? I’m sorry but most wealth is inherited. I’m sure you work hard, but so does everyone else. Luck and birth are the main indicators of wealth.
Of course there is also the morality of obscene wealth issues. Then there is the fact that a market economy cant sustain itself without adequate demand, a demand which it inherently destroys, leading to crisis.
23. Necronomic Justice | December 1st, 2009 at 3:57 pm
@21. StopCrying
Let me guess, you are white?
24. adolphhitler | December 1st, 2009 at 4:54 pm
@21…I find it difficult to believe that anyone who makes 750k a year reads this website…i call bullshit
25. StopCrying | December 1st, 2009 at 7:58 pm
I’m half white I guess, my Dad is black. Nice of you to ask. You went to the race card awfully quickly. I suppose I needed to be white to think for myself? Amusing. My company is primarily staffed by Russians (great mathematicians), so I do read the exile. The writing is good, and it’s not slathered with government propaganda. Call bullshit all you’d like ‘lil hitler, it’s the fact.
Let’s face it. Most Americans are just too soft to chase the dream. So, they ask someone else for a job and are accept what that person gives them. Don’t go bashing the capitalists too much mate, or you’ll find out how tough unemployment is.
The comment about “inherited wealth” is simply statistically untrue. I don’t want to “goad” but really, where did you learn that sort of silliness? Statistically (in the US at least) most inherited wealth (over 95%) is entirely spent within 18 calendar months. Besides, I’m hardly wealthy. My company has only been doing this well for about six years. But I hope to be wealthy by saving my money rather than buying flashy swag. In my experience those who can actually do… the rest sit around and complain about some mythical “they.”
But, in the interest of not being a wanker I say we drop it. Sorry if I offended, it was not my intention.
26. adolphhitler | December 2nd, 2009 at 6:50 am
@25…ok, you got me…dont worry, no offense taken
27. az | December 2nd, 2009 at 9:38 am
25: So are you one of those people here to tell me about Google MoneyTree? Because otherwise your comments presupposing that all Americans are able to start successful companies making a lot of money at the same time are kinda… even more dubious that Google MoneyTree and all those other referral spam pyramids/whatever.
28. obvious | December 2nd, 2009 at 11:27 am
i love stopcrying’s quote “The comment about “inherited wealth” is simply statistically untrue. I don’t want to “goad” but really, where did you learn that sort of silliness? Statistically (in the US at least) most inherited wealth (over 95%) is entirely spent within 18 calendar months.”
unfortunately, stopcrying is including ALL inheritances, and that 95% of squandered inheritance is disproportionately small sum wealth that’s spent on restaurant meals and trips to the mall. stopcrying does not refer to big-time money, the type that isn’t really touched by the death tax. of course he/she most likely gleaned this disingenuous nugget of information on some dipshit rightwing website, those sites do a great job of convincing dumbasses to view society as fair, and be less questioning of inequality.
29. cripes | December 2nd, 2009 at 12:50 pm
If stopcrying is lying or not, I can’t say.
But I do know the american idea that everyone can make it “big” by being an entrepreneur, hiring other people and making alot of profit is a lie.
Since the wealth of just one “entrpreneur” depends on the exploitation and probably impoverishment of many times his number, then by definition, we can’t all do it.
Those “entrepreneurs” aren’t wealth creators, as the right would have you beleive; they are wealth extractos, taking away from millions the value they have created throught their labor.
But, hey, the theory works fine if your goal is to stop people from fighting for decent wages and conditions in the jobs they actually have, you know, teacher, factory worker, salesclerk. Instead of building a society where all jobs have the ability to earn a living wage, have decent housing and health care, we can just blame them for being too stupid to become millionaires!
30. cripes | December 2nd, 2009 at 12:56 pm
Oh yeah, and the single-minded pursuit of money to the exclusion of all other things is not something decent people brag about. Especially considering the disgusting things that people who live for it do to their fellow men.
Time to stop pretending that exploiting others to become “rich” is a virtue, it’s not. christ said so 2,000 years ago, and I agree with him there. Calvinist rewrites and Newt Gingrich bullshit about “personal responsibility” doesn’t change anything, except provide cover for lying, cheating, selfish peices of crap who want us to worship their depravity.
31. Viking | December 3rd, 2009 at 3:58 pm
Kentucky is only Republican in national elections. We’re Democrats on the local level. Southern Democrats did not all migrate over to the GOP after the civil rights act, despite the myth.
What AIG is doing isn’t capitalism it’s corperate commmunism. When a company is large enough it can avoid any customer blowback by its sheer size and give lousy service without threat of retribution and the assurance that the feds will bail them out if they screw up.
32. Marquelot | December 4th, 2009 at 7:57 am
Ah, so Kentucky is full of republican idiots only for national elections. Although both parties are going to fuck you, at least the democrats use a little vasoline.
33. az | December 5th, 2009 at 8:22 am
Yo Viking, it’s called State Monopoly Capitalism. Read up on yo’ Lenin.
34. George Eliot | December 6th, 2009 at 8:10 am
StopCrying, Exactly how much of your personal wealth and your company’s income was and is legally obtained? What about your startup funds? Were those legally obtained? BTW, “loan” from a drug dealer friend or cousin does not count as being legally obtained. How many of your employees are citizens or legal residents of the USA? What about the non-technical staff? Are the janitors, landscapers, receptionists, etc. citizens or legal residents of the USA? If your company made the money you claim last year, I think you can afford to pay living wages and benefits. Beings as how you state you are a person of color, what an apprenticeship program for smart inner city youth? I think, in exchange for being able to live and work in the USA, the Rusian mathmaticians could be asked to train some local kids.
35. Plamen Petkov | December 7th, 2009 at 12:50 am
so stopcrying clue us poor idiots in how did you manage to make $750K lastr year and in CA of all places tthats got double digits unemployment?
Whats your secret? if anyone can get rich, tell us so we can all do it too and then stop crying.
36. Uncle B | December 29th, 2009 at 9:48 am
Socialized medicine coming soon to Americans, The American Medical Cartel have had their “Executioners Rights” in the offices of their “Selection Committees” tied and regulated by Mr Obama, and they no longer rely only on the actuaries figures for ROI for the large Insurance Corps to determine who does and who does not live or die with or without humane medical coverage in America – some progress to be certain. America is still facinfg the oil barons however, and for a good study, Google, torrent the movie “Who Killed The Electric Car” Especially the guy who is lucky enough to make $750K an. If the bigger corporate fish find out, they will surely skin your fatted ass to the bone and throw your entrails to the sharks, gut your enterprise and eat your bean counters alive, it is called acquisition sometimes or other less publishable names, but your ass is in ultimate danger if you have that kind of resource going! America has far too many corporate lawyers far too few real Scientists, engineers of worth, and very expensive labor that on the whole does poorly! For Example: Chrysler cars falling apart on the streets! Goddammit! Americans Fatted Calves ready for the Asian fires!