A Tale of a Contaminator

Ira Rennert is an American billionaire industrialist. When you learn that someone is a billionaire, one of the first things you wonder is - "how they got so much money?” Were they exceptionally talented, creative, clever, or did they happen to know the right people? In the case of Ira Rennert, it’s a combination of all of the above, but not as one usually thinks.

Ira Rennert’s financial career is a bit like riding a roller coaster ride - a lot of wild ups and downs. Little is publicly known of his childhood other then being born in 1934 of immigrant parents and growing up in Brooklyn, New York. After graduating from Brooklyn College and receiving a Masters of Business Administration from New York University in 1956, he started his own securities firm in 1960. However, the NASD (National Association of Securities Dealers) revoked his license in 1964 after his brokerage firm was caught operating with insufficient funds twice.

This setback merely helped him step through the door into the world of private equity, which isn’t regulated, allowing him to operate more freely and recklessly with other people’s money. His new modus operand us went into effect: he would find a distressed company, on the verge of bankruptcy and buy it for just its assets, getting a bank to pay for the bulk of the equity, personally investing as little as possible. Then he would issue junk bonds against it to naïve investors, paying himself a huge one-time “dividend.” In this manner, he collected close to $350 million with his purchase of WCI Steel.

However, this did not happen overnight and not without a great deal of drama, trauma, and financial gymnastics. There were times when the bond holders could not be paid and they sued, and the time when the EPA filed a $900 million suit charging that Rennert’s magnesium company was negligent with toxic waste near Utah's Great Salt Lake. He also had a sticky problem with WCI Steel workers’ unpaid pension funds when he filed bankruptcy. In that case, he had to deal with the federal Pension Benefit Guaranty Corporation who was not enthusiastic to cover the millions in unpaid pensions while Rennert personally was building the largest private residence in the U.S..

Typically when an investor is in financial crisis, they sell. However, Rennert, who sold the original junk bonds to investors when his companies were doing well, bought back the same bonds at a fraction of their value when the companies were doing poorly and tittering on bankruptcy. Some say he purposely drove his companies into the ground to take advantage of panicked bondholders. Hence, over and over again, he increased his wealth and power, skirting the edges of the law, and earning himself the reputation as a "financial Houdini."

One of his triumphs was the purchase of the AM General, the maker of Humvee troop carriers and the gas guzzling Hummer, for $133 million. What could be a better company to own with the approaching tensions in the Middle East? He later sold 70% of the company for $930 million, another financial coup. (Man With Many Enemies, Forbes, 7/22/02 & NYT 2/3/06) Now, at age 73, he is the sole owner of a financial empire, the Renco Group, for which he receives multimillion dollars in fees annually, not to mention the profits.

Recently, a couple of Rennert’s problem children have been the Doe Run Company of Saint Louis, Missouri and its sister company in Peru, Doe Run Peru. Both of these companies are multi-metal smelters, “producing essential raw materials—lead, zinc, copper, gold and silver, that are needed for everyday life." Together they are North America’s largest integrated lead producer and the third largest total lead producer in the world. They claim to be "dedicated to environmentally responsible mineral and metal production," but are they?

In the U.S., environmental groups have been waging war against their negligent mining practices that have contaminated the soil, air and water, but even more devastating are the horrendous health hazards experienced by the employees and families living near the smelting plants. In Herculaneum, Missouri, Doe Run had to literally buy out and demolish over one hundred homes that were too contaminated to clean and make safely livable again. There are still dozens of lawsuits pending, and the potential of hefty fines to be paid for damages. And that still won’t return health to the people with lead in their bones or life to those who have died prematurely due to exposure of toxic emissions.

In Peru, the story is even sadder. Rennert has successfully outsourced much of his polluting business to a location that has fewer regulations, fewer health standards, a weaker court system, and an abundance of poor people who desperately need jobs. And such a bargain! Doe Run Peru's smelter in La Oroya creates almost four times as much revenue as the U.S. plant and spews 31 times as much lead into the air. The result? Over 99% of the town's 12,000 children have lead poisoning.

Exposure to lead is shown to cause anemia, high blood pressure, developmental delays, behavioral problems, decreased intelligence, central nervous system damage, and even death. For the second year in a row La Oroya has been named one of the top ten World's Worst Polluted Places, alongside such infamous catastrophes as Chernobyl.

The Peruvian government placed environmental mandates on the company to lower toxic emissions, but Doe Run succeeded in postponing these responsibilities “due to financial hardship,” even though a government sponsored study proved that almost $100 million in “commissions and consulting fees” was siphoned off to the U.S., enough to have paid for all the necessary environmental upgrades.

So what is Rennert doing to address these environmental issues now? The companies’ web sites are full of reports of decreased contamination, improved health, more education and help for the community, and perhaps these efforts assuage his guilt, if he has any.

But most experts dismiss Doe Run Peru's claims as they have a long record of twisting the facts while broadcasting a long list of their window dressing improvements. These improvements temporarily address the contamination symptoms, but neglect to address the root cause, which needs the most important, and expensive, of their promised environmental upgrades. It doesn't do much good to temporarily fix damages from pollution if the pollution is going to continue.

One can only guess what Rennert feels and thinks about his amassed wealth and the human cost it entails. He has never given an independent media interview, there are few photos of him, and he's not even listed on his own Renco Group web site. He has apparently worked hard to erase his personal history from would-be biographers.

We do know that Rennert loves ostentatious comfort. He now resides in a 29 bedroom, 39 bathroom home in the Hamptons on New York's Long Island, valued at $185 million. He hosted the former Israeli Prime Minister, Netanyahu frequently, and has another home in Israel where he and his wife financed the restoration of Western Wall Tunnels. He is active in the Fifth Avenue Synagogue of which he is chairman and was formerly the head of the Torah Ethics Project whose mission is to promote personal and business ethics. Curious hypocrisy there.

Rennert has been a strong contributor to scholarship funds at various eastern universities, and at Columbia and New York University he has endowed professorships in his name. And to top it off, the Rennerts donated more then one million dollars to the World Trade Center Memorial. Within his synagogue and high society circles, he and his wife perhaps have bought the power and respectability that he desires. Did it work?

Nationally and internationally, there are social, environmental, religious and political groups that want justice for the people and the land that such greed has damaged. There is no motive, political or otherwise to justify the diseased lives and countless deaths that have resulted from irresponsible mining and smelting practices. Rennert did not start the negligent practices at the smelters in Missouri or Peru, but he did continue them well into the present when there was more than enough information available to warn workers and the community at large of the dangers of lead poisoning. He chose not to act on this information, but instead to ignore it, better yet, to deny it.

Should one man be able to thrive at the expense of those with fewer options in life? Hopefully, the global community at large has not heard the end of this story.