Prison Privatisation Report
International
No. 47,
May 2002
Published by the Public
Services International Research Unit (PSIRU),
www.psiru.org/justice
This publication is
supported by a grant from the Foundation Open Society Institute.
IN THIS ISSUE
Speculation about Wackenhut Corrections’ future ownership
The $573m acquisition of Wackenhut
Corrections Corporation’s (WCC) parent company, the Florida-based Wackenhut Corporation, by rival security firm Group 4 Falck of Copenhagen has led to lawsuits in the
Following eight months of
negotiations, on
Wackenhut’s founder, former FBI agent
George Wackenhut retires with a payout of over $124m
for his shares. His son Richard Wackenhut receives
$31.2m and will do consulting work for Group 4 Falck.
Other executives will also receive substantial sums if they leave the company
as a result of the merger. For example, Wackenhut’s
chief financial officer will receive at least $13m including $0.5m for his work
on the merger. Wackenhut’s board of directors will
receive $4.2m. Meanwhile, around 100 Wackenhut
corporate office staff based in
Soon after the proposed
acquisition was made public in March 2002 some Wackenhut
shareholders filed lawsuits in order to prevent it being completed. They
alleged that the terms favoured the Wackenhut family
and other executives at the expense of Wackenhut’s
public shareholders. That ploy failed in April when a
Prison business : Group 4 to
dispose of WCC
Group 4 Falck
has acquired the 57 per cent of WCC that was owned by the Wackenhut
Corporation. The rest of WCC’s stock is traded on the
However, in March, Group 4 Falck stated that once the acquisition was completed it
would sell WCC. Group 4 Falck’s chief operating officer, Jim Harrower, said that as
the operating and financial model in the US private corrections market is
materially different from that in the regions where Group 4 subsidiary Global
Solutions Ltd (GSL) operates, “Group 4 Falck A/S does not intend to remain a majority shareholder
in Wackenhut Corrections Corp Inc.”
Mr Harrower added: “Wackenhut Corrections Corporation will be accounted for as
a discontinued operation in the financial statements of Group 4 Falck A/S. This is in line with GSL’s
strategy to achieve a broad business base in the areas of PFI [private finance
initiative] and PPP [public private partnerships].”
The governments of
But on 9 May, the day after the merger was
completed, the British government’s
secretary of state for trade and industry, Patricia Hewitt, announced that her department had referred
the merger to the competition commission. She had been advised “that this
acquisition may raise competition concerns in the markets for the provision of
transportation and custodial services. The transaction would bring together the
leading suppliers of these services in the
The full reasons for the
referral to the competition
commission have not been
published. Even if they do make it into the public domain anything deemed
commercial in confidence will be kept back.
But what obviously concerns
the government is that WCC - through its joint venture with Serco
plc, known as Premier Custodial Group Ltd - and Group 4, through its Global
Solutions Ltd
subsidiary, have the majority of the contracts for private
prisons, immigration detention centres, secure training centres and prisoner
transportation. Premier also provides electronic monitoring services. Group 4
owning 50 per cent of Premier would make a mockery of the government’s desire
to maintain a competitive market amongst an already narrow range of companies.
Responding to the government’s
action, a
spokesperson for Group 4 Falck told PPRI that
he “simply reiterated the company’s intention” to dispose of WCC’s business.
Wackenhut ensures competition
The terms of the merger also
includes complex measures to ensure that global competition between Group 4 and
WCC’s international interests is not affected. In
March, George Zoley, WCC’s vice chairman and
chief executive officer, said that his company “has secured sufficient
safeguards to guarantee unhampered global competition in a concerted effort to
protect the independence of each company.”
According to a letter sent to
government clients and seen by PPRI, following the merger WCC will have
a nine member board of directors, the majority of whom will be independent. Two
Group 4 Falck members will be on the board but none
will be from Global Solutions Ltd. Nor will Group 4 Falck
representatives sit on the boards of any WCC subsidiary or joint venture
outside the
Remarkably, the letter also
states that there will be no sharing of financial contractual or confidential
information between WCC and GSL in the
Who will buy?
Concerns for the competition
commission doubtless include how long Group 4 Falck’s disposal of WCC’s
For example, a bid from French
multinational Sodexho to buy WCC might also pose a
threat to competition in the
Of the other American prison
companies only Utah-based Management & Training Corporation has international operations but none
so far in the
Another likely option would be
for WCC’s directors to buy the entire business back
from Group 4, a possibility that George Zoley raised
following a shareholders’ meeting in May. The terms of the acquisition would
appear to pave the way for that eventuality. An industry source who did not
wish to be identified told PPRI that negotiations for buying back the
Jim McDonald, a leading
corrections industry analyst with First Analysis of Chicago believes that Group
4 will dispose of Wackenhut’s corrections business
piecemeal over the next two years. Nevertheless, he told PPRI that he regards
the situation that has arisen with Serco plc in the
The Serco twist
Wackenhut Corrections Corporation (WCC)
and British facilities management company Serco have been
But Serco believes that it has a right to acquire WCC’s’ 50 percent interest in the
Legal issues aside, acquiring WCC’s
Citing commercial
confidentiality Serco would not be drawn on the
details of their claim against Wackenhut. A
spokesperson told PPRI that “we believe that the contractual position is
clear. We are currently deciding whether to exercise our rights,” he said.
PPRI has seen the original
shareholders agreement dated
Government permission required
There is yet a further complication. Prison
contractors in
The home office will not say
whether its approval has been granted. “We wouldn’t comment on something that affects a commercial
company. It’s a matter for Wackenhut and Group 4,”
said a spokesperson.
But given the government’s
commitment to the private sector and its likely unwillingness to find the money
to buy out numerous
contracts, the termination option seems remote.
The
Wackenhut set out its position on the
dispute with Serco in a statement on 9 May: “We are
vigorously pursuing a positive outcome of the
The competition commission is
scheduled to report its findings to the department of trade and industry by
Public sector managing
Premier’s Ashfield
The prison service has taken the unprecedented step of
removing the company’s prison director and installing public sector management at the Premier
Prisons-run Ashfield, a prison for young offenders near Bristol, south west
England.
The decision was taken on
Ashfield was privately
financed, designed and built and has been run by Premier since the prison
opened in November 1999. The facility holds up to 400 sentenced juveniles and
young offenders aged between 15 and 21.
The director general of the
prison service, Martin Narey, took the decision to
take over the management on behalf of the secretary of state. Mr Narey said: “I have recently made three unannounced visits
to Ashfield after repeated concerns were raised to me by the prison service
monitors based at the prison and by senior staff who oversee the juvenile
estate. What I found has concerned me greatly and I have decided to act swiftly
to bring in a new governor.
“I found that standards of
care and control of prisoners were not as high as I would expect them to be. I
considered that the prison was unsafe for both staff and the young people
detained there and that urgent action was required. I informed Premier
Custodial Services of my decision today and I will continue to monitor the
situation at Ashfield very closely. My aim is that the prison should be made
safe and constructive and that in due course we are able to hand management
back to a director appointed by Premier.”
Section 88 (5) of the Criminal
Justice Act 1991 allows the prison service, on the authority of the secretary
of state, to intervene to appoint a governor if it is considered that the
director of the prison has lost or is likely to lose effective control of the
prison. According to the prison service, the management team has been brought
in on a temporary basis. No decision has been taken on how long this
arrangement will continue. The contract between the prison service and Premier
remains in place.
nAshfield has been plagued with staffing
shortages and other problems since it opened.
In December 2001 the company was issued with an improvement notice for
non-compliance with its contract.
According to government figures, Ashfield had the most reported
incidents of self harm for the 15-17 year old age group of any juvenile
establishment for financial years 2000-2001 and 2001-2002 up to
As at
Premier reduces staffing at
Doncaster
After managing
Insurers demand higher premiums for
prisons
UK Detention Services Ltd (UKDS) has been unable to
sign contracts to finance, design, build and operate two prisons in
“The insurance companies have
done a runner and don’t want to insure prisons any more. There is a bit of a
problem which we are now wrestling with,” said David Kent, head of the prison service’s contracts and
competition group (CCG). Mr
UKDS, a subsidiary of French
multinational Sodexho, should have signed the contracts in
March and April. The prison at Ashford, in south east
The reluctance of the
insurance industry to cover new prisons stems partly from the post-
Another incident that might
have a bearing occurred on 21 February 2002 when nine detainees escaped from
UKDS-run Harmondsworth immigration detention centre
near Heathrow airport. The detainees smashed a window, climbed out and used a
rope ladder to climb a wire-mesh fence.
As a result of the fire at Yarl’s Wood, Group 4 has only been able to obtain minimal
coverage for two other immigration facilities that it operates for the
government. Although Yarl’s Wood was not commissioned
under the government’s controversial private finance initiative (PFI),
transferring risk such as insurance cover to the private sector is a central
plank of the claimed benefits of PFI. If the insurance industry maintains its
stance, the
government may have to once again become the insurer of last resort.
The government is the insurer
for the first PFI prison contract that was signed in
Mr
The Scottish Executive is proposing to close Peterhead
prison in Aberdeenshire and Low Moss, near
Following a review of the prison
estate, the Executive issued a consultation document in March 2002 setting out
its proposals which focus on providing enough places for the prisoner
population - projected to increase from the current 6,300 to 7,200 - and requiring 3,300 new prisoner
places within ten years; ending the practice of slopping out; and finding the
option which represents best value for money. According to the Executive no
political decision has been made and there is consultation on the findings
until
Much of the findings were
based on comparative costings commissioned from
consultants PricewaterhouseCoopers (PWC). The firm concluded that taxpayers
would save £700m over 25 years if the three new 700 bed prisons were privately
financed, designed, built and operated rather than built and run by the public
sector. PWC also rejected the option of private
build/public operate. Despite evidence to the contrary, the Scottish Executive
also stated that “there is ample evidence, both from
Announcing the proposals,
deputy first minister Jim Wallace said: “The difference between the wholly
private sector option and the public sector is £700m. No responsible
administration can ignore such a difference. We should remember that if were to
choose the public sector option, there would be £700m less to spend on other
public services.”
The proposals have come under
fire from members of the Scottish parliament (MSPs)
of all parties as well as the Prison Officers Association and the Scottish
Trades Union Congress. One Scottish Nationalist MSP, Stewart
On
The Scottish Executive’s Consultation on the Future of
the Scottish Prison Estate;
www.scotland.gov.uk/consultation/justice/spec-00.asp
Academics criticise government
plans
An independent report from Christine Cooper and Phil
Taylor of the universities of Stratchclyde and
n the Scottish Executive is failing to make clear to the
Scottish public how these proposals compare internationally. If these proposals for three 700 place
private build/private operate prisons are implemented,
n the Scottish Executive has wilfully ignored the profound
and long-established ethical, moral and humanitarian case against prison
privatisation;
n the PricewaterhouseCoopers (PwC) report which underpins the Scottish Executive’s
proposals is not an independent report and is based on unsound methodologies;
n the PwC report, whilst failing
to consider the fundamental question of
rehabilitation, does not even make a successful case for privatisation
based on costs alone;
n the experience of
n the Scottish Executive proposals attack both the
integrity of the national SPS service and the Prison Officers Association as
they seek to introduce inferior pay and conditions;
n one parent company behind Premier Prison Services (
The authors concluded that the Scottish Executive
should not pursue the privatisation option and HMP Kilmarnock should be
restored forthwith to the public sector.
Privatised Prisons and Detention
Centres in
Contact Phil Taylor, email:
philip.taylor@stir.ac.uk or Christine Cooper, email: c.cooper@strath.ac.uk
Third report on
Violent incidents between
prisoners at HMP Kilmarnock have almost doubled in the last year according to
the latest report by the chief inspector of prisons for
The prison opened in March
1999 and is run by Kilmarnock Prison Services Ltd, part of Premier Custodial
Group Ltd. The chief inspector made an unannounced inspection of the prison on
14 and 15 March 2002, his third in three years (see PPRI
# 44, 43, 40, 37 & 36).
The prison is designed to hold
between 500 and 506 male prisoners but the contract allows for a further 192
prisoner places. As at 14 march 2002, the population
was 545.
The chief inspector, Clive Fairweather,
expressed concerns for the contract between the Scottish prison Service
and the company, noting that it had been drawn up five or six years ago and is
“output based and influences standards and activities within the prison but,
though subject to constant review, its terms ... would seem to be relatively
inflexible. In addition, it was drawn up before many of the updated sentence
management arrangements, programmes to address offending behaviour and risk
assessment were developed in the rest of the prisons estate.”
He also noted that the
contract is centred on an industrial model which “could start to be at odds
with the focus of the rest of the Scottish Prison Service estate which has
started to pursue correctional excellence underpinned by the business
improvement model. This might leave
The chief inspector found that
staff attitudes and co-operation with prisoners were “quite excellent.” He also
noted that staff turnover had been reduced from 32 per cent to 14 per cent in
the last year. There was also
an “apparent drop” in mandatory drug testing figures from 23 per cent
to 15 per cent. However, the significant reduction in the annual rates of
positive tests was attributed to “previously inaccurate recordings.”
All areas of the prison were
relatively clean and conditions for prisoners were decent; the standards for remand
prisoner s compared favourably with the best found elsewhere in the SPS estate.
His main concerns were “much
as in previous inspections” centred around the lack of
quality opportunities available for prisoners to address their offending
behaviour. The drug strategy was also found to be “somewhat superficial and unco-ordinated.” Prisoners also criticised the sentence
management system, claiming that it was too superficial and lacked a proper
action plan. The chief inspector also found that the Personal Officer scheme
was not working effectively, largely due to a lack of continuity of staffing on
individual wings.
“More fundamentally, the
requirement to work meant that opportunities to take part in the various
programmes were tending to be segmented,” he noted. Other findings included:
n the prison was operating 13 staff under complement ...
which was adding considerable pressure to an already difficult staffing
situation (previously described by those at
n there had been a very high turnover of
nursing staff from the health centre and existing staff were struggling to
deliver what was required; the chief inspector judged that “the pressure on
nursing services ... to be serious in the light of what we have seen
and heard ...;”
n due to staff shortages and
the lack of a specific addictions nurse, no individual work with prisoners is
conducted during prescribed detoxification;
n the number of deaths in custody seemed to be on the
increase - possibly at a higher rate than elsewhere. There had been five deaths
since March 2001 whereas across all SOS establishments throughout the year
there had been a total of 16. However, the inspector also noted that many of
n since March 2001 there had been three apparent
suicides and a number of attempted suicides but the chief inspector was “told
the number of cases of self harm had been reducing (these had been described in
a previous report as being as high as 125);”
n custody officers claimed that staffing levels could,
at times, be dangerously low, especially in ‘A’ Wing and at weekends. There had
been two assaults on staff and a large number of less serious incidents over
the last year. “We sensed generally that staff seemed to be even more concerned
about safety than they had been a year ago ... examples were cited where it was
impossible to arrange relief cover for toilet breaks, meaning that prisoners were left unsupervised
- except by CCTV - during these
periods”;
n there had been 26 fires in the prison compared with
41 across the whole SPS estate;
n weekly earnings for prisoners had reduced from as
much as £45 per week to an average of around £18 per week (the Scottish public
sector average is £8); like some other SPS establishments “there appears to be
insufficient work to support the number of convicted prisoners”;
n given that prisoner custody officers account for a
substantial majority of staff within the establishment “it is difficult to see
how it can properly respond to the range of challenges presented by prisoners
if the staff responsible for their day to day management are not properly
trained and developed;”
n staff told the chief inspector that they were
concerned about low staffing levels particularly in the event of an incident
when there was the potential for a lack of back up; he was also told that it was impossible to arrange relief
cover for toilet breaks and prisoners were left unsupervised except by CCTV
during these periods;
n conditions of service for staff were reported
as being “poor”, with staff speaking about long shifts in the accommodation
blocks without appropriate breaks; there was also frustration over industrial
relations and little progress was made with management due to the need to
comply with the contract.
n in terms of social work, “areas of concern which have
been consistently raised since the first inspection still need resolution”;
n prisoners
described health care provision as atrocious; some complained that induction
and sentence management were well behind elsewhere in
In his report of a formal
inspection in March 2000, the chief inspector made 37 recommendations for
improvements. In this new report he assessed the progress that had been made.
He found that only four of the recommendations had been fully implemented;
seven had been partially implemented; but 26 had not been implemented.
The chief inspector concluded
that
HMP Kilmarnock, Follow-up inspection
- 14/15 March 2002, HM Prisons Inspectorate, Scottish Executive, Room M1/6, Saughton House, Broomhouse Drive,
Edinburgh, EH11 3XD, Scotland.
Justice 1 Commitee hearings
The Scottish Parliament’s
Justice 1 Committee has been holding hearings into the Scottish Executive’s
proposals for the future of the prison estate. On
Maureen Macmillan (deputy
convenor): The
committee has heard evidence that staff at
Phil Hornsby: I
receive few reports of concerns about the level of violence, but I receive
almost daily reports from staff that they are frightened about what might happen
because of the very low staffing levels.
Donald Gorrie (
Phil Hornsby: They
share that view. The staff tell me that there is not
enough time to do the job properly, because the number of staff is
insufficient.
The Convener:
Recently, the press contained a report - I will not quote it verbatim, because
I do not have a copy - that a nurse who had worked at
Phil Hornsby: Yes.
Recently, I became involved in an officer’s disciplinary case. A matter that
became apparent during that case was the lackadaisical administration of paracetamol. I pointed out to a director of the prison that
was a dangerous practice. Paracetamol is a dangerous
drug if large quantities are taken at once. There seemed to be a lack of
control over the administration of paracetamol.
The Convener: Where
was the paracetamol destined? I am trying to follow
what you are telling us.
Phil Hornsby: In the circumstance to which I
am referring, supplies of paracetamol were available
for staff to give to prisoners during the night. That meant that those tablets
were just pushed under the door on a piece of paper. The prisoner, therefore,
did not have our advantage of being able to read warnings on the bottle about
the dangers of paracetamol. In addition to that,
there was no control over, or record of, how many tablets had been
administered. I found that fact to be particularly disturbing.
The Convener: How
has the situation changed?
Phil Hornsby: I
am talking about something that has happened in the past two to three weeks. I
am not aware of steps having been taken to rectify that matter.
The Convener: That
is a matter that we would want to raise because the nurse who complained was
disparaged by the private prison service as someone who was just out of sorts -
if I can put it that way.
Michael Matheson (
Phil Hornsby: Yes,
I think that that procedure is common practice in private prisons. I do not
know why that should be the case.
The Convener: On
health, are any of your union members also members of the nursing service part
of
Phil Hornsby: Yes.
The Convener: I
am looking at Clive Fairweather's follow-up
inspection report of 14 and 15 March, which states:
“The problem of nurse
recruitment reflects the national shortage of nursing staff. The inability to
replace members of the nursing team with permanent staff has meant that the
health care manager has been forced to rely on agency and bank nurses to make
up the shortfall in numbers.”
The report goes on to say:
“In addition, agency or bank
nurses, even when they attend the prison regularly as replacements, cannot
provide the continuity which is essential for the proper management of probably
the most demanding population of patients with which any primary care medical
service is expected to serve.”
That sounds like a bad
situation. Can you comment on that report?
Phil Hornsby:
I could not disagree with the report. The nursing service is a vital part of
the prison. However, the nursing staff situation is, in many ways, similar to
the experiences that we have had with the general recruitment of staff in
Michael Matheson: I
want to move on to staffing levels and pay and conditions. Much has been said
in the media about the difference between staffing and pay and conditions in
private sector and those in public sector prisons. Can you comment on the
difference between the pay and conditions of staff at
Phil Hornsby:
Yes. The