Walgreens pays $107 million over prescription billing fraud claims. And will the backlash against DEI initiatives hurt the financial services talent pipeline? I'll talk about it with Crane's banking and finance reporter, Mark Weynrab. They really do have to thread the needle on this one. This is something they want to do, this is something they've seen benefits for, but ironically doing this leaves them exposed to social pressures that look very bad and they just don't want to have to deal with a day or a week or whatever being in the spotlight on Twitter. And also with the Supreme Court ruling that's out there, what the next one might be to make sure they're not exposed when that comes down. I'm Amy Guth, and this is Crane's Daily Jist for Tuesday, September 17th. Thanks for listening to Crane's Daily Jist. Remember, we provide a daily news brief that drops right in your inbox. It's our newsletter called the Crane's Morning 10. They're the 10 stories that will fuel a smarter workday. To subscribe, visit ChicagoBusiness.com/Morning10. I'm joined by Crane's banking and finance reporter, Mark Weynrab, to talk about the backlash against DEI initiatives and what that might mean for the financial services talent pipeline. Okay, there's a lot here to get into, but talk to me about this story, if you would. Yes, well, like everybody else, financial services companies made a big investment and commitment to this back in 2020 with the murder of George Floyd and the racial justice protest that we saw. It seems that they made some good success and were happy with what they were doing. And they're really trying to stick with it through internship offerings and other programming, but they don't want to be as loud about it as they were back then because we have seen such a backlash against companies such as Budweiser, and I don't think Budlight has still recovered, so they're still doing it, but they're just not quite as loud about it as they were in the past. And it seems like, according to your reporting, that some companies are kind of just taking the opportunity to sort of tweak the wording a little bit. Like the process might still be the same, but just the way it's being framed is really what's changing. Exactly. Atlas Fellows, started by Valley Asset Management, runs an internship program for rising high school seniors and tries to place them with internships in the financial service industry throughout their four years of college to prep them for a job in financial services. They really highlight under-resourced. They don't mention minority, but the under-resourced seems to be a way to get at it and they were really talking about their participants that were the first ones to go to college rather than break meat down along racial backgrounds. And so you've talked to some financial companies in particular. You mentioned Jamie Diamond of JP Morgan, who really kind of underscored the idea that, hey, diverse workforces are good for the bottom line. Has that pretty much been what you've heard throughout the industry? That is absolutely what I heard. It is specifically hard to tease out exactly what they mean, but someone I was talking to was referring to insurance companies, for instance. You would like to have an insurance office in neighborhoods, if we're talking about Chicago on the south and west side, and they would like to have the staff look like the people that come in here looking for insurance. So if you can do that, you can boost the number of customers. They feel more comfortable with people at the desk instead of walking into a completely unknown situation. If it's somebody from the neighborhood, they're more likely to buy insurance products. And so these are opening up whole new communities and whole new markets for them that they didn't have before. And that certainly is going to run straight to the bottom line. So they definitely are seeing the benefits. And talk to me a bit about kind of the specifics of how this issue lands in the finance industry as opposed to just kind of companies in general. Well, in the finance industry, lately, you really have to get in there very early, like you are seeing people who are offered internships after their sophomore years in college that then goes on to become their permanent job. Finance industry throws a lot of resources at finding talent and finding it early. They figure if the student is smart enough, they can train them up to the position and by the time they're 25, 30, whatever, that's not going to go away. And so really it's getting them early. So if you have kids on the south and west side, for example, which Atlas Fellows really targets, they don't have that kind of modeling. They don't know anybody in the street. They aren't aware of that. So if they figure that out by their junior year in college, maybe it's too late then, which sounds very strange, but that's the way things are right now. And so they really need to get them early. So seniors in high school are applying for these Atlas fellowships. And then their first internship is the summer before they go to college. And a lot of that is equipping with the knowledge they need. Hey, when you get to campus, you got to look at X, Y, and Z. You have to go to the career center and start asking about these internships. You have to get in these classes because we know that the people on the other end, that's what they're looking for and they're looking for it right away. Yeah. And this came through and in some of the folks that you talk to and inside it and you're reporting kind of a sense of yes, there is this big issue and a lot of people are struggling with it of kind of how to have a DEI program, but also with the background of a lot of economic uncertainty going on right now and kind of being at sort of a crossroads of those two things and being in a bit of sort of a holding pattern and kind of just waiting to see how things go, which I think is kind of, I mean, absolutely two separate issues, but interesting to just to see the way they're converging in this. Yeah. I mean, that's the kind of thing that cuts across industries and cuts across the financial economy. If they're cutting back everywhere, these are programs that are going to be, I don't want to say cut because nobody has come out and said we're cutting it, but we're going to say, hey, we got to look at these really closely, go everything with the fine-tooth comb and make sure it is paying off given what we're seeing broadly. Atlas Fellows mentioned for the first time they had a few Fellows that they weren't able to find internships for this summer. They didn't give me the exact number and that could kind of be a canary in a coal mine of is this going to be an issue going forward? It's certainly something to watch. We have the Fed meeting this week and interest rates are expected to come down. So if the economy comes roaring back, I would expect we won't be talking about this because this will be something that won't be, but in times of uncertainty, it's always the new things, the things that haven't fully proven themselves are the ones that everybody's going to look at. But as you mentioned, Jamie Diamond just last week came out full-throated backing of this. I would be very surprised if we see a complete hard stop in this like we did with Molson Coors just a few weeks ago, again, the financial services industry is very careful about the talent. So the students they are finding, they are happy with. Yeah, yeah, for sure. And do you have the sense that this really started queued from social pressure to tamp down DEI or from the Supreme Court ruling or a little bit of both? I think that's all wrapped into one. Yeah. The Supreme Court ruling was specifically talking about college admissions. So financial services industry is not involved in that, but they can certainly read the writing on the wall. These are smart people. If the Supreme Court said this about colleges, the next ruling to come down might look a little, you know, be more targeted toward the workplace. And we have to be ready ahead of that instead of responding to that. So that's why I think we're seeing a lot of the tweaks in the language right now. So they can say, hey, we weren't doing this anyway. So whatever ruling comes down, we are prepared to deal with and move forward as we have been doing. Any other kind of throughlines that you heard echoed as you were talking to people in this industry that seemed to just kind of hit every company? I think they all realize that it is a very, you know, they really do have to thread the needle on this one. This is something they want to do. This is something they have seen benefits for, but ironically doing this leaves them exposed to social pressures that look very bad and they just don't want to have to deal with a day or a week or whatever being in the spotlight on Twitter. And also with the Supreme Court ruling that's out there, what the next one might be to make sure they're not exposed when that comes down. Yeah. And what will you be keeping an eye on related to this just in the months ahead, particularly I think leading up to the election when rhetoric is just so high? That's another good one. I think the election to see, however, that shakes down if there will be any change either way based on what happens with the election, if they will ramp up, I mean we're vocal about this, if Harris wins or if they will try to get even quieter about this, if Trump wins. This also is, it is hiring season for next year's internship class. So I'd be interested to see exactly if the numbers are the same as they have been at some of these organizations or if there has been a dialing back. All right, well, we will keep turning to you for the latest. Thanks so much for stopping by to talk it through today. Thanks, Amy. Always good to talk with you. Coming up, a developer proposes a 243-unit condo project in Fulton Market. We'll talk about that and more right after this. Want to dive deeper into the topics you've heard here? Read the full stories and get access to all of Crane's award-winning coverage with a Crane's Chicago Business subscription. Crane's Daily Jist listeners can get 20% off a one-year Crane's Chicago Business digital subscription by visiting ChicagoBusiness.com/Jist and using promo code Jist at checkout. Once again, to redeem this offer, visit ChicagoBusiness.com/Jist and enter code Jist to get this deal while it lasts. This is the Crane's Daily Jist with Amy Gu. Crane's health care reporter Katherine Davis reported that Walgreens Boots Alliance has agreed to pay a $106.8 million fine to the U.S. Department of Justice to settle allegations that had billed government health care programs for prescriptions never dispensed. In a statement Friday, the DOJ said Deerfield-based Walgreens had allegedly violated the False Claims Act and state statutes between 2009 and 2020 when it submitted false claims for payment to federal health care programs like Medicare and Medicaid for prescriptions that it processed but were never picked up by patients. Davis noted in reporting that instead Walgreens allegedly restocked and resold the same prescription to another customer without reversing the claim submitted to the government. The Department of Justice said the alleged scheme allowed Walgreens to collect payment twice on those prescriptions, receiving what was described as tens of millions of dollars for prescriptions never provided to government health care plan beneficiaries. Also according to the statement from the Department of Justice, "To help prevent fraud of this nature again, Walgreens made changes to its electronic pharmacy management system." A Walgreens spokesperson said in a statement to Crane's quote, "Due to a software error, we inadvertently build some government health care programs for a relatively small number of prescriptions our patients submitted but never picked up." Continuing quote, "We corrected the error, reported the issue to the government, and voluntarily refunded all overpayments." Also saying quote, "We appreciate the government acknowledged our compliance efforts as part of resolving this matter." Davis also reported that as part of its agreement with the DOJ, Walgreens will receive a $66.3 million credit for previously refunding that amount to the government. Of the total amount paid by Walgreens, about $91.8 million of it is being returned to the federal government. The remaining $14.9 million is being returned to individual states where lawsuits were filed, such as New Mexico, Texas, and Florida. Capitol News, Illinois reported that, according to the U.S. Environmental Protection Agency, agribusiness giant ADM violated federal regulations, a federal permit and the safe drinking water act earlier this year, when a monitoring well at their carbon sequestration site in Decatur leaked liquefied carbon dioxide into what were described as unauthorized zones. In an August notice, the federal regulatory agency also alleged the company failed to follow proper emergency response and remediation plans after it identified the leak. Capitol News noted in reporting that ADM's carbon injection facility is the first and only project of its kind in the country. It stores more than 45 million tons of carbon dioxide generated from industrial processes at the company facility in Decatur, more than a mile underground. The project began operations in 2011. Capitol News reported that the leak was first detected in March, according to an August 22 letter from the EPA to the company, although the company had known about corrosion and tubing at the well since October of 2023. In the original notice of violation, the EPA's director of enforcement and compliance for the region, Michael Harris, told ADM that the issue could be grounds for a "enforcement action, including administrative and civil judicial penalties," and that ADM's permit for the project could be terminated. Capitol News noted in reporting that an ADM spokesperson said the company is now working with the EPA to address the issue. The company said in a statement on Friday, quote, "That monitoring well was plugged is not in use and none of the other wells were impacted." Continuing, quote, "At no time was there any impact to the surface or groundwater sources or any threat to public health." According to the spokesperson, roughly 8,000 metric tons of liquid carbon dioxide and other ground fluid was leaked. This is equivalent to about three days' worth of injection. According to a company document, the leaked carbon dioxide state about 5,000 feet below ground, well below groundwater in the area, which is about 200 feet beneath the surface. The Illinois Clean Jobs Coalition, a group of labor organizations and environmental advocates, were quick to criticize the company on Friday for failing to notify the public of the problem. Saying in a statement, quote, "There are significant risks at every step of the CCS, or carbon capture and sequestration process. And it's not a matter of if carbon sequestration facilities leak, but rather when." The coalition's statement continued, quote, "Neither ADM nor the U.S. EPA have released any details about the nature of the leak or its impacts on the local community, groundwater or the environment, and we are anxious to learn more." The coalition also characterized the lack of public disclosure as, quote, "unacceptable and dangerous." Capital News noted that the ADM spokesperson said the company reported the situation to the EPA, quote, "In accordance with our permit requirements when there is no potential endangerment to an underground source of drinking water, which was the situation here." But as Capital News also pointed out, other critics of the technology said the risks of carbon capture outweigh the potential benefits. Pam Richard, co-director of Eco-Justice Collaborative, said in a statement, quote, "This leak is a wake-up call. It's a stark reminder that carbon capture is not the climate solution it sold as, but a dangerous gamble with our drinking water." Ukraine's Mark Weynrobb reported that latitude, an attorney placement firm providing contract attorneys to law firms and corporate legal departments, is opening a regional office in Chicago. Weynrobb reported that the office will be headed by Justin Johnson, who previously worked as senior counsel at North Chicago-based pharmaceutical manufacturer Ab V. He also held positions at Rush University System for Health and served as a corporate attorney at Kirkland in Ellis. Weynrobb noted in reporting that the use of contract attorneys has risen in recent years as companies look for legal talent to meet short-term surges in demand for certain types of work, as was the case during the COVID-19 pandemic or when economic conditions don't support a full-time hire. The option has also been attractive to some younger attorneys or working parents who are looking for better work-life balance than is the norm at most large law firms. Weynrobb noted that latitudes Chicago Outpost at 110 North Wacker Drive will be the third new office the Nashville, Tennessee-based company has opened this year following Tampa and Seattle. It now has locations in 14 cities including Atlanta, Boston, Indianapolis, and Minneapolis, among others. Weynrobb also noted that latitudes practice areas include commercial contracts, data privacy, M&A, employment, and litigation. The company has been operating in Chicago for more than 10 years, but having a partner-led new office will allow it to recruit new clients and attorneys in the area. As developers raised to bill departments in the Fulton Market District, a luxury condo developer is betting that some new residents in the neighborhood will want to own their places instead. Crane's Danny Ecker reported that in the largest ever condo proposal for the trendy former meatpacking corridor, Sulu Development wants to build a three-tower building with as many as 243 condo units at 1325 West Fulton Street, that according to a zoning application set to be introduced to the city council in the week ahead. Ecker noted that Sulu would acquire the vacant property from Chicago developer Sterling Bay, which has owned it since 2017 and previously floated plans for an office project on the site, according to a source familiar with the property. Ecker further noted that the proposal stands out as a for-sale unit option amid a slew of new towers rising in Fulton Market with rental units meant to serve a rush of new residents in the once-gritty area that's now home to major corporate offices and upscale hotels and restaurants. Residential developers have been on a building tear since the city lifted its ban in 2020 on new residential projects in Fulton Market, north of Lake Street. Ecker reported that the 1325 West Fulton proposal includes three high rises of different heights and ground floor commercial space. The tallest of the three towers would rise 538 feet at the southeast corner of Fulton and Ada Streets and include 106 units, while a 438-foot-tall tower with 83 units would be on the eastern portion of the property at Fulton and Elizabeth Streets, according to plans. A 54-unit, 301-foot-tall-condo tower would be built mid-block between those two, also according to the plans. Ecker also noted that the site today is primarily used as a surface parking lot, and led by principals Dominic and Derek Sullo, the development firm, needs the city council to rezone the property in order to allow for residential use. Ecker also reported that it's unclear how much Sullo is under contract to pay for the site, Sterling Bay bought it as part of a larger portfolio acquisition of Fulton Market properties in 2017. The developer, which helped transform the neighborhood into a corporate destination by luring Google's Chicago office and McDonald's global headquarters there over the past decade, has been looking to unload several Fulton Market development sites. Ecker noted that Sterling Bay recently hired a broker to seek a buyer for the site at 1,200 Carroll, and two smaller development parcels just north of that property, and also hired brokers earlier this year to sell two other properties in the neighborhood at 345 North Aberdeen and 370 North Carpenter, both of which have been rezoned by the city council for Sterling Bay proposed developments. That's Crane's Daily Jist for now. You can follow all of our conversations on Apple Podcasts, Spotify, or wherever you like to get your audio on demand. Don't forget to subscribe and please rate and review Crane's Daily Jist. Our show is produced by Todd Manley at Earsight Studios. I'm Amy Gooth, thanks so much for listening and I'll meet you right back here next time.
