Business

L.A.’s kombucha empire exploited workers for years

Published

1 year ago

August 1, 2023

L.A.’s kombucha empire exploited workers for years

Kombucha has treated George Thomas Dave well.

But Dave’s kombucha factory treated workers terribly for years, according to a new ruling in a long-running lawsuit against his company, GT’s Living Foods.

Dave started selling kombucha as a teenager in the 1990s, personally delivering bottles he brewed in his parents’ Bel-Air home to Erewhon Market, and GT’s Living Foods remains the leading company in the market. Today, candy-colored bottles of GT’s drinks, including the popular Synergy brand, line the shelves at Walmart, CVS, Whole Foods and practically every other major retailer in the nation.

As the owner of GT’s — which sells about $275 million of the fermented tea drink and other beverages each year — Dave has become a billionaire, according to Forbes estimates. This year he bought a $14-million hilltop estate just a few streets away from the two-home compound he already owned in Beverly Hills.

All along, he’s insisted that good vibes and a positive attitude have been the secret to his success.

“People’s energy has an influence on the quality of the kombucha,” Dave told The Times in 2008, along with an anecdote he’s repeated multiple times in the 15 years since: He contended that the dark energy surrounding one early employee who was “suffering from depression” and then died of a heart attack caused the kombucha to go bad.

“As silly as it sounds, because of its living-life-force qualities, the kombucha is sensitive to the energy that surrounds it,” Dave reiterated in 2015. Each bottle of his brew says right on the label: Made with “100% pure love!!!”

But according to a ruling filed last week in Los Angeles County Superior Court, Dave’s kombucha company subjected a number of workers to “deplorable and abusive and disturbing working conditions” in one of its factories in Vernon, just south of downtown Los Angeles, between 2010 and 2014.

The judge in the case, William Highberger, found that the company hired undocumented workers knowing that they could be “intimidated and abused,” that it required workers to clock 12- to 14-hour shifts without adequate breaks or overtime pay and that Dave himself, who testified in his own defense, “demonstrated a total absence of credibility” by contradicting himself in court.

Simon Rojas, one of the plaintiffs in the case who worked in the factory, said he was “very happy” with the ruling. “I want all of this to come out into the light because I know other companies are doing similar things. I want people to know that you don’t have to keep silent — if you’re exploited, you can speak up.”

Dave, for his part, said in a statement to The Times that he was “saddened” by the ruling. “Words such as ‘deplorable,’ ‘abusive’ and ‘disturbing working conditions’ are contrary to the standards I set for my Company since I began in 1995,” he wrote.

Responding to the judge’s assertion that he was not a credible witness, Dave wrote in his statement, “I did my best to speak truthfully, accurately, and sincerely. It is important to recognize that this case is over ten years old. Therefore, it can be difficult to specifically remember every detail, date and event.”

The ruling marks a milestone in a consolidated lawsuit that began a decade ago. In it, the court awarded more than $450,000 in restitution to 11 workers at one of Dave’s kombucha factories under California’s unfair competition laws, with some awarded nearly $59,000 in unpaid back wages. One worker, Arcemio Garay, was awarded a little more than $180,000, in part because the court found that the company wrongfully pocketed wages garnished from his paycheck for a personal debt.

This suit is only the first phase of a number of linked lawsuits alleging that GT’s Living Foods and its associated firms violated California labor laws. The violations have affected thousands of employees in the last decade, the lawsuits allege.

In testimony and in interviews with The Times, workers described the abuse and exploitation they experienced at the factory.

In the earliest period covered by the suit, workers were expected to line up outside the doors 15 minutes before their shifts began between 4 and 6 a.m. and were terminated if they were late, according to the ruling. Then, as they entered the facility, their names were checked off a list on a clipboard.

Inside, the job required boiling tea, transporting large jugs of liquid and working without adequate breaks for more than 10 hours per day, according to the ruling. Some workers testified that their workday often stretched to 12 or 14 hours.

Every two weeks, the company would ask the workers — some of whom the court found to be illiterate — to sign a time sheet indicating that they worked eight-hour days and released the employer “for any future claims on this pay period.” Occasionally, workers would be paid in cash for their overtime work, but the court found the time sheets to be inadequate, the release to be illegal, and ultimately that “equity justifies disregarding the cash payments” because there was no way to determine whether the cash was enough to cover the hours worked.

Rojas testified that the tea-brewing areas of the factory were so hot that workers’ sweat would fall into the tanks of brewing tea. He also said supervisors enforced strict control of breaks, when they were granted, rushing workers out of the bathroom if they took too long.

Another worker, Amancio Palacios, told The Times that after he sued the company in 2013, his supervisors used the temperature gradients of the plant to punish him. First, Palacios said, he would work in the tea-brewing area of the factory, where he would stack up buckets of brewing kombucha onto pallets, and would end up “drenched with sweat.” Then, he said, supervisors would send him to the refrigerated containers where finished products were kept. “My sweaty clothes would turn ice cold,” Palacios said.

Dave disputed both workers’ accounts, writing in a statement that cleanliness is “absolutely essential” in his company’s production facilities and that the brew vessels have lids to keep them protected from outside contaminants. He added that “no evidence of retaliation of any kind was ever proven.”

In court, Dave testified that he believed the case to be frivolous. “Unfortunately, in this current state of the world we live in,” Dave said, lawsuits “just happen if you have any smell of success around you. … That is the cross that I bear.”

On the stand, he also repeated the story of the employee with negative energy that damaged his kombucha: He described how one of his first managers, in the early 2000s, died of a heart attack a week after confiding in Dave that his wife had been cheating on him and that he planned to confront her.

“The reason why this is important,” Dave testified, is that every batch the manager touched during this period “all turned to mold.”

“That was my first indication that I can never take the nature of my product for granted,” Dave said. “It’s truly a living, breathing, empathetic, sensitive living food, which is why it keeps me honest with how we behave as a corporation.”

When the attorney for the plaintiffs asked Dave if, given this philosophy, he intended to create an abusive work environment, Dave said he strove for the opposite and learned early on that workers want “kindness and compassion and respect.”

“If you give that to them, especially in the Latin community, you are immediately a family member,” Dave testified. “And they will do things that they wouldn’t ordinarily do because out of the kindness of their heart or because of this connection that you have established with them.”

Palacios told The Times that working at the GT’s Living Foods plant was “the worst experience of my life.”

Due to his precarious financial situation — and the fact that the job left him without time or energy to apply elsewhere — he kept working under the harsh conditions. “That place took a year of my life and it just threw it in the trash,” Palacios said. “For all the mistreatment I got, there were days I wanted to cry, but I had to take it because I had no other choice.”

Sergio Lopez, another plaintiff in the case, told The Times that the kombucha factory was his first job after migrating to the United States. The job gave him the impression that this country “was an ugly place to work.”

Dave, in his statement to The Times, pointed out that his company won a separate case brought by workers with similar claims in recent years and that the plaintiffs’ lawyers, with the firm Hennig Kramer Ruiz & Singh, had failed to certify the current case as a class action.

Dave described himself as a victim of harassment. “Small family-owned businesses like mine are under attack on a regular basis by unsubstantiated claims/lawsuits that are truly disguised extortion,” Dave wrote in his statement to The Times. “I believe being the son of an attorney and witnessing my Father defend countless cases, I developed the perspective that it’s better to sometimes fight for what you believe in than to succumb to financial threats and legal bullying.”

Judge Highberger wrote in the court’s ruling last week that Dave “lacked any credibility and did not provide truthful testimony on the witness stand.” Highberger expressed his opinion of Dave’s sincerity more forcefully during the trial proceedings earlier this year.

“I, frankly, found that Mr. Dave lied through his teeth and is not in any way, shape, or form credible,” the judge said to one of the lawyers defending GT’s Living Foods. “And if he appears in front of a jury, I’ll tell them not to believe him.”

The next phase of the trial will cover alleged labor code violations affecting the approximately 3,600 workers who have passed through the kombucha factory’s doors since 2012. It has yet to be scheduled. The plaintiffs will not receive their awards until the full case closes.

Business

Elon Musk, Mark Zuckerberg and Jeff Bezos to Attend Trump’s Inauguration

Published

4 hours ago

January 15, 2025

Press Room

Elon Musk, Mark Zuckerberg and Jeff Bezos to Attend Trump’s Inauguration

Bezos, Zuckerberg and Coke at the inauguration

Corporate America had already raced to donate big sums to Donald Trump’s record-breaking inaugural fund. Now some of its leaders appear eager to jockey for prominent positions at the inauguration next week.

It’s a new reminder that for some of the nation’s biggest businesses, forging close ties to a president-elect who is promising hard-hitting policies like tariffs is a priority this time around.

Jeff Bezos and Mark Zuckerberg are expected to be on the inauguration dais, according to NBC News, alongside Elon Musk and several cabinet picks.

The presence of Musk isn’t a surprise, given the Tesla chief’s significant support of and huge influence over Trump. But the other tech moguls have only more recently been seen as supporters of the administration. (Indeed, Bezos frequently sparred with Trump during his first presidential term.)

It’s the latest effort by Bezos and Zuckerberg to burnish their Trump credentials. At the DealBook Summit in December, Bezos — whose Amazon has faced scrutiny under the Biden administration and whose Blue Origin is hoping to win government rocket contracts — said that he was “very hopeful” about Trump’s efforts to reduce regulation.

And Zuckerberg recently announced significant changes to Meta’s content moderation policy, including relaxing restrictions on speech seen as protecting groups including L.G.B.T.Q. people that won praise from Trump and other conservatives. On the inauguration front, Zuckerberg is also co-hosting a reception alongside the longtime Trump backers Miriam Adelson, Tilman Fertitta and Todd Ricketts.

Both tech moguls have visited Mar-a-Lago since the election, with Zuckerberg having done so more than once.

Coca-Cola took a different tack. The drinks giant’s C.E.O., James Quincey, gave Trump what an aide called the “first ever Presidential Commemorative Inaugural Diet Coke bottle.”

More broadly, business leaders want a piece of the inauguration action. The Times previously reported that the Trump inaugural fund had surpassed $170 million, a record, and that even major donors have been wait-listed for events.

Others are throwing unofficial events around Washington, including an “Inaugural Crypto Ball” that will feature Snoop Dogg, with tickets starting at $5,000, The Wall Street Journal reports.

It’s a reminder that C.E.O.s are reading the room, and preparing their companies for a president who has proposed creating an “External Revenue Service” to oversee what he has promised will be wide-ranging tariffs.

David Urban, a longtime Trump adviser who’s hosting a pre-inauguration event, told The Journal, “This is the world order, and if we’re going to succeed, we need to get with the world order.”

In other Trump news: The president-elect is expected to appear via videoconference at the World Economic Forum in Davos, Switzerland, which starts on Inauguration Day, according to Semafor.

HERE’S WHAT’S HAPPENING

Investors brace for the latest inflation data. The Consumer Price Index report, due out at 8:30 a.m. Eastern, is expected to show that inflation ticked up last month, most likely because of climbing food and fuel costs. Global bond markets have been rattled as slow progress on slowing inflation has prompted the Fed to slash its forecast for interest rate cuts.

More Trump cabinet picks will appear before the Senate on Wednesday. Senator Marco Rubio of Florida, the choice for secretary of state, is expected to field questions about his views on the Middle East, Ukraine and China, but is expected to be confirmed. Russell Vought, the pick to run the Office of Management and Budget, will most likely be asked about his advocacy for drastically shrinking the federal government, a key Trump objective. And Sean Duffy, the Fox Business host chosen to lead the Transportation Department, will probably face questions on how he would oversee matters including aviation safety and autonomous vehicles, the latter of which is a priority for Elon Musk.

Meta plans to lay off another 5 percent of its employees. Mark Zuckerberg, the tech giant’s C.E.O., told staff members to prepare for “extensive performance-based cuts” as the company braces for “an intense year.” The social media giant faces intense competition in the race to commercialize artificial intelligence.

A new bill would give TikTok a reprieve from a ban in the United States. Senator Ed Markey, Democrat of Massachusetts, said he planned to introduce the Extend the TikTok Deadline Act, which would give the video platform 270 additional days to be divested from its Chinese parent, ByteDance before being blacklisted. It’s the latest effort to buy TikTok time, as the app faces a Jan. 19 deadline set by a law; President-elect Donald Trump has opposed the potential ban as well.

A question of succession

JPMorgan Chase and BlackRock, the giant money manager, just reported earnings. (In short: Both handily beat analyst expectations.)

But the Wall Street giants are likely to face questioning on a particular issue on Wednesday: Which top lieutenants are in line to replace their larger-than-life C.E.O.s, Jamie Dimon and Larry Fink.

Who’s out:

Daniel Pinto, who had long been Dimon’s right-hand man, said he would officially drop his responsibilities as JPMorgan’s C.O.O. in June and retire at the end of 2026. Jenn Piepszak, the co-C.E.O. of the company’s core commercial and investment bank, has become C.O.O.
And Mark Wiedman, the head of BlackRock’s global client business and a top contender to succeed Fink, is planning to leave, according to news reports.

What Wall Street is gossiping about JPMorgan: Even in taking the C.O.O. role, JPMorgan said that Piepszak wasn’t interested in succeeding Dimon “at this time.” DealBook hears that while she genuinely appears not to want to pursue the top job, the phrasing covers her in case she changes her mind.

For now, that means the most likely candidates for the top spot are Marianne Lake, the company’s head of consumer and community banking; Troy Rohrbaugh, the other co-head of the commercial and investment bank; and Doug Petno, a co-head of global banking.

The buzz around BlackRock: Wiedman reportedly didn’t want to keep waiting to succeed Fink and is expected to seek a C.E.O. position elsewhere. (So sudden was his departure that he’s forfeiting about $8 million worth of stock options and, according to The Wall Street Journal, he doesn’t have another job lined up yet.)

Fink said on CNBC on Wednesday that Wiedman’s departure had been in the works for some time, with the executive having expressed a desire to leave about six months ago.

Other candidates to take over for Fink include Martin Small, BlackRock’s C.F.O.; Rob Goldstein, the firm’s C.O.O.; and Rachel Lord, the head of international.

But Dimon and Fink aren’t going anywhere just yet. Dimon, 68, said only last year that he might not be in the role in five years. And Fink, 72, said in July that he was working on succession planning: “When I do believe the next generation is ready, I’m out.”

The S.E.C. gets in a final shot at Musk

Another battle between Elon Musk and the S.E.C. erupted on Tuesday, with the agency suing the tech mogul over his 2022 purchase of Twitter.

It’s unclear what happens to the lawsuit once President-elect Donald Trump, who counts Musk as a close ally, takes office. But the agency’s reputation as an independent watchdog may be at stake.

A recap: The S.E.C. accused Musk of violating securities laws in his $44 billion acquisition of the social media company.

The agency said that Musk had failed to disclose his Twitter ownership stake for a pivotal 11-day stretch before revealing his intentions to purchase the company. That breach allowed him to buy up at least $150 million worth of Twitter shares at a lower price — to the detriment of existing shareholders, the agency argues.

The S.E.C. isn’t just seeking to fine Musk. It wants him to pay back the windfall. “That’s unusual,” Ann Lipton, a professor at Tulane Law School, told DealBook.

Alex Spiro, Musk’s lawyer, called the latest action a “sham” and accused the agency of waging a “multiyear campaign of harassment” against him.

The showdown sets up a tough question for the S.E.C. Will Paul Atkins, the president-elect’s widely respected pick to lead the agency, drop the case? Such a move could call the bedrock principle of S.E.C. independence into question.

Jay Clayton, who led the agency during Trump’s first term, earned the respect of the business community for running it in a largely drama-free manner. It was under Clayton that the S.E.C. sued Musk over his statements about taking Tesla private.

Musk, who is set to become Trump’s cost-cutting czar and is expected to have office space in the White House complex, has called for the “comprehensive overhaul” of agencies like the S.E.C. The billionaire said he would also like to see “punitive action against those individuals who have abused their regulatory power for personal and political gain.”

In related news: The Consumer Financial Protection Bureau sued Capital One, accusing it of cheating its depositors out of $2 billion in interest payments.

THE SPEED READ

Deals

DAZN, the streaming network backed by the billionaire businessman Len Blavatnik, is closing in on funding from Saudi Arabia’s sovereign wealth fund as the kingdom continues to expand its sports footprint. (NYT)
The Justice Department sued KKR, accusing the investment giant of withholding information during government reviews for several of its deals. KKR filed a countersuit. (Bloomberg)
OpenAI added Adebayo Ogunlesi, the billionaire co-founder of the infrastructure investment firm Global Infrastructure Partners, to its board. (FT)

Politics and policy

Best of the rest

We’d like your feedback! Please email thoughts and suggestions to dealbook@nytimes.com.

Business

For uninsured fire victims, the Small Business Administration offers a rare lifeline

Published

4 hours ago

January 15, 2025

Press Room

For uninsured fire victims, the Small Business Administration offers a rare lifeline

As wildfires continue to burn around Southern California, thousands of business owners, homeowners and renters are confronting the daunting challenge of rebuilding from the ashes. For some number of them, the road ahead will be all the more difficult because they didn’t have any or enough insurance to cover their losses. For them, the U.S. Small Business Administration is a possible lifeline.

The SBA, which offers emergency loans to businesses, homeowners, renters and nonprofits, is among the few relief options for those who don’t have insurance or are underinsured. Uninsured Angelenos can also apply for disaster assistance through the Federal Emergency Management Agency, or FEMA.

The current wildfires are ravaging a state that was already in the midst of a home insurance crisis. Thousands of homeowners have lost their insurance in recent years as providers pull out of fire-prone areas and jack up their prices in the face of rising risk.

“For those who are not going to get that insurance payout, this is available,” Small Business Administration head Isabella Casillas Guzman said in an interview during a recent trip to the fire areas. “The loans are intended to fill gaps, and that is very broad.”

About one-third of businesses don’t have insurance and three-quarters are underinsured, Guzman said.

“There will be residual effects around the whole community,” she said. “Insurance will not cover this disaster.”

Businesses, nonprofits and small agricultural cooperatives can apply for an economic injury loan or a physical damage loan through SBA. Homeowners are eligible for physical damage loans. Economic injury loans are intended to help businesses meet ordinary financial demands, while physical damage loans provide funds for repairs and restoration. People can apply online and loans must be repaid within 30 years.

Renters can receive up to $100,000 in assistance, homeowners up to $500,000 and businesses up to $2 million, according to Guzman. Homeowners and renters who cannot get access to credit elsewhere can qualify for loans with a interest rate of 2.5%. The SBA determines an applicant has no credit available elsewhere if they do not have other funds to pay for disaster recovery and cannot borrow from nongovernment sources.

Interest rates for homeowners and renters who do have access to credit elsewhere are just over 5%. Loans for businesses could come with interest rates of 4% or 8% depending on whether the business has other credit options.

An applicant must show they are able to repay their loan and have a credit history acceptable to the SBA in order to be approved. The loans became available following President Biden’s declaration of a major disaster in California.

“We’ve already received hundreds of applications from individuals and businesses interested in exploring additional support,” Guzman said. “We know the economic disruption may not be contained to the footprint of any evacuation zones or power outages.”

People who don’t have insurance or whose insurance doesn’t cover the entirety of their losses are eligible for loans, Guzman said. While many will use the funds to start from scratch after losing their property to the fires, businesses that are still standing can also apply for support to cover lost revenue.

Guzman was not able to estimate the total value of loans they expect to offer in California but said the organization is on solid financial footing after temporarily running out of funds in October.

“Funding has been replenished by Congress, and we expect to be able to coordinate closely with Congress,” Guzman said. “We’re fully funded and in a good position to provide support.”

Business

Cookies, Cocktails and Mushrooms on the Menu as Justices Hear Bank Fraud Case

Published

12 hours ago

January 15, 2025

Press Room

Cookies, Cocktails and Mushrooms on the Menu as Justices Hear Bank Fraud Case

In a lively Supreme Court argument on Tuesday that included references to cookies, cocktails and toxic mushrooms, the justices tried to find the line between misleading statements and outright lies in the case of a Chicago politician convicted of making false statements to bank regulators.

The case concerned Patrick Daley Thompson, a former Chicago alderman who is the grandson of one former mayor, Richard J. Daley, and the nephew of another, Richard M. Daley. He conceded that he had misled the regulators but said his statements fell short of the outright falsehoods he said were required to make them criminal.

The justices peppered the lawyers with colorful questions that tried to tease out the difference between false and misleading statements.

Chief Justice John G. Roberts Jr. asked whether a motorist pulled over on suspicion of driving while impaired said something false by stating that he had had one cocktail while omitting that he had also drunk four glasses of wine.

Caroline A. Flynn, a lawyer for the federal government, said that a jury could find the statement to be false because “the officer was asking for a complete account of how much the person had had to drink.”

Justice Ketanji Brown Jackson asked about a child who admitted to eating three cookies when she had consumed 10.

Ms. Flynn said context mattered.

“If the mom had said, ‘Did you eat all the cookies,’ or ‘how many cookies did you eat,’ and the child says, ‘I ate three cookies’ when she ate 10, that’s a false statement,” Ms. Flynn said. “But, if the mom says, ‘Did you eat any cookies,’ and the child says three, that’s not an understatement in response to a specific numerical inquiry.”

Justice Sonia Sotomayor asked whether it was false to label toxic mushrooms as “a hundred percent natural.” Ms. Flynn did not give a direct response.

The case before the court, Thompson v. United States, No. 23-1095, started when Mr. Thompson took out three loans from Washington Federal Bank for Savings between 2011 and 2014. He used the first, for $110,000, to finance a law firm. He used the next loan, for $20,000, to pay a tax bill. He used the third, for $89,000, to repay a debt to another bank.

He made a single payment on the loans, for $390 in 2012. The bank, which did not press him for further payments, went under in 2017.

When the Federal Deposit Insurance Corporation and a loan servicer it had hired sought repayment of the loans plus interest, amounting to about $270,000, Mr. Thompson told them he had borrowed $110,000, which was true in a narrow sense but incomplete.

After negotiations, Mr. Thompson in 2018 paid back the principal but not the interest. More than two years later, federal prosecutors charged him with violating a law making it a crime to give “any false statement or report” to influence the F.D.I.C.

He was convicted and ordered to repay the interest, amounting to about $50,000. He served four months in prison.

Chris C. Gair, a lawyer for Mr. Thompson, said his client’s statements were accurate in context, an assertion that met with skepticism. Justice Elena Kagan noted that the jury had found the statements were false and that a ruling in Mr. Thompson’s favor would require a court to rule that no reasonable juror could have come to that conclusion.

Justices Neil M. Gorsuch and Brett M. Kavanaugh said that issue was not before the court, which had agreed to decide the legal question of whether the federal law, as a general matter, covered misleading statements. Lower courts, they said, could decide whether Mr. Thompson had been properly convicted.

Justice Samuel A. Alito Jr. asked for an example of a misleading statement that was not false. Mr. Gair, who was presenting his first Supreme Court argument, responded by talking about himself.

“If I go back and change my website and say ‘40 years of litigation experience’ and then in bold caps say ‘Supreme Court advocate,’” he said, “that would be, after today, a true statement. It would be misleading to anybody who was thinking about whether to hire me.”

Justice Alito said such a statement was, at most, mildly misleading. But Justice Kagan was impressed.

“Well, it is, though, the humblest answer I’ve ever heard from the Supreme Court podium,” she said, to laughter. “So good show on that one.”