Prison Privatisation Report International

During a briefing on the department of correctional services’ state of affairs, there was a discussion on the freezing of posts caused by the need to “afford other programmes”. This referred to the private prisons commissioned under the government’s Asset Procurement and Operational Partnership System (APOPS) which are costing half of the department of correctional services’ annual budget for the entire prison system. According to the committee minutes the following exchange took place:

The chair [Mr NB Mashimbye (ANC)] asked if it had been wise to do this. Someone obviously knew that this was a wrong decision, but went ahead with it.

Mr Tshivase [chief financial officer] agreed that this was not a correct decision and that treasury had advised against it. He said at the time he was a mere financial manager and took orders from the top.

The chair insisted that something illegal had gone down and someone knew what it was. He said he was not sure what but the DCS [department of correctional services] had some explaining to do. He said that this matter needed to be discussed in full with all the other members of the opposition present.

Mr Bloem [ANC] suggested that an urgent meeting be called with the minister present to discuss this issue.

Mr Mti [commissioner, department of correctional services] said that there was a presentation they needed to do on the APOPS. He said the decision to go to the APOPS was political. There had been political pressure on officials.

The Chair commented that South Africa was not a banana republic. There is a rule of law and no room for anarchy. If there is corruption, it will be exposed and the perpetrators dealt with accordingly. The issue needed to be looked at.

n Since 2001, a commission of inquiry headed by Judge Thabani Jali has been investigating alleged corruption within South Africa’s correctional services. One of the terms of reference is to inquire and report on alleged incidents of corruption and maladministration relating to the procurement of goods and services for the department of correctional services.

COSTA RICA

Confusion over MTC contract

The government of Costa Rica faces a legal challenge from the Defensoría de los Habitantes (Ombudsman) before the country’s first private prison contract can be agreed (see PPRI #49-46 & 42). While negotiations with Management & Training Corporation of Utah have been continuing, internal wrangling within the government has led to the sacking of the minister of justice, José Miguel Villalobos, who was opposed the private prison being commissioned.

The Ombudsman has filed a case with the Sala Constitucional - the court dealing with constitutional matters - claiming that contracting out correctional duties to a private company is unconstitutional.

In October, hundreds of civil servants and public sector prison staff held a demonstration in San José to protest against the private prison being commissioned. The prison staff union has since threatened strike action. Alternative proposals have been made to the government including the suggestion that building smaller units with a capacity of 200 prisoners each and run by the public sector would be more efficient and less costly.

MTC has been negotiating over a proposed prison at Pococi, with 800 medium and 400 maximum security prisoners. Mr Villalobos was opposed to the contract on the grounds that it was too expensive, with the proposed cost taking up at least 50 per cent of the ministry of justice’s entire annual budget. He also argued that the contract would commit the government to guaranteeing that the prison would always be at least 80 per cent full.

Pro-privatisers within the government have argued that by refusing to sign the contract Costa Rica would give negative signals to potential investors in the country and the region as a whole.

AUSTRALIA

Group 4's human rights policy questioned

Group 4's bid for the contract to run the Australian federal government’s immigration detention centres has been challenged on human rights grounds. The contract - for up to ten facilities - is the largest single immigration contract in the world (see PPRI #49, 46-44 & 42-36). Group 4 is also bidding against Australasian Correctional Management (ACM) which not only currently holds the contract but is also now owned by Group 4.

On 25 October 2002 the Brimbank Community Legal Centre in Victoria wrote to Mr Lars Norby Johansen, Group 4's chief executive officer, arguing that “if Group 4 is successful in its bid then it will become an instrumental actor in the violation of fundamental human rights of children and adults in immigration detention. If ACM is successful ... then a company that Group 4 holds a majority interest in ... will continue to participate and be instrumental in the knowing violation of children and adults in immigration detention.”

The centre’s action was prompted by recent events in Israel. In 2001 Group 4 bought a 50 per cent interest in Hashmira, a leading Israeli security company. Hashmira provides support to the Israeli military in settlements in occupied territories which have been deemed illegal by UN Security Council’s 1979 resolution 446 and which also contravene the fourth Geneva Convention. Following investigations by Danish and British newspapers into Hashmira’s activities, Group 4 agreed to an impartial legal analysis of its operations’ compliance with international law.

Group 4's position was reported in the Guardian, 9 October 2002. “Even if our investigation clearly indicates that our activities on the West Bank do not entail a breach of human rights, it is not enough for us to be legally in the clear. In some situations there are also other criteria, which we must take into consideration. And to avoid any doubt about whether Group 4 Falck respects international conventions and human rights we have decided to leave the West Bank.”

In its 16 page letter, the Brimbank Community Legal Centre commended Group 4's action in investigating the legal status of its operations in Israel. The letter did not, however, ask if Group 4 had investigated the legal aspects of Hashmira’s operations before buying into the company in 2001.

The letter reminded the company that the United Nations Human Rights Committee, the United Nations High Commissioner Human Rights Special Envoy and the Australian Human Rights and Equal Opportunity Commission had all found that Australia’s policy of mandatorily detaining all refugees and asylum seekers violates human rights law as it applies to adults and children in detention.

“It is a matter of settled international jurisprudence that Australia’s policy and practice ... constitutes a grave and continuing violation of international human rights law,” said the centre’s Charandev Singh. “If Group 4 intends to undertake its international business in compliance with international human rights law ... it must as a matter of urgency withdraw itself from the IDC [immigration detention centre] tender process. It must also require WCC and ACM to remove itself from the IDC tender and their ongoing role in the violation of fundamental human rights obligations owed to children in immigration detention in Australia.”

The letter continued: “The domestic and international reputation of Group 4 is very much at stake at a time when your acquisition and global repositioning activities are taking the company’s international profile and operations (and scrutiny thereof) to a level not experienced in the history of Group 4.”

Group 4 replies

Mr Anders Wallin, chair of Group 4 Falck’s corporate citizenship task force, responded to the Centre’s letter on 4 November 2002. He stated that “it is not appropriate that we should comment on the policy of the Australian government in respect of mandatory detention,” adding that the government has stated that its detention of immigrants is legal. He continued: “We totally refute the implication ... that if Group 4 Falck is successful in its bid ‘it will become an instrumental actor in the violation of human rights of children and adults in immigration detention.’ We have consistently stated and demonstrated through our commitment to the welfare of detainees and prisoners in our care in every country where we operate that Group 4 Falck respects international conventions and human rights.”

n ACM and Group 4 are also bidding against Management & Training Corporation (MTC). The Utah-based company has one prison contract in Australia but no experience of operating immigration detention centres. The federal government is expected to announce a preferred bidder by the end of November 2002.

Public interest versus commercial confidentiality

Australia’s human rights commissioner has rejected claims by Australasian Correctional Management (ACM) and the federal department for immigration, multicultural and indigenous affairs (DIMIA) that their evidence to a public inquiry should be kept confidential.

The inquiry, launched in November 2001, has been investigating the rights of children in Australia’s privately operated immigration detention centres. In July 2002, the commissioner issued notices to ACM and DIMIA to produce relevant documents for a public hearing in September. In August 2002, the commissioner issued a further notice to ACM. Both parties responded but DIMIA subsequently asked for “directions of confidentiality” and submitted a written brief. ACM made an oral submission. Both parties claimed that disclosing information about operations at the immigration detention centres could jeopardise the management, place staff and detainees at risk, limit the possibility of innovative service delivery and commercially compromise ACM in the current tendering process for new contracts.

The public hearing in September at which both parties were due to give evidence had to be cancelled. This was replaced by a hearing into DIMIA and ACM’s arguments and that hearing was held in private.

Announcing his decision on how to proceed with the inquiry on 9 October 2002, the commissioner, Dr Sev Ozdowski, said that “I am of the view that there is a significant public interest in making the processes of the commission open to the public.” He added: “I have carefully considered all the submissions made by DIMIA and ACM. However, I have decided in the majority of cases not to make a direction for confidentiality. In many cases I have rejected the claims made by DIMIA and ACM altogether. Where I have accepted the concerns raised by DIMIA and ACM I have balanced them with the interests of the public in being informed of the results of the inquiry and other relevant factors.”

The commissioner also said DIMIA and ACM had argued that certain documents should not be published in their entirety on the basis of commercial confidentiality and innovation. He decided to grant their request “on the basis that it does not prevent my ability to refer to relevant extracts of the documents in question in public hearings and in the commissioner’s final report.” A public hearing at which ACM and DIMIA will give evidence will take place in Sydney from 2- 5 December 2002.

Human Rights and Equal Opportunities Commission, National Inquiry into Children in Immigration Detention, Reasons for Decision.

www.humanrights.gov.au/human_rights/children_detention/dimia/reasons.html

Victoria’s short list for semi-private prisons

The government has short listed three consortia to be invited to bid for the design, construction and maintenance of two new correctional facilities (see PPRI #50). They are Guardian Alliance (Multiplex Constructions, ABN‑AMRO); Prison Services Victoria (John Holland, Siemens, Laing Investments); and Victorian Correctional Infrastructure Partnership (Baulderstone Hornibrook, United KG, Rothschild).

The consortia must now respond to a detailed project brief currently being prepared by the Office of the Correctional Services Commissioner (OCSC). Responses must be submitted by early 2003. However, the minister for corrections, Andre Haermeyer, said that “If, after this process is completed and the private sector respondents have not demonstrated value for money, the government would build the facility.”

The 600 bed Metropolitan Remand Centre will be located at Ravenhall and a 300 bed Correctional Programs Centre will be built at Lara, with a combined value of about A$140 million. The state’s prison service will manage the facilities. The government’s probity auditor for the tendering process is PriceWaterhouseCoopers.

Prison economy features in election

Arguments over the building of a new prison or whether an alternative economic strategy is required is at the heart of an election battle in Kororoit, Victoria, where community lawyer Amanda George is standing as an independent against the Labor candidate, Andre Haermeyer. Mr Haermeyer is minister for corrections and police. The election is on 30 November 2002.

Speaking on a recent radio programme, Ms George said: “... we are becoming a prison precinct in Melbourne and the government’s going to be spending A$115 million building a prison. And what our community needs is community building. We’ve got the second highest drop out rate of secondary students. Our community has twice as many unemployed people as any area in the west. We need money for real crime prevention and spending money on prisons will not deliver a safe community. We desperately need primary school classes to be reduced from 30 to 20 ... we have got 13 per cent unemployment of young people ... in our community we haven’t seen an economic windfall from the two prisons we’ve already had. They’re saying that they will create some 300 jobs. There is no suggestion that all of these jobs will go in the west. “

“And the point is, we don’t only want jobs that are prison jobs. Our community wants to be a mixed community. There are plenty of ways we can get job creation in our community without the government just dumping a prison on us. There is real need for traineeships and apprenticeships for young people. Now the prison population is increasing because of the policies of the government. The government can quite easily reduce the rate of incarceration if they introduce some real crime prevention and if they do something about the increasing sentences that are producing no benefit to the community. A$55,000 to keep a young person in prison for a year: that is a salary of a teacher, a teacher who could teach 20 students a year and perhaps keep them from falling into the criminal justice area. .. The amount of money we are spending on prison is financially unsustainable in the long term. It must rob our budgets in education and health and public housing. If we’re really concerned about building a safe community we have to put money into building community, not into building prisons, because prisons don’t reduce crime.” Extract from an interview with Amanda George on Radio National Breakfast programme, 29 October 2002.

Complaints to Victoria’s Ombudsman

Victoria’s ombudsman received 173 complaints from prisoners at Group 4's Port Phillip Prison and 127 combined from ACM’s Fulham Correctional Centre and Melbourne Custody Centre. This is out of a total of 699 complaints received from the remainder of the state’s correctional system in the year 2001/2002.

The main issues of concern at Port Phillip were: visits, medical, property, assaults and harassment/victimisation. Complaints from prisoners at Fulham and Melbourne Custody Centre included: property, assaults, medical, buildings and facilities and visits.

In his recently published annual report the ombudsman highlighted the case of a Fulham prisoner to emphasise the problems relating to property. The prisoner was transferred from Fulham to a public sector prison and complained that some of his property had not arrived at the destination. “The prisoner was compensated for the property he claimed was still missing. The facts of this case clearly illustrate that staff had failed to check the prisoner’s property prior to transfer, that the documentation accompanying the property that was first transferred was inaccurate and that there should have been documentation describing property transferred subsequently. In my previous report I emphasised that responsibility for collecting, recording and securing prisoners’ property rests with the forwarding institution."

The Ombudsman then highlighted the plight of a number of prisoners at Fulham who complained that they had become unemployed after an industry within the prison, which supplied components to an outside organisation, was closed. ACM’s contract with the company expired and was not renewed. ACM paid the prisoners an unemployment rate as there was no alternative work. “The prisoners, who wanted to work, indicted that no other jobs were available and they believed they should be paid the normal working rate. The prison authorities originally did not wish to do so, but after discussions with my office, agreed to pay the working rate.” Victoria, Twenty-ninth report of The Ombudsman, 30 June 2002, No. 190, Session 1999-2002.

NEW ZEALAND

Human rights protected?

The operation and monitoring of New Zealand’s privately managed prison - Auckland Central Remand Centre - and the contracted out escort service has been called into question by the United Nations Human Rights Committee (see PPRI #43, 34 & 32).

In its concluding observations on the recent report of the government of New Zealand the committee noted “with concern that the management of one prison and prison escort services have been contracted to a private company. While welcoming the information that the State party has decided that all prisons will be publicly managed after the expiry of the current contract in July 2005 and that the contractors are expected to respect the United Nations Minimum Standards for the Treatment of Prisoners, it nevertheless remains concerned whether the practice of privatisation in an area concerning important rights of protection of persons deprived of their liberty by the State in practice meets effectively the obligations of the State party under the Covenant [International Covenant on Civil and Political Rights] and its own accountability for any violations.”

“The Committee further notes that there does not appear to be any effective day to day monitoring mechanisms to ensure that prisoners are treated with humanity and with respect for the inherent dignity of the human person and further benefit from treatment, the essential aim of which is directed to their reformation and social rehabilitation. The State party should ensure that all persons deprived of their liberty are not deprived of the various rights guaranteed under article 10 of the Covenant.” Concluding Observations of the Human Rights Committee: New Zealand, CCPR/CO/75/NZL, 7 August 2002.

n Auckland Central Remand Prison opened in July 2000 and is managed by Australasian Correctional Management (ACM). The prisoner escort and court custodial services in Northland and Auckland are operated by Chubb New Zealand Ltd. Since August 1999 Chubb has also operated the electronic monitoring service.

UNITED KINGDOM

Wackenhut acquisition approved

The government has approved Group 4 Falck’s acquisition of The Wackenhut Corporation which has brought together the two largest private prison services operators in the UK(see PPRI #50, 49 &47).

Between them the companies operate seven of the nine contracts for private prisons and seven of the nine prisoner escort contracts. The competition commission concluded that competition in six markets - five of those relating to custodial services - “may not be expected to operate against the public interest.”

The commission’s report was published by the competition minister on 22 October 2002. As well as the UK markets for manned guarding, alarm and CCTV installation and monitoring and aviation security the custodial markets examined were: the provision of services to design, construct, manage and finance (DCMF) prisons; management only (MO) services for prisons; management only services for immigration detention centres; DCMF services for secure training centres; and the provision of prisoner and immigrant detainee transport.

Several issues persuaded the commission to arrive at their decision: in particular, Group 4's stated intention to dispose of Wackenhut Corrections Corporation (WCC), “ a sale [of WCC] either to Serco or to a third party should eliminate the concerns expressed by competitors relating to the connection between Group 4 Falck and Premier” ; the legal framework drawn up under Florida state law which separates the custodial services operations of WCC and Group 4; and commercial factors which determine the ability of Premier and Group 4 to compete led the commission “to conclude that Premier was an independent competitor in the relevant markets and would have the necessary resources to compete effectively.” The commission was “unanimous” in concluding that there were no competition concerns in respect of the markets for DCMF prisons, MO contracts for prison services and DCMF contracts for secure training centres.

However, in the course of the investigation the commission’s evidence included:

n Group 4 “would have preferred not to have acquired The Wackenhut Corporation’s(TWC) shareholding in Wackenhut Corrections Corporation (and indirectly WCC’s interest in Premier). TWC ‘s major shareholders were, however, insistent on a clean and comprehensive exit from all their TWC businesses and, when it became clear that this issue was not negotiable, Group 4 reluctantly agreed to acquire TWC’s interest in WCC ...”

n The commission asked Group 4 about Serco’s rights in respect of its 50 per cent interest in the Premier joint venture. Group 4 stated that these were “subject to the terms of the confidential joint venture shareholders agreement between Serco and WCC which neither Group 4 nor The Wackenhut Corporation had seen. Group 4 was not in a position to protect Serco’s commercial interests and did not regard itself as having any responsibility to do so. Group 4 had reached no agreements with Serco with regard to premier but it had indicated to WCC that Group 4's representatives on the WCC board would support a sale of WCC’s interest in Premier to Serco. However, Group 4 had no control of decision making in WCC since Group 4's representatives were in a minority on the WCC board.”

n Divestment of Global Solutions Ltd “could be delivered by Group 4 Falck ... such a remedy would address any possible UK competition concerns because it would restore the pre-merger situation in the markets and remove any overlap between Group 4 Global Solutions Ltd and Premier.”

n “Notwithstanding its willingness to entertain the foregoing divestments, Group 4 expressed a preference for behavioural remedies ...in terms of s strengthened safeguards agreement ... enforceable in a UK court would address any competition concerns.”

n Serco said that “the merger would substantially reduce or eliminate competition between Group 4 and Premier. It did not believe that the assurances provided by Group 4 and its associates in the ‘ring fencing agreement’ would be effective ... Serco believed the detriments identified could only be resolved by requiring Group 4 to dispose of WCC’s 50 per cent share in Premier. Serco was seeking to acquire WCC’s interest in Premier under a right of pre-emption in the 1999 shareholders agreement. WCC disputed the applicability of the right...”

n UK Detention Services Ltd “did not believe that the safeguards agreement would prevent the transfer of information between Group 4 and Premier. It did not believe the merger should be allowed.”

There were more incidents of category ‘A’ drug use at Premier Custodial Group’s Kilmarnock prison in the first half of this year than in the whole of the first year of the prison’s operation and almost as many as in the whole of the second year (see PPRI #49-47, 44, 43, 40, 37 & 36). If the present rate continues it will represent a 26 per cent increase over 2001/2002's figures. So far this year Premier has been fined for 74 category ‘A’ drug finds compared with 58 in 1999/2000; 75 in 2000/2001; and 117 in 2001/2002.

Comparative figures for 1999/2000 and 2000/2001 also reveal that Kilmarnock prisoners had the highest rate of opiate use of all Scottish local prisons. In 1999/2000 14 per cent tested positive in random mandatory drug tests; in 2000/2001 the figure was 20 per cent.

Financial penalties

Meanwhile, the Scottish National Party (SNP) alleges that, due to the way the contract has been drawn up, the company has been saved from being penalised at least £60,000 so far this year. Despite being hampered by commercial confidentiality, which make exact calculations difficult, research carried out by the SNP is based on answers to parliamentary questions and those elements of the contract which are in the public domain.

The contract specifies that financial penalties fro contract failures are capped at five per cent of the quarterly fee payable to the company. The contract also specifies a formula for converting points into financial penalties: points for various categories of contract failure for the quarter are totalled. Thereafter, a baseline number of points is deducted. For every remaining point 0.01 per cent of the quarterly payment to the company is deducted.

In the first two quarters of 2002/2003 Kilmarnock incurred 2,368 performance points. Although separate figures are not available for each quarter, if the performance points incurred are spread evenly across the period, there would have been 1,184 in each quarter. The quarterly baseline for this year is 587 points. 1,184 less the baseline of 587 is 597.

Without the cap in each quarter the company could have been fined 5.97 per cent of the quarterly contract price. However, with the five per cent cap in each quarter, the contractor escaped being fined 0.97 per cent of the contract price. Basing its calculations on 2001/2002 when the Scottish Prison Service paid Premier £12.44 million, or £3.11 million per quarter, the SNP calculates that 0.97 per cent of that quarterly figure is £30,181 or £60,363 over two quarters. The SNP assumes that quarterly payments to the company for 2002/2003 will be higher than in 2001/2002.

Fire alarm

It has also been revealed that the company’s contract has no performance measure for the number of fires at the prison. Yet Kilmarnock has had the worst record of all Scottish prisons for arson: there were 24 such incidents in 2001/02 compared to 11 at closest rival the publicly run Perth prison. According to the chief executive of Scottish Prison Service “it was not considered necessary or appropriate to have such a performance measure.”

Prison medical service fined

Medacs, the company which took over the provision of general medical practitioners’s services to the Scottish Prison Service in November 2000, had been fined a total of £21,650 by September 2002. Although this total amount was revealed, the chief executive officer of the Scottish Prison Service refused to divulge the individual penalties incurred, the reasons for the fines and what proportion they represent of the company’s total payments under the contract.

On 8 November 2002, in written answers to parliamentary questions from Christine Grahame MSP, Mr Tony Cameron said that: “the cost of the contract in each year is commercially confidential. It is therefore not possible to provide the proportion to that figure of the amounts ...” and that “the ... value of each individual penalty is commercially confidential. The data on performance specification will be made available when the Medacs contract is published in due course following discussion with the company.”

nMedacs is part of Corporate Services Group PLC, best known in the UK for its Blue Arrow staff recruitment services. Medacs refers to itself as “one of the UK’s leading suppliers of temporary health care professionals. Its clients include many of the UK’s largest NHS trusts, public bodies and the private sector.” It comprises 25 per cent of CSG’s UK sales. In the USA, CSG’s staffing services operation has faced such substantial workers’ compensation claims, particularly from is operations in California, that CSG has had to make a provision of £3 million to cover these. According to a company statement on 12 September 2002, “the settlement of claims and a requirement from our insurers to cash collatoralise future claims, resulted in cash outflows of $12 million during the period” [half year ended 30 June 2002].

Three former directors of CSG have been charged with fraudulent trading after the government’s Serious Fraud Office investigated accounting irregularities in 1997 and 1998. This took place prior to the new board being appointed in May 1999. The new board includes Lord Norman Blackwell, who was head of the No. 10 [Downing Street] Policy Unit from 1995-1997. He is chairman of the Centre for Policy Studies (CPS) a right wing think tank set up in 1974 by the then prime minister Margaret Thatcher. The CPS claims “a large share of the credit for initiating polices such as privatisation, trade union reform, council house sales, pensions deregulation ....”. Lord Blackwell’s recent writings include Replacing the NHS Monopoly and Towards Smaller Government.

UNITED STATES

CCA to pay IRS $54 million

Corrections Corporation of America (CCA) has been ordered to pay $54 million to settle a dispute with the Internal Revenue Service (IRS) over a 1997 audit of its predecessor, Prison Realty Trust (see PPRI #42- 40 & 37).

Prison Realty was formed out of the original CCA in 1997 as a real estate investment trust (REIT) to own CCA’s prisons. The REIT was a vehicle by which Prison Realty paid less federal tax and distributed 95 per cent of annual income distribution amongst shareholders. The REIT was disbanded in 2000. CCA is still appealing IRS findings as a result of audits in 1998 and 1999. CCA is the largest private prison operator in the US.

ENDS

Prison Privatisation Report International

Public Services International Research Unit (PSIRU)

School of Computing and Mathematical Sciences

University of Greenwich

30 Park Row, London SE10 9LS, England

Internet:www.psiru.org/justice

Email: Stephen Nathan, stephennathan@compuserve.com